Analysis of George Osborne's July 2015 Budget by Joan Grant of KUWG
It is with some relief that I can report that the Government decided not to make all Housing Benefit claimants pay 10% of our rent.
However, the budget took away the right of young people (18-21) on JSA to claim Housing Benefit. There will be an exemption for those young people who are parents. There are less than 20,000 young people on JSA claiming Housing Benefit. Many have troubled backgrounds and are not able to live with their families. Their situation will be made more vulnerable. Saving: £40M
They abolished maintenance grants for students from low income and replaced them with loans. Saving: £2.5B. This change just means that young people will be saddled with more debt. A measure like this makes it harder for people from low income backgrounds to get access to higher education and therefore better paid jobs.
The Apprenticeships that the Tories harp on about are just 6 months of providing cheap labour. They are nothing like the 3 or 5year apprenticeships that young people used to get in the 1970s when they learnt a trade properly.
We really must highlight the unfairness of the treatment of young people. The Tories are blighting the futures of a whole generation of young people: they are saddled with debt, paid low wages and have no security. It is interesting to note that pensioners have not had a penny of cuts. Is that because they tend to vote Tory? Pensions go up by at least the rate of inflation. There are of course some pensioners on low incomes. But overall pensioners are more likely to be home owners than young people. This will be the subject of a detailed post at a later date.
The rumours about tax credits were right. These have been cut back quite a lot. People already claiming tax credits will be affected from April 2016 and they will be £1000 a year worse off on average. April 2017 is when the major changes, such as only paying Child Tax Credit for 2 children, take effect.
The really unexpected measure was the new National Minimum Wage for people over 25. However, experts have now calculated that people who get tax credits will still be worse off, despite higher wages. That to me, takes some doing. Humans can put satellites in space and send astronauts to repair them quite easily. But we cannot figure out how to spend literally billions of pounds in a way that ensures low earners have enough money to live on and do not have to use food banks. Obviously, the Tory Government has no interest in solving the problem of low pay.
At this point, I have to declare an interest. I am someone who argued that tax credits need to be cut back. To me, it made no sense that people in work cost the nation 6 times as much as people who are out of work. We needed wages to rise which has now happened. However this new National Minimum wage is less than the Living Wage of £7.85 outside London and £9.15 an hour that low paid workers need right now in order to make ends meet.
Some of the other rumours proved fairly accurate.
Working age benefits were frozen for four years – we had been told that they would be frozen for two years. That freeze now goes on for a further two years. This freeze does not apply to most disability benefits including ESA Support Group. Saving: £4bn
Changing the amount of ESA-WRAG to the same as JSA happens in April 2017. It will not affect anyone currently getting ESA WRAG. Saving: ££640m. I think the Tories will have a go at making this reduction apply to people already in the WRAG at a later date.
The Benefit Cap was reduced from £26,000 to £23,000 in London and £20,000 everywhere else. As this includes rent, it will lead to more people not being able to afford their rent, especially in London. Saving: £200m. They also reduced the LHA’s (Local Housing Allowances). They reduced the grants to Housing Associations, and plan to make them cut rents by 1%. There were no measures to cut private sector rents. Private rents are extortionately high and cutting them would actually reduce the housing benefit bill.
In stark contrast, they raised income tax thresholds and raised the Inheritance Tax thresholds.
Cutting back tax credits saves a significant amount of money, but most of the other cuts save very small amounts. They raised more in taxes than they gave away. So it proved to be a fairly typical Tory budget – they took from the least well off and gave more to the better off. All the signs are that Labour will support the reduction in the Benefit Cap.
For further info see a report by the IFS: Andrew Hood - Benefit Changesand Distributional Analysis.