Autumn Statement Analysed

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27 Dec 2012

I have recently received information from Citizens Advice detailing the impact of the changes announced in the Chancellor’s Autumn Statement and what it means for the actual income of households. They have analysed the benefit uprating and tax changes which are coming next April to look at the type of households which will be better or worse off and by how much.

The cumulative impact of capping the uprating of most benefits to no more than 1% for three years breaks the longstanding link between benefits and either earnings or prices. This will hit low and middle income families as well as those who are out of work or who are unable to work because of sickness or disability.

A fixed income cut will have a much greater impact on a low income household than a household on a higher income as the cut will be a greater proportion of their income. Even when a cut is proportional to income it is often felt more acutely by a household on a lower income as a greater proportion of their income is spent on essentials such as food and fuel.

A couple with two children earning £26,000 a year and paying a rent of £130 a week (£563 a month) will experience a net loss of £1.85 a week from next April, £6.52 the following April and £11.20 in April 2015. A possible rise in the personal tax allowance to £10,000 in perhaps April 2014 would only give them £0.75 a week to offset the loss of £6.52.

People who are disabled are not protected by the fact that disability benefits will be uprated in line with inflation, because it is likely that most of their income comes from other benefits. For example, a lone parent in the ESA support group who has two children and pays rent of £130 a week, will face a loss of £3.06 a week in April 2013, £7.34 in April 2014 and £11.62 in April 2015.

This analysis demonstrates that the impact of these benefit cuts will dwarf the benefit from the increase in the personal tax allowance, for almost all low income households whether in or out of work and many middle income families with children.