WELFARE BENEFITS UPRATING BILL – COST TO WORKING FAMILIES

The Welfare Benefits Uprating Bill will cut over £1,000 from working families on modest incomes who have 2 children.

This is on top of the freezes to Working Tax Credit and Child Benefit over the last 2 years, which have already cost the same families over £800.

Thousands of working families are already struggling to cope financially and do not know how they could face another 3 years of cuts to the support that they need.

This is what the implications of the pernicious bill will mean if the Government force it through tomorrow.

1. Cost to Families of the Welfare Benefits Uprating Bill

The Welfare Benefits Uprating Bill is another blow to working families. Compared to uprating Child Benefit and tax credits by CPI from 2013/14 to 2015/16, the analysis below shows the Bill will cost working families on modest incomes:

• £784 for a family with 1 child

• £1,091 to a family with 2 children

• £1,398 to a family with 3 children (See Note 1 for full figures)

2. Working Families affected by these effective cuts

Child Benefit – all families with children, with one partner earning up to £60,000

Child Tax Credit – 2.6 million working families with earnings up to:

• £27,000 with 1 child

• £34,000 with 2 children

• £41,000 with 3 children

Working Tax Credit – 1.8 million working families with earnings up to £20,000

3. Families are already Suffering from Freezes for the last 2 years

This comes on top of freezes to Child Benefit and Working Tax Credit for the past 2 years which, compared to RPI increases, have already cost these same families:

• £741 for a family with 1 child

• £846 for a family with 2 children

• £951 for a family with 3 children (See Note 2 for full figures)

4. Treasury Figures for Losses by Families on Minimum Wage in 2013-14

In response to PQs from Ann Coffey MP, the Treasury has confirmed that the Working Tax Credit lost in 2013-14 by people working full-time on the minimum wage, due to the Government’s freezes and increase in the earnings taper, is:

• £475 lost by a single person with no children

• £660 lost by a couple with 1 child

(18 Dec 2012, Col 688. Responses to questions 133778 – 133782)

Contrary to assertions in Parliament, the amount of Working Tax Credit lost by families with one earner on the minimum wage is greater than their tax saving of £420 in 2013-14 from the increase in the personal tax allowance.

5. Measures in the Welfare Benefits Uprating Bill

In 2013-14:

• Child Benefit and the basic & 30 hour elements of Working Tax Credit - frozen

• Couples & lone parents element of WTC and Child Tax Credit to rise by 1%

In 2014-15 and 2015-16:

Child Benefit, all Working Tax Credit elements and Child Tax Credit to rise by 1%

6. Comparison of Rates of Increases with RPI and CPI, 2011 to 2016

Working Tax Credit and Child Benefit

Year         Actual          CPI        Difference   RPI        Difference
                Increases     (Sept)     to CPI        (Sept)     to RPI

2011-12   0 %             3.1 %     3.1 %          4.6 %    4.6 %
2012-13   0 %             5.2 %     5.2 %          5.6 %    5.6 %
2013-14   0 or 1 %      2.2 %     1.7 %          2.6 %    2.1 %
                Avg 0.5%
2014-15 *  1%            2.5 %      1.5 %         2.6 %    1.6 %
2015-16 *  1 %           2.2 %      1.2 %         3.1 %    2.1 %

Total          2.5 %       15.2 %    12.7 %       18.5 %  16.0 %

* These are estimates by the Office of Budget Responsibility

7. Other Cuts affecting Working Families
The following cuts also affect most families on low and modest incomes:

January 2011: Rise in VAT cost the average family on low pay £307 a year

April 2011: Tax Credit for babies under 1 year old - £545 cut

• Childcare Tax Credit reduced from 80% to 70% - average loss £457 per child

• Increase in earnings taper of Working Tax Credit from 39% to 41% (an effective 2% tax rise for the low paid) - cost families with 1 child up to £400 and those with 2 children up to £500 each year

October 2011: Housing Benefit capped at 30% of market rates – cost an average £468 (40% of claimants are in work)

April 2012: Couples had to work 24 hours a week instead of 16 hours. 200,000 couples lost all their Working Tax Credit of £3,870

April 2013: ‘Bedroom tax’ will cost social housing tenants an average £728 a year

• Cuts to Council Tax Benefit with localisation in April 2013. As pensioners are to be protected, the benefit for working age recipients will be cut