George Osborne abandoned some tax credits cuts in his Autumn Statement last week. The move was his biggest U-turn since becoming chancellor.
It came after a Tory revolt, defeat in the House of Lords and opposition by Jeremy Corbyn’s Labour Party.
Yet the Autumn Statement doesn’t make for pleasant reading.
Paul Johnson, director of the neoliberal Institute for Fiscal Studies, said, “This is absolutely not the end of austerity. This spending review is one of the tightest on record.”
Osborne has kept in place plans to cut Universal Credit.
The Resolution Foundation think tank said that would snatch an average of £1,000 each from over three million households in 2020.
Around £900 million of the tax credit changes announced in July will go ahead. The amount of additional income a claimant can earn without losing benefits will drop from £5,000 to £2,500.
The Tories are committed to the £12.5 billion welfare cuts they outlined in the summer. And they still want more than £20 billion in departmental spending cuts up to 2020.
Most low paid families will rely on Universal Credit rather than tax credits by the end of the parliament—so many will still face losses.
Working households on Universal Credit are set to lose an average of £1,000 in 2020—and for some it’s even higher. A low-earning couple with three children, where one parent works full time and the other works part time, is set to lose £3,060 by 2020.
A single parent with one child, working part time on the national living wage, would lose £2,800. And the new limit of two children on Child Tax Credits is still going ahead.
New claimants—or existing claimants who come off the benefit for more than six months—will only be able to claim for the first two children. Some low earning couples with three children will lose £3,000.
To Osborne’s great convenient good fortune along came the Office for Budget Responsibility (OBR).Osborne established the OBR in 2010 to crunch the numbers.
It magically discerned, in the uncertain future of the public finances, a sum of £27 billion that was invisible only three months ago.
So threatened police cuts have been cancelled and increases in money for “security” can go ahead.
But the Tories will still cut the state from roughly 45 percent of GDP in 2010 to 35 percent by 2020.
The benefit cuts that are still going ahead
- £4billion - four-year freeze in working age benefits
- £640million - reducing benefits for long term sickness using jobseeker’s allowance
- £110million - means testing childcare for housing benefit
- £240million - increasing council house rents
- £495million - reducing the benefit cap to £20,000 (£23,000 in London)
- £190million - changes to the way Universal Credit entitlement will be worked out
- £170million - capping social rents to same limit as private rents for housing benefit
- £900million - keeping cuts to tax credit work allowance
- £25million - no housing benefit and pension credits for people who have been outside the country for more than four weeks
- £4billion - further cuts to welfare in the figures but not yet announced