The Cuts

“If the Tories get in on their own, my message to working people is be afraid – very afraid.” Danny Alexander

The Cuts Cameron didn’t tell us about…

The Work Allowance for in-work benefits has been slashed under Universal Credit. This, and other changes  are already passed in the Welfare Reform Act.

NB. Changes in the 2015 Summer  Budget  eliminate all claimants without dependant children from Universal Credit.  Working Tax Credit was awarded to 512,000 claimants without children in 2012/13 (see table 2. below)

A large part of the welfare cuts have been under our noses all the time, but because the changes are already passed in the WChanges to Work Allowance Universal Credit vs Tax Creditselfare Reform Act, the Government has not been obliged to mention them.  These cuts affect all low paid workers who would currently be eligible for Tax Credits.

Work Allowance cut by > a third

The level of earnings allowed for in-work benefits before payments are withdrawn has been cut by over one third and the rate of withdrawal (the taper rate) increased from 41p/£ to 65p/£ under Universal Credit.

The cuts to  the  Work Allowance , combined with changes to the rules for self employed claimants*  represents a huge reduction to claimant’s eligibility and the  awards they will receive.

The Work Allowance

Under Universal Credit, the amount claimants can earn before payments stop has been cut by over a third compared with that allowed under Tax Credits.

For example, the amount a single parent with one child can earn

Table 1. Drop in allowed earnings before payments stop under Universal Credit compared with current Tax Credit allowances (all figures approx.) [ see refs. 1, & 2 below]
Table 1. Drop in allowed earnings before payments stop under Universal Credit compared with current Tax Credit allowances (all figures approx.) [ see refs. 1, & 2 below]
before their basic award + child element cease,  drops from £25,000 under Tax Credits, to £14,000 under Universal Credit – for a single claimant with no children it drops from £12,000 to £7,200.

Due to variables such as number of children and housing award, the exact numbers affected are hard to quantify, but many will lose all, or a large part of their awards under Universal Credit.

Table 2. claimants by income awarded Tax Credits 2012/13 (see ref. 3)
Table 2. claimants by income awarded Tax Credits 2012/13 [see ref. 3 below]
Table 2. shows a large proportion of  Tax Credit claimants earn more than the Universal Credit Work Allowance.     For instance, 208,000 Working Tax Credit  claimants (without dependants) earned between £10,000  &  £19,000 in 2012/13. They would not receive their basic award under Universal Credit, as would many earning between £6,421 & £9,999.

The Cuts?

As these changes have been statute since 2013, it is surprising that George Osborne  failed to mention them, particularly before the election, suggesting these are  ‘The’ Cuts

*The new rule for the self employed, the Minimum Income Floor, eliminates the basic award for those with no dependants and reduces payments for parents ( basic award + 1 child) by up to 70% (if awarded the housing element)   seehttps://makingworkerspay.wordpress.com/2015/05/06/trap-for/

1. Tax Credits Entitlement Tables, Gov.UK:
https://www.gov.uk/government/collections/tax-credits-entitlement-tables

2. Universal Credit Work Allowance rates:
http://about.universalcredit.service.gov.uk/kms/Pages/Work_allowance_for_Universal_Credit.htm

3. HM revenue and customs child and working tax credit statistics 2012 -13:
https://www.gov.uk/government/statistics/child-and-working-tax-credits-statistics-finalised-annual-awards-2012-to-2013

 

 

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