How will we know if the 2013 budget is anti-poverty?

Will the 2013 budget put the poorest people first, asks Julia Unwin.

How will we know if this is an anti-poverty Budget? The Chancellor is never short of advice. At Budget time, think-tanks, talking heads and lobby groups all tout their ideas for cuts, taxes or spending.

We all know that the Chancellor has limited room for manoeuvre. All the signs are this is going to be a cautious budget, maintaining the overall direction of Government policy.

So rather than offer advice, we decided to set four tests for the Budget. Our aim is not to push for unrealistic goals, pet projects or miracle cures. Instead we want to provide a yardstick, to judge if this Budget will be an anti-poverty one - or not.

1. Will incomes for the poorest rise, fall or stay the same?

Each Budget of this Parliament has made significant changes to the tax and benefits system. If this Budget overall makes the poorest better off – whether that’s through tax cuts or benefit changes – it will have passed the first test.

This isn’t quite as simple as it sounds, though. Poverty is about households, so we should think about raising household incomes, rather than just individuals'. It’s also important to separate out this budget from the cumulative impact of all changes so far under the Coalition.

Our first and biggest test: on Wednesday, will the poorest people be better off or not?

2. Will other tax changes help reduce the cost of living?

It’s wrong, though, to think about poverty solely as a function of the taxes and benefits system. We know, for example, that childcare costs undermine work incentives and eat into household budgets. JRF research shows that current energy policies are regressive, adding costs to the fuel bills of the poorest. And that housing tax is illogical and fuels a volatile housing market, which hurts the poor most. We are desperately short of the homes we need to adequately house people. A chronic under-supply will lead to 1.5 million locked out of ownership by 2020 and 400,000 teetering between insecurity and homelessness. Housing shortages ramp up costs for people now and put three million more into poverty.

In other words, the cost of living is hugely influenced by the tax regime that surrounds essential goods and services.

If the Budget helps to reduce these costs, then it will be a anti-poverty Budget. 

3. Will welfare be cut? And if so, where?

If the Budget announces further cuts to welfare, and it continues to fall exclusively on working-age families, poverty will increase. This is true, whether benefits are considered to be the primary poverty-fighting tool or not. It's also true whether the principles of welfare reform (simplifying the system and incentivising work) are broadly supported or not - we should distinguish between any cuts in this Budget, and the wider programme of reform. There is simply no such thing as an easy target in welfare.

What’s more, if the Budget is fiscally neutral, then extra spending in one place means finding savings elsewhere. There are always trade-offs in every budget. And the welfare bill is not the only bill that affects poor people. Investment in childcare, in house building, and in reducing costs, may all be positive for the poorest people. Examining these trade-offs will be crucial for understanding the Budget’s real impact on poor people.

4. How will the Chancellor describe poor people?

The Autumn Statement saw some unfortunate rhetoric about those on benefits. The Benefits Uprating Bill described all those on benefit as unemployed. It is more than possible to make the case for austerity without insulting poor people. Careless rhetoric debases the discussion, and prevents constructive engagement.

Poor people are just people - no more, nor less. A major test of the Budget will be whether it reflects this fact, or peddles myths and untruths about poverty.

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