Chancellor's Budget giveaways failed to support an all-out assault on poverty

16th Mar 2016

Responding to the Budget, Julia Unwin, chief executive of the independent Joseph Rowntree Foundation (JRF), said:

“In his Budget the Chancellor said we need to act now so we don’t pay later, but his actions did little to address the risk poverty presents for the economy.

“Support for savers to prevent poverty in later life, money to tackle homelessness and the freeze in fuel duty are all welcome in helping those on low incomes.

“It is hugely welcome that employment has reached record levels and that we have the lowest proportion of people claiming out-of-work benefits since 1974, but what we needed was a Budget building on these foundations and supporting the Prime Minister’s all-out assault on poverty.

“But the extra support he offered – tax cuts and savings help for better-off workers and extra support for business – will bypass those in work but living in poverty.

“With the economy recovering, this was the ideal time to set out a long-term plan to help those on the lowest incomes and ensure they share in on the UK’s prosperity. Instead, lack of security and risk of poverty remains the reality for millions of people on low incomes.”

On the increases in the personal tax allowance to £11,500, Chris Goulden, head of policy and research at JRF, said:

“Raising the income tax personal allowance helps people in poverty less and less: 85p in every £1 of the personal allowance rise will go to the richest half of the country. This is because many don’t earn enough to benefit and it’s the combination of tax with earnings, welfare and costs that matters for people’s standard of living, not income tax by itself.

“Instead, the Chancellor should have considered cancelling cuts to the Work Allowance in Universal Credit, which would put £1,000 in the pockets of three million low-earning families. There was no mention of UC in his speech, but this flagship policy should be central to the nation’s efforts to reduce poverty.”

On cuts to Personal Independence Payment (PIP), Katie Schmuecker, policy and research manager at JRF, said:

“The £4.4 billion cut to personal independence payments over the next four years is a real concern. The official figures show 3.1million disabled people are in poverty (26%), but JRF research shows the true figure is at least one million higher.  Disabled people face additional costs to meet their basic needs, costs PIP is designed to compensate for.”

On the support for savers through a Lifetime ISA and Help to Save, Claire Turner, head of policy and research at JRF, said:

“We welcome the government’s Help to Save initiative. Rainy day savings are an important buffer against financial shocks and saving schemes which provide match funding are better incentives to save for low income households than tax breaks. Although lack of spare income means that, for some low income households, saving is pretty unlikely even with incentives.  

“The Lifetime ISA for 18-40 year olds could provide an alternative savings plan for the self-employed who we know are amongst the most under-pensioned. However, for many people on a low income, the biggest barriers to saving remain the day-to-day challenges of low paid and insecure jobs, and the high costs of housing and other essentials.”     

On extra money for longer school hours and opening more academies, Helen Barnard, head of analysis at JRF, said the money could have been better spent:

The additional money for schools is welcome but could have been spent on better ways of improving attainment for children from low income children, such as:

  • Support for children with Special Educational Needs at risk of exclusion: around £8 million per year;
  • Doubling the Early Years Premium from £300 to £600 per child, extending it to two-year-olds and introducing it in the devolved administrations: £128 million per year;
  • Funding a fully graduate led early years workforce, supported by funding to meet training and wage costs: £200 million to £500 million per year.

Additionally, the Chancellor could have increased funding for the Pupil Premium to enable more children in poverty to receive it who currently miss out because their parents are in work.

On reforms to business rates, Dave Innes, policy and research manager for economics at JRF, said councils face losing extra revenue:

“While this may provide a boost for small businesses, it could hit local councils’ budgets as business rates are being fully devolved to them in 2020. The government has announced some protection for councils in the short run, but if this isn’t extended to after business rates have been devolved, councils stand to lose £1.9bn per year, or 2.9% of their total revenues. The government should consider providing extra support for councils facing the biggest challenges to grow their local economy, which are often the most deprived areas which have been hit hardest by local authority cuts in the last five years.”