CSR: Welfare cuts ‘will lead to higher public spend’
Clare Goff, New Start
The government announced cuts of a further £7bn to welfare in today’s spending review, adding to the £11bn unveiled in June’s Budget.
The introduction of Universal Credit is at the heart of today’s announcements, replacing the current welfare system with a tapered payments scheme that ensures it will ‘always pay to work’, chancellor George Osborne said.
Further details of the new scheme, which will be funded by £2bn over the next four years, are to be announced in the upcoming white paper.
More immediate savings will come from a range of changes, including a cap on housing benefit and the withdrawal of child benefit to high income families.
The Employment and Support Allowance, given to people unable to work due to sickness or disability, will be restricted to one year, making savings of £2bn a year by 2014-15.
Mr Osborne said increases to the child tax credit will ensure welfare changes will have no impact on child poverty for the next two years, but the Child Poverty Action Group said that the increase will be dwarfed by the much bigger cuts to housing and welfare.
Chief executive Alison Garnham said: ‘Rather than saving money the impact of these continued raids on the family budgets of the most vulnerable will mean higher public spending bills in the future as the costs of damaged life chances, social failure and economic underachievement mount up.’
The change to the Employment and Support Allowance in particular is particularly worrying, she said.
Social and affordable housing were hit heavily in today’s review. The current social housing system will be replaced by more ‘flexible’ agreements for new tenants which will see them charged up to 80% of the market rate, a move the National Housing Federation (NHF) said could ‘trap thousands of social housing tenants in a lifetime of poverty, provide a strong disincentive to work and increase dependency on benefits’.
NHF calculates that thousands of low-income families could pay an extra £9,000 a year in social housing rents, with the changes leading to rent for an average three-bed social home to rise from £85 a week to £250 a week.
Today’s review announced plans that could also see an end to council homes for life, and cut the affordable house-building budget by 60%.
Housing charity Shelter called the cuts to housing ‘a huge blow’.
Chief executive Campbell Robb said: ‘The proposed figure of up to 150,000 affordable homes over four years represent less than a third of what this country urgently requires to bring the housing system from its knees, notwithstanding the half a million ‘lost’ homes referenced by the chancellor himself.’
The Housing Market Renewal Fund is to be moved to Regional Growth Funds, with total funding cut, a move NHF estimated that would result in plans to build or improve up to 23,000 homes being shelved.
‘It will be essential for those few local authorities that gain access to the funding that is left account openly for how they use the resources’, the chief executive of NHF David Orr said.