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The Budget 2015: what does it mean for our welfare system?

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On 8th July, Chancellor George Osborne delivered the Summer Budget. Popular measures included a national living wage of £7.20 per hour and an increase in the tax-free personal allowance to £11,000 from next April. It would appear, in the words of Mr Osborne, that “Britain is getting a pay rise”.

But what about those whose wages are so low that they rely on tax credits, or those unfortunate enough to be out of work or are too ill to work? The budget was certainly not good news for our welfare system.

The first measure introduced by the Chancellor was the abolition of the automatic entitlement to housing benefit for 18-21 year olds. Whilst the details are not yet clear, it would appear that those young people in receipt of income related benefit will not be entitled to help with housing costs. Those who have family will simply have to stay at home until they can afford to pay for their own accommodation, but what about those who haven’t? The Chancellor said that exceptions will be made for “vulnerable people” and other “hard cases”, but how will this be administered? Who is ‘vulnerable’ and who isn’t? Will an 18 year old sleeping rough be a hard enough case? The devil, I suggest, will be in the detail which we eagerly await.

The Chancellor also introduced changes to employment and support allowance, a benefit for those with health conditions that limit their ability to work. Those claimants in the work related activity group, claimants who essentially have health conditions that limit their ability to work but who receive support to find suitable employment, will have the amount they receive reduced in line with jobseeker’s allowance. This is currently £73.10 a week for those over 25.

This amount will not increase for four years as the Chancellor has also announced that working age benefit will be frozen for four years. Therefore there will be no annual increase in benefits including jobseeker’s allowance, employment and support allowance in income support. Any future rises in inflation will hit those in receipt of benefits hardest.

 The Chancellor will also cut the amount that people can earn before losing tax credits and universal credit. Currently a claimant can earn £6,420 before their tax credit award is affected; this will be reduced to £3,850. The income taper will however be increased to 48 per cent. This measure will affect the lowest paid workers in our economy; not quite the pay rise that Mr Osborne promised.

Controversially, the Chancellor announced that from April 2017 claimants will not receive universal credit or child tax credits for more than two children. Child benefit however will remain the same.  

Further, the ‘work allowance’ element will be removed from universal credit for those who are fit to work and without children. The ‘benefit cap’ will also be reduced to £23,000 in London and £20,000 outside of the capital.

The full impact of this latest round of welfare changes will not become clear until further details are given. However what is clear is that the young, those on low pay and those with health conditions affecting their ability to work certainly won’t be benefiting from Britain’s pay rise. 

By Michelle Tilley, graduate paralegal, pro bono welfare team