The impact of scheduled benefit changes will dwarf national insurance reform
The post-budget news cycle is a strange thing.
Today, every paper leads with the National Insurance Contributions (NICs) reform that Philip Hammond announced yesterday. Right-wing voices have declared it an unjustified attack on the White Van Man, while the left think they should be attacking the reform but — beyond knowing that the Tories have broken a manifesto promise — don’t seem sure why.
And bizarrely, all of this fuss centres on a very modest set of reforms, which won’t substantially affect either the exchequer or poor families.
Indeed, the IFS today warned that the biggest threat facing poor families has nothing to do with Wednesday’s announcements. Rather, they should brace themselves for the scheduled changes to child-related benefits due to hit in April.
The impact these will have — with 300,000 families set to be £7,000 a year worse off on average — should concern left-wing politicians a lot more than a small national insurance shift.
As IFS director Paul Johnson explained:
“Tax credit changes in April will not affect current claimants immediately but will mean big losses in the longer term. The removal of benefit from third and subsequent children will mean that in the long run 600,000 three child families will be an average of £2,500 a year worse off than they would have been, while 300,000 families with four or more children will be £7,000 a year worse off on average. This and the reduction in the “family element” of tax credits will save around £5 billion a year in the long run, dwarfing all of yesterday’s announcements combined.
And here’s a thing. If you’re really concerned about changes affecting the low income self employed it is to Universal Credit that you should be looking. New rules mean that anyone declaring as self employed will, after a year, be deemed to be earning at least equivalent to working 35 hours at the National Living Wage (or minimum wage for younger people). Such a change makes some sense in the context of the difficulty of monitoring actual incomes. It is due to save £1.5 billion a year. The NI changes are very small by comparison.”
Overall, about four million families will see their entitlements fall as a result of the changes coming in April.
Leave a Reply