Autumn Statement: an Initial View of Its Impacts on Reforming Welfare

This guest blog post was written by Malcolm Gardner, a director of the Welfare Reform Club and associate of Policy in Practice. It is reproduced with kind permission.

The Chancellor’s Autumn Statement was delivered with all the confidence and aplomb that we have come to expect from the Chancellor, and it was without doubt a political statement rather than a financial one. It was in a large part a gamble and a big gamble at that because the stakes are high for a Chancellor who’s eye is on the big job and whose popularity has taken a recent sharp downturn.

It is high-stakes for the rest of us too, because there was a big gamble that the economy will continue to improve.

On the headlines:

1. £12bn of welfare savings will be delivered in this parliament

We should not lose sight that in his Autumn Statement, the Chancellor has not backed down for the level of cuts that he requires. The jiggery-pokery of the OBR’s finding some £26bn for the Chancellor to play with has only spread the cuts over two years he not removed them.

2. Tax Credits

The u-turn on tax credit cuts is to be welcomed. However, the impacts will still be felt by those on Universal Credit, and the roll-out of the new benefit means that more households will be affected during the remainder of this Parliament.

This will ramp up from 2018 if the much-touted migration starts to take place. It probably now means that low-income working households will not be better off on UC.*

3. Council Tax Increases

On one hand council’s being allowed to increase Council Tax by 2% to cover the rising cost of adult care is also welcomed. However, this will also mean an increase in the cost of Local Council Tax Reduction Schemes.

This will mean further adjustments for councils who have passed on the 10% reduction to working age claimants. It will be too late to get the consultation process in place but will mean adjustments for 2017/18 schemes.

Now would be time to consider converting LCTR to a proper discount and unshackling it from Housing Benefit assessments.

4. Housing benefit capped at local housing allowance rate

Some of the Chancellor’s welfare tax credit savings will come from housing benefit. Until we crunch the numbers, we will not know how it will affect tenants.*

5. Housing budget doubled to £2bn

The increase in the building of starter homes and right to buy makes the assumption that more people will be able to buy their own home and will not be renting.

If true it would be a further drop in Housing Benefit claimants but low earning owner/occupiers have not done well under reforms to welfare so far.

However, while evictions due to rent arrears have been at their highest (increasing by 51% higher than five years ago) mortgage repossessions were down by 26%.

However, in the context that was 11,000 tenancy evictions and 21,000 mortgage repossessions over a 12-month period.

6. £12bn to fund a local growth fund and 26 new or extended enterprise zones. Business rates to be kept by local authorities. 100% of receipts from sales of local properties to be kept by local councils

All three of these statements show just how far the Government is committed to getting Local Authorities to take a firm grip on local economies. This is strongly linked to the preceding points.

To mitigate the impacts of other changes, it requires local government to manage the local economy. More than ever the delivery of financial support and local economic growth are being tied together.

Local discretion is going to more and more a part of the administrative landscape.

7. £22bn of NHS efficiency savings to be made

This will probably mean that NHS trusts will need to work closer with local authorities and charities in a variety of care and support. For example, the NHS will need to engage with any local universal support.

To do so, the NHS would need to stop using data protection and confidentially as a barrier to working with other organisations.

8. Free infant school meals to be maintained. 500 new free schools will be established. School funding system to be phased out, with a new formula to be introduced from 2017

This will go some way to redressing the issue that some rural areas have been underfunded. There will be some winners but equally there will be some losers too.

9. Childcare

From 2017, there will be 30 hours of free childcare for three and four-year-olds, but this will only be available to parents working more than 16 hours a week and with incomes of less than £100,000.

This acts as a driver to get low-earning parents of young children to work longer hours. Not so much nudge as a shove. Personally I struggle with this in the light of David Cameron’s claim to being the Prime Minster of the family.

10. Basic state pension to rise by £3.35 to £119.30 a week from next year

The Chancellor is continuing to protect state support for pensioners. However, pensions are now made up of the basic pension and some add-ons. A little sleight of hand here insofar as basic pension rises but the add-on remain frozen.

11. 600,000 small businesses to get business rate relief for another year

This will help small business and generate some new jobs but there was no new information on a business rates review.

12. Apprenticeship levy to be set at 0.5% of an employers’ pay bill

This will raise £3bn a year for the Chancellor. The CBI has never been keen on apprenticeship levy and sees it as a hidden tax burden that will not solve the skills crisis.

This is a welfare cut that is addressed by an increase in tax.

13. £1bn reduction in car insurance premiums

This will be achieved by ending claims for injuries such as whiplash. While not an obvious welfare reform this is projected to reduce car insurance bills an average of £40-£50 annually.

Insurance is something that all households with a car need, and regardless of income the cost of insurance is the same. For low earning rural households, this is a bit of a saving. London dwellers are less likely to benefit.