How the Autumn Statement hit "the strivers"

Sixty per cent of welfare cuts made in this parliament will fall on the working poor.

For a Chancellor who prefaced his Autumn Statement with a declaration that he was "on the side of these who want to work hard and get on", George Osborne has made some rather inconsistent announcements yesterday.

Consider, for example, his decision to uprate tax credits at below-inflation levels for the next three years. Both working couples and lone parents look set to lose over £23 of their working tax credit (WTC) in 2013-14 as a result of this move. Not so bad, one might think, but remember that this comes on top of a prior freeze in value of other key elements of WTC which will remain in place, and which will shave an additional £60 off a working family’s entitlement next year.

The changes being made to the personal tax allowance will do little to offset this shortfall. Extending the threshold potentially leaves basic rate taxpayers £47 better off in 2013-14. But for low-income working families, much of this gain evaporates as other forms of support are tapered away in response to their higher post-tax income. While those further up the income scale will keep the full £47, a working family eligible for both housing and council tax benefit will gain only 13p a week extra as a result of extended allowances.

Osborne is fond of the notion that there is a group of hard working "strivers" out there who throw "those with their blinds down" into sharp relief. In truth, the vast majority of those who rely on benefits and tax credits for part of their income have worked, are in work, or will be back in work very shortly in the future.

And with estimates suggesting that around 60 per cent of welfare cuts made in this parliament will hit the working poor, the Chancellor must do much more to show he understands the problems that those on low incomes face. Rather than glib words, Osborne needs to start providing real, rather than merely rhetorical, support for hard-pressed working families and individuals.

Work and Pensions Secretary Iain Duncan Smith leaves 10 Downing Street on 5 December, 2012. Photograph: Getty Images.

Alison Garnham is chief executive of the Child Poverty Action Group

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Theresa May defies the right by maintaining 0.7% aid pledge

The Prime Minister offers rare continuity with David Cameron but vows to re-examine how the money is spent. 

From the moment Theresa May became Prime Minister, there was speculation that she would abandon the UK's 0.7 per cent aid pledge. She appointed Priti Patel, a previous opponent of the target, as International Development Secretary and repeatedly refused to extend the commitment beyond this parliament. When an early general election was called, the assumption was that 0.7 per cent would not make the manifesto.

But at a campaign event in her Maidenhead constituency, May announced that it would. "Let’s be clear – the 0.7 per cent commitment remains, and will remain," she said in response to a question from the Daily Telegraph's Kate McCann. But she added: "What we need to do, though, is to look at how that money will be spent, and make sure that we are able to spend that money in the most effective way." May has left open the possibility that the UK could abandon the OECD definition of aid and potentially reclassify defence spending for this purpose.

Yet by maintaining the 0.7 per cent pledge, May has faced down her party's right and title such as the Sun and the Daily Mail. On grammar schools, climate change and Brexit, Tory MPs have cheered the Prime Minister's stances but she has now upheld a key component of David Cameron's legacy. George Osborne was one of the first to praise May's decision, tweeting: "Recommitment to 0.7% aid target very welcome. Morally right, strengthens UK influence & was key to creating modern compassionate Conservatives".

A Conservative aide told me that the announcement reflected May's personal commitment to international development, pointing to her recent speech to International Development staff. 

But another Cameron-era target - the state pension "triple lock" - appears less secure. Asked whether the government would continue to raise pensions every year, May pointed to the Tories' record, rather than making any future commitment. The triple lock, which ensures pensions rise in line with average earnings, CPI inflation or by 2.5 per cent (whichever is highest), has long been regarded by some Conservatives as unaffordable. 

Meanwhile, Philip Hammond has hinted that the Tories' "tax lock", which bars increases in income tax, VAT and National Insurance, could be similarly dropped. He said: "I’m a Conservative. I have no ideological desire to to raise taxes. But we need to manage the economy sensibly and sustainably. We need to get the fiscal accounts back into shape.

"It was self evidently clear that the commitments that were made in the 2015 manifesto did and do today constrain the ability to manage the economy flexibly."

May's short speech to workers at a GlaxoSmithKline factory was most notable for her emphasis that "the result is not certain" (the same message delivered by Jeremy Corbyn yesterday). As I reported on Wednesday, the Tories fear that the belief that Labour cannot win could reduce their lead as voters conclude there is no need to turn out. 

George Eaton is political editor of the New Statesman.

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