Why April will be the cruellest month in the age of austerity

The "bedroom tax", the new Poll Tax and the 1% cap on benefit increases will squeeze the poor as never before.

April is the month when the full force of George Osborne's austerity programme will finally be felt. In the seventy years since the Beveridge report was published, no government has ever so consciously reduced support for the poorest. Below, I summarise the measures that mean the unemployed and the low paid will have their incomes squeezed as never before.

1 April: The "bedroom tax"

Perhaps the cruellest and most ill-thought through of all of the reforms. From next month, those social housing tenants deemed to have one spare room will have their housing benefit cut by 14 per cent, while those deemed to have two or more will have it cut by 25 per cent. The removal of what the government calls "the spare room subsidy" (and what most others call the "bedroom tax") will cost tenants an average of £14 a week more in rent or an extra £728 a year. Ministers have defended the measure on the basis that it will encourage families to downsize to more "appropriately sized" accommodation but in doing so they have ignored the lack of one bedroom houses available. In England, for instance, there are 180,000 social tenants "under-occupying" two-bedroom houses but fewer than 70,000 one-bedroom social houses to move to. Housing experts have warned that the £490m the government hopes to recoup could be reduced or even wiped out as families are forced into the private sector, where rents are higher, leading to even greater pressure on the housing benefit budget.

But by far the most troubling aspect of the "bedroom tax" is the impact it will have on the disabled. For many of these families, this additional space is not a luxury but a necessity. For instance, a disabled person who suffers from disrupted sleep may be unable to share a room with their partner, likewise a disabled child with their brothers and sisters. The same applies to those recovering from an illness or an operation. After months of pressure from campaigners, the government announced that families with severely disabled children would be exempt (as well as 5,000 foster carers and some armed forces families) but the majority of the 670,000 tenants due to be affected will still lose out, including hundreds of thousands of disabled families.

In a written statement, Iain Duncan Smith emphasised that Discretionary Housing Payments would remain available for "other priority groups" including those "whose homes have had significant disability adaptations and those with longterm medical conditions that create difficulties in sharing a bedroom." But research published by the National Housing Federation shows how inadequate this support is. Were the £30m discretionary fund to be distributed equally among every claimant of Disability Living Allowance affected (229,803 in total), they would each receive just £2.51 per week, compared to the average weekly loss in housing benefit of £14.

Having conceded that those families with severely disabled children should be exempt, on what grounds does the government maintain that those with one more or disabled adults should not? In a recent letter to George Osborne calling for all disabled families to be spared from the cut, the heads of seven charities, including Carers UK, Mencap and Macmillan Cancer support, cited one typical case.

Jean and Carl live in a two bedroom house. Carl has suffered from serious health complications for years and is now unable to work as a result of a series of operations and treatment. Jean juggles caring for her husband with a job at a local supermarket. They are unable to share a room because Carl’s condition causes very disrupted sleep and if they share Jean cannot sleep. Her shifts at work mean she frequently has to be up at 4am and she would simply be unable to do this if she could not get a good night’s sleep. They fear they will not be able to make up the shortfall in their Housing Benefit and if forced to downsize Jean is worried about her ability to do her job if she is unable to sleep properly (names changed to preserve anonymity).

1 April: "Poll Tax II": council tax support cut by 10 per cent

The most hazardous of the welfare changes could be that which has received the least attention (although Staggers readers will be better briefed than most): the government’s reform of the council-tax system. Polls routinely show that the levy is Britain’s most unpopular tax but the coalition is about to ensure that millions of people pay it for the first time. At present, those households deemed too poor to meet the monthly charge receive Council Tax Benefit to cover all or part of their bill. With 5.9 million recipients, it is claimed by more families than any other means-tested benefit or tax credit. Now, in its quest to roll back the welfare state, the coalition has cut the fund for council tax support by 10 per cent. At the same time, it has localised the system, transferring responsibility for the new regime from central government to local councils.

From this April, councils must either maintain current levels of support and impose greater cuts elsewhere, remove other exemptions (such as those for second homes and empty properties), or ask those who receive a full or partial rebate at present to make a minimum payment. Most have opted for the latter course. A report earlier this week by the Joseph Rowntree Foundation found that 1.9 million families who do not currently pay council tax will be billed an average of £140 a year. In addition, 150,000 low income families will pay on average £300 more a year.

When the poll tax was introduced in 1989, the poor were at least assured that their benefits would rise with prices. But under George Osborne’s plan to uprate working-age benefits by 1 per cent for each of the next three years (see below), rather than in line with inflation, their incomes will be squeezed to an unprecedented degree. Figures from the Institute for Fiscal Studies show that the average working family will lose £165 per year, while the average non-working family will lose £215. Confronted by these losses, which household will willingly pay hundreds of pounds in additional tax? Yet, for the sake of saving just £480m a year, the coalition intends to force councils to chase the poorest through the courts to recoup a charge they cannot afford to pay.

8 April: Benefit increases capped at 1 per cent for three years

From this April, until at least 2015-16, working-age benefits and tax credits will be uprated by just one per cent a year, rather than in line with inflation as usual. By breaking this link, the coalition will leave the poorest families even more vulnerable to fluctuations in food and energy prices. CPI inflation is forecast by the Office for Budget Responsibility to be 2.6 per cent in September 2013 and 2.2 per cent in September 2014, meaning that those families affected will suffer a cumulative loss of four per cent of income by the end of the period. For many, this will mean being forced to choose between heating their home and feeding their family.

As the Institute for Fiscal Studies has shown, 2.5 million households without someone in work will lose an average of £215 per year in 2015-16, while seven million households with someone in work will lose an average of £165 per year. If, as in recent years, inflation rises faster than expected, these losses will be even greater.

In seeking to justify the measure, the Conservatives have repeatedly highlighted the fact that benefits have risen faster than private sector wages in recent years. Since 2007, the former have increased by an average of 20 per cent (in line with inflation), while the latter have increased by 11.4 per cent.

But this is an argument for increasing wages (for instance, by ensuring greater payment of the living wage), not for cutting benefits. Indeed, many of those whose wages have failed to keep pace with inflation rely on in-work benefits such as tax credits to protect their living standards. The government's decision to cut these benefits in real-terms (contrary to ministers' "strivers/scroungers" dichotomy, 60 per cent of the real-terms cut falls on working families) will further squeeze their disposable income.

When Iain Duncan Smith says that benefits have risen faster than wages, he is really complaining that wages have risen more slowly than inflation (and are expected to continue to do so until at least 2014). But rather than prompting the government to slash benefits, this grim statistic should encourage it to pursue a genuine growth strategy that ensures more people have access to adequately paid employment.

While benefits have increased faster than wages in the last five years, this is a temporary quirk caused by the recession. Until now, their value relative to wages has plummeted. In 1979, unemployment benefit was worth 22 per cent of average weekly earnings. Today, it is worth just 15 per cent.

15 April: Benefit cap of £500 a week introduced

First announced by George Osborne at the 2010 Conservative conference, the £500 a week (£26,000 a year) cap on the total amount of benefits an out of work family can claim will be introduced next month. But in a sign of ministerial nervousness over the measure, it will initially apply only to four London boroughs - Bromley, Croydon, Enfield, Haringey - before being applied nationwide from September. The cap, which applies regardless of family size, will cost 50,000 households an average of £93 a week, with 29 per cent losing more than £100. The Children's Society has warned that 80,000 children will be made homeless as families are forced to move out of private sector rented homes that are no longer affordable.

The government has justified the cap on the grounds that it is unfair for an out of work family to receive more in benefits than the average family receives from going out to work. But this (admittedly shrewd) line ignores the support that many in-work families receive through the tax credit system. Were the cap to take this into account, it would be set at a significantly higher level of £31,500, preventing thousands of families being pushed into poverty.

Finally, it's worth noting as I have before, that welfare cuts aren't just bad for the poor, they're bad for growth too. To anyone with an elementary understanding of economics, this will come as no surprise. If the government reduces someone's benefits by £728 a year (the average annual cost of the "bedroom tax"), that's £728 less for that person to spend on goods and services. And since, as Paul Krugman sagely observes, "your spending is my income" (and "my spending is your income"), it's not just the claimant who loses out, it's shops and businesses too.

In addition, since the poor are forced to spend, rather than save, what little they receive, welfare cuts are around twice as economically harmful as tax increases (the OBR estimates that output is reduced by £60 for every £100 of welfare cuts, compared to £35 for increases in VAT and £30 for increases in income tax). It's for this reason that wise governments allow welfare spending to rise in times of stagnation. While borrowing temporarily increases as a result, higher benefits (known as the  "automatic stabilisers") are an essential means of maintaining consumer demand. But Osborne’s decision to cap benefit increases at 1 per cent (alongside other pro-cyclical measures) runs entirely against such logic. Welfare payments will now fall, rather than rise, in line with inflation, reducing real-terms incomes. As a result, Britain’s anaemic economy will be even more prone to recession.

Postscript: a welfare cut for the poor, a tax cut for the rich

There is, however, one group conspicuously exempt from next month's austerity: the rich. For the 1.5 per cent of earners who make over £150,000 a year, the top rate of income tax will be reduced from 50 per cent to 45 per cent on 6 April. The move will benefit the UK's 13,000 income millionaires by an average of £100,769 a year. Were the government to reverse this measure, it could expect to raise around £3bn a year, more than enough to fund inflation-linked rises in benefits.

Even in the first year of the 50p rate, when temporary forestalling meant many avoided it (for instance, by bringing forward income to 2009-10, the year before the new rate took effect - a trick they could only have played once), the tax raised an extra £1.1bn. This alone is enough to meet the annual cost of increasing benefits in line with inflation (the government expects to save £0.9bn in 2014-15 by capping increases at 1 per cent).

George Osborne leaves number 11 Downing Street in central London on March 19, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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No, IDS, welfare isn't a path to wealth. Quite the opposite, in fact

Far from being a lifestyle choice, welfare is all too often a struggle for survival.

Iain Duncan Smith really is the gift that keeps on giving. You get one bile-filled giftbag of small-minded, hypocritical nastiness and, just when you think it has no more pain to inflict, off comes another ghastly layer of wrapping paper and out oozes some more. He is a game of Pass the Parcel for people who hate humanity.
For reasons beyond current understanding, the Conservative party not only let him have his own department but set him loose on a stage at their conference, despite the fact that there was both a microphone and an audience and that people might hear and report on what he was going to say. It’s almost like they don’t care that the man in charge of the benefits system displays a fundamental - and, dare I say, deliberate - misunderstanding of what that system is for.
IDS took to the stage to tell the disabled people of Britain - or as he likes to think of us, the not “normal” people of Britain -  “We won’t lift you out of poverty by simply transferring taxpayers’ money to you. With our help, you’ll work your way out of poverty.” It really is fascinating that he was allowed to make such an important speech on Opposite Day.
Iain Duncan Smith is a man possessed by the concept of work. That’s why he put in so many hours and Universal Credit was such a roaring success. Work, when available and suitable and accessible, is a wonderful thing, but for those unable to access it, the welfare system is a crucial safety net that keeps them from becoming totally impoverished.
Benefits absolutely should be the route out of poverty. They are the essential buffer between people and penury. Iain Duncan Smith speaks as though there is a weekly rollover on them, building and building until claimants can skip into the kind of mansion he lives in. They are not that. They are a small stipend to keep body and soul together.
Benefits shouldn’t be a route to wealth and DWP cuts have ensured that, but the notion that we should leave people in poverty astounds me. The people who rely on benefits don’t see it as a quick buck, an easy income. We cannot be the kind of society who is content to leave people destitute because they are unable to work, through long-term illness or short-term job-seeking. Without benefits, people are literally starving. People don’t go to food banks because Waitrose are out of asparagus. They go because the government has snipped away at their benefits until they have become too poor to feed themselves.
The utter hypocrisy of telling disabled people to work themselves out of poverty while cutting Access to Work is so audacious as to be almost impressive. IDS suggests that suitable jobs for disabled workers are constantly popping out of the ground like daisies, despite the fact that his own government closed 36 Remploy factories. If he wants people to work their way out of poverty, he has make it very easy to find that work.
His speech was riddled with odious little snippets digging at those who rely on his department. No one is “simply transferring taxpayers’ money” to claimants, as though every Friday he sits down with his card reader to do some online banking, sneaking into people’s accounts and spiriting their cash away to the scrounging masses. Anyone who has come within ten feet of claiming benefits knows it is far from a simple process.
He is incredulous that if a doctor says you are too sick to work, you get signed off work, as though doctors are untrained apes that somehow gained access to a pen. This is only the latest absurd episode in DWP’s ongoing deep mistrust of the medical profession, whose knowledge of their own patients is often ignored in favour of a brief assessment by an outside agency. IDS implies it is yes-no question that GPs ask; you’re either well enough to work or signed off indefinitely to leech from the state. This is simply not true. GPs can recommend their patients for differing approaches for remaining in work, be it a phased return or adapted circumstances and they do tend to have the advantage over the DWP’s agency of having actually met their patient before.
I have read enough stories of the callous ineptitude of sanctions and cuts starving the people we are meant to be protecting. A robust welfare system is the sign of a society that cares for those in need. We need to provide accessible, suitable jobs for those who can work and accessible, suitable benefits for those who can’t. That truly would be a gift that keeps giving.