Getty
Show Hide image

What welfare changes did Philip Hammond make in his Budget 2017?

The Chancellor offered nothing new to help ease the Tory squeeze on benefits.

You could be forgiven for believing this Chancellor is more sympathetic towards benefit claimants than his predecessor. While George Osborne used arbitrary cuts to the welfare budget as an ideological weapon against the state, hitting the most vulnerable, the current government has changed the rhetoric about those who have the least.

Who could forget the fawning over Theresa May’s first statement as Prime Minister by even the most progressive corners of the press? Her claim outside No 10 that she is “squarely at the service of ordinary working-class people” – and the dedication of her speech to those who “can just about manage but […] worry about the cost of living” – led to excitable cries of One Nation, blue-collar Toryism and even Milibandism.

But, as I have argued before, the Chancellor Philip Hammond’s first financial statement last Autumn showed that this rhetoric wouldn’t be backed up by a huge amount of policy. Hammond and May’s inheritance of Osborne’s severe welfare cuts continues to characterise their attitude towards benefit claimants.

The welfare cap is still there. The four-year freeze of working-age benefits continues. This means those claiming Jobseeker’s Allowance, Employment and Support Allowance, income support, housing benefit, Universal Credit, child tax credits, working tax credits and child benefit will be worse off, as inflation increases but their benefits remain flat.

Child tax credits and child benefit through Universal Credit will be limited to two children, and the government recently announced its plan to remove the entitlement to housing benefit for some 18-21 year olds.

Hammond’s only offer to those depending on the state to boost their income is to reduce the taper rate at which your benefits through Universal Credit are withdrawn as you begin to earn more – from 65 per cent to 63 per cent.

The Chancellor announced this in his Autumn Statement last November and has made no new announcements about benefits since. In fact, his only reference to welfare in his Spring Budget speech was to repeat his softening of the taper rate:

“The Universal Credit taper rate will be reduced in April from 65 per cent to 63 per cent, cutting tax for 3 million families on low incomes.”

But remember, this isn’t giving more money to claimants – it’s very slightly reducing the amount Universal Credit is being cut. According to the Independent, the planned £3bn-a-year reduction in the work allowance (which is the amount benefit claimants can earn before their benefits start being withdrawn) has only really been reduced by about £700m by Hammond.

And the Office for Budget Responsibility’s analysis of the Budget finds less expenditure on the new benefit regime of Universal Credit than the old welfare system – reflecting the fact that the new system is “less generous on average”, particularly for those who will be claiming the equivalent of tax credits and disability benefits.

Not exactly relieving those worries about the cost of living May was so sympathetic about on Downing Street last July.

Anoosh Chakelian is senior writer at the New Statesman.

Getty
Show Hide image

Why Angela Merkel's comments about the UK and US shouldn't be given too much weight

The Chancellor's comments are aimed at a domestic and European audience, and she won't be abandoning Anglo-German relationships just yet.

Angela Merkel’s latest remarks do not seem well-judged but should not be given undue significance. Speaking as part of a rally in Munich for her sister party, the CSU, the German Chancellor claimed “we Europeans must really take our own fate into our hands”.

The comments should be read in the context of September's German elections and Merkel’s determination to restrain the fortune of her main political rival, Martin Schulz – obviously a strong Europhile and a committed Trump critic. Sigmar Gabriel - previously seen as a candidate to lead the left-wing SPD - has for some time been pressing for Germany and Europe to have “enough self-confidence” to stand up to Trump. He called for a “self-confident position, not just on behalf of us Germans but all Europeans”. Merkel is in part responding to this pressure.

Her words were well received by her audience. The beer hall crowd erupted into sustained applause. But taking an implicit pop at Donald Trump is hardly likely to be a divisive tactic at such a gathering. Criticising the UK post-Brexit and the US under Trump is the sort of virtue signalling guaranteed to ensure a good clap.

It’s not clear that the comments represent that much of a new departure, as she herself has since claimed. She said something similar earlier this year. In January, after the publication of Donald Trump’s interview with The Times and Bild, she said that “we Europeans have our fate in our own hands”.

At one level what Merkel said is something of a truism: in two year’s time Britain will no longer be directly deciding the fate of the EU. In future no British Prime Minister will attend the European Council, and British MEPs will leave the Parliament at the next round of European elections in 2019. Yet Merkel’s words “we Europeans”, conflate Europe and the EU, something she has previously rejected. Back in July last year, at a joint press conference with Theresa May, she said: “the UK after all remains part of Europe, if not of the Union”.

At the same press conference, Merkel also confirmed that the EU and the UK would need to continue to work together. At that time she even used the first person plural to include Britain, saying “we have certain missions also to fulfil with the rest of the world” – there the ‘we’ meant Britain and the EU, now the 'we' excludes Britain.

Her comments surely also mark a frustration born of difficulties at the G7 summit over climate change, but Britain and Germany agreed at the meeting in Sicily on the Paris Accord. More broadly, the next few months will be crucial for determining the future relationship between Britain and the EU. There will be many difficult negotiations ahead.

Merkel is widely expected to remain the German Chancellor after this autumn’s election. As the single most powerful individual in the EU27, she is the most crucial person in determining future relations between the UK and the EU. Indeed, to some extent, it was her intransigence during Cameron’s ‘renegotiation’ which precipitated Brexit itself. She also needs to watch with care growing irritation across the EU at the (perceived) extent of German influence and control over the institutions and direction of the European project. Recent reports in the Frankfurter Allgemeine Zeitung which suggested a Merkel plan for Jens Weidmann of the Bundesbank to succeed Mario Draghi at the ECB have not gone down well across southern Europe. For those critics, the hands controlling the fate of Europe are Merkel’s.

Brexit remains a crucial challenge for the EU. How the issue is handled will shape the future of the Union. Many across Europe’s capitals are worried that Brussels risks driving Britain further away than Brexit will require; they are worried lest the Channel becomes metaphorically wider and Britain turns its back on the continent. On the UK side, Theresa May has accepted the EU, and particularly Merkel’s, insistence, that there can be no cherry picking, and therefore she has committed to leaving the single market as well as the EU. May has offered a “deep and special” partnership and a comprehensive free trading arrangement. Merkel should welcome Britain’s clarity. She must work with new French President Emmanuel Macron and others to lead the EU towards a new relationship with Britain – a close partnership which protects free trade, security and the other forms of cooperation which benefit all Europeans.

Henry Newman is the director of Open Europe. He tweets @henrynewman.

0800 7318496