Support 100 years of independent journalism.

  1. Politics
  2. /
11 February 2011

The coalition’s welfare squeeze

Families could lose £2,700 a year as a result of cuts to benefits and tax credits.

By George Eaton

Iain Duncan Smith memorably “guaranteed” to the Commons that there would be no losers from the introduction of the universal credit. But today’s TUC study on welfare suggests otherwise. There will technically be “no losers” when the universal credit is introduced in April 2013, in the sense that no one will see their income fall as a direct result. But it is only possible for the government to make this claim because it is pre-emptively slashing benefits elsewhere.

To be fair, the government’s own white paper states as much:

This simplification means that, in the long term, some households will be entitled to less under Universal Credit than they would have been had the current benefits and tax credits system continued.

The coalition has pledged to provide “transitional payments” to anyone whose level of benefits or tax credits drops as a result of the reform. But it has yet to define clearly how long these payments will be made for or how it will avoid creating perverse work incentives.

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The best of the New Statesman, delivered to your inbox every weekday morning. The New Statesman’s global affairs newsletter, every Monday and Friday. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy

The TUC report warns that a family with two children, with both parents in minimum-wage jobs, could lose £2,756 a year by April 2013. The full calculation is below.

The coalition’s welfare squeeze

Total annual financial losses from welfare cuts for households with two parents in employment, working 35 hours a week, each on the minimum wage.

Reduction in childcare costs met by tax credits (from April 2011) – £1,560

Child benefit freeze (three years from April 2011) – £201

Freeze in the value of the basic element of Working Tax Credit (three years from 2011) – £135

Switching from RPI to CPI uprating of the couple element of Working Tax Credit (from April 2011) – £40

Freeze in the value of the 30-hour element of Working Tax Credit (three years from April 2011) – £60

Abolition of the baby element of Child Tax Credit (from April 2011) – £545

Abolition of the toddler element of Child Tax Credit (from April 2012) – £220

Abolition of the Child Trust Fund (from January 2011) – £250

Above-inflation increase in the child element of Child Tax Credit (in April 2011 and April 2012) – £255

Total loss: £2,756