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  1. Politics
7 March 2017updated 01 Aug 2021 7:11am

Budget 2017 for benefits: what welfare changes is Philip Hammond planning?

Everything we know so far about the Chancellor’s plans for the benefits system.

By Anoosh Chakelian

The Chancellor Philip Hammond will announce changes to welfare when he delivers his Budget. What do we know?

How has Theresa May’s government approached welfare so far?

Outside No 10 on 13 July 2016, Theresa May put equality at the heart of her first statement as Prime Minister. She claimed that she would put herself, “squarely at the service of ordinary working-class people”. She dedicated her speech to those who, “can just about manage but you worry about the cost of living and getting your kids into a good school”, telling the nation: “If you’re just managing, I want to address you directly.”

This meant that progressives looked to the first Autumn Statement from her Chancellor Philip Hammond last year to see if she would turn her rhetoric into action.

There wasn’t much, however, for the “just about managing” (nicknamed “Jams”) when the new government announced its first plan for Britain’s finances. The Chancellor eased the planned cuts to Universal Credit slightly, by slowing the pace at which your benefits are reduced the higher above the allowance you earn. He said the welfare cap would remain, but promised there would be no more welfare cuts this parliament.

A four-year freeze on tax credits and benefits such as Jobseeker’s Allowance and income support has been in place since April 2016 last year, and £12bn worth of cuts to the welfare budget were planned for this parliament in the 2015 Tory manifesto pledge. The government wants to stick to making these savings. A £3bn-a-year reduction in the work allowance – the amount benefit claimants can earn before their benefits start being withdrawn – has only really been reduced by about £700m by Hammond.

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Hammond inherited harsh welfare policies from George Osborne’s regime, whose austerity programme hit low-income households the hardest – cutting working-age benefits to add to the burden of wage stagnation and rising living costs. He’s not done much so far to ease this pain.

So what are they planning for the Budget?

We can’t expect a huge amount of easing up on benefit freezes in the coming Budget. Here’s what we’re likely to see:

Jobseeker’s Allowance freeze

This is an Osborne legacy, but the unemployment benefit will continue to be frozen at £57.90 a week for under-25s, and £73.10 for those who are 25 and older. Since April 2013, this went up 1 per cent a year. The freeze was announced in the 2015 budget, and came into force last year. Remember, the rate of inflation is increasing, so this could be a big squeeze in the next year.

No automatic entitlement to housing benefit

The government recently announced its plan to remove the entitlement to housing benefit for some 18-21 year olds. Centrepoint warns that this could lead to 9,000 young people being unable to access accommodation and at risk of homelessness. The Guardian suggests Hammond might u-turn on this.

Child benefit freeze

Another continued freeze, at the existing rate of £20.70 a week for the first child and £13.70 for ensuing children. Again, inflation going up means this will feel increasingly tighter. Another part of the Osborne plan.

Child tax credit limited to two children

If you want to claim child tax credits for children born on or after 6 April 2017, you can only do so for two children. If you already claim them, your claims won’t be affected. You also won’t receive what’s known as the “family element” (around £40.40 a month) if your children are born after that date. This is another Osborne policy, announced in 2015 to start this year.

Universal Credit freeze

Universal Credit rates will be frozen for 2017-18. The Osborne plan was the cut the work allowance by £3bn each year – a plan Hammond slightly softened by reducing the taper rate in the Autumn Statement.

So that’s a huge squeeze on living standards for May’s beloved “ordinary, working-class people” then?

Yep.

How do they justify it?

Not very well. The government talks a lot about the rise in what it brands the “national living wage”, which is actually the minimum wage, and also about raising the personal tax allowance. The former isn’t enough to live on if in-work benefits are being restricted (it is lower than the actual living wage, as calculated by the Living Wage Foundation). And the latter disproportionately benefits higher earners.

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