- Our Work
- The Reformer Blog
29 May 2015
On Wednesday, the House of Commons gathered to listen to the Queen lay out her government’s plans for the coming Parliament. The Conservative Government put forward a “One Nation” approach focused on social justice, better outcomes for working people and uniting the country. David Cameron reaffirmed his commitment to improving opportunities for the most disadvantaged, seeing the election outcome as “a golden opportunity to renew the promise to those least fortunate; that they will have the opportunity for a brighter future”.
The Full Employment and Welfare Benefits Bill set out changes to improve the financial position of low earners, in particular to remove people on the minimum wage from paying Income Tax and ensure the Personal Allowance rises in line with the minimum wage rather than inflation. Benefit freezes may however offset any potential gain from these measures. For those on already low incomes the proposed freezing of working age benefits including Jobseekers Allowance, Tax Credits and Child Benefit, will only erode the value of their benefits and reduce their standard of living.
While the Welfare Bill held no surprises, there was a gaping hole where the detail of the Government’s promised £12 billion worth of savings should have been. The measures set out on Wednesday will make limited headway towards this figure – there’s a long way to go, particularly if the “least fortunate” are not to be hit the hardest.
The speech renewed the previous Government’s focus on fairness between those in and out of work and the need for strong work incentives. Reducing the household benefit cap to £23,000 a year, equivalent to a £29,000 annual salary before tax, means that out-of-work families can no longer receive more than the average working family. This is aimed at improving perceived fairness of the benefits system. The Institute for Fiscal Studies have calculated that this policy would affect fewer than 100,000 families, each losing £3,000 or less, and reduce spending by only £0.1 billion. Similarly, removing automatic entitlement to housing support for 18-21 year olds constitutes a significant cut for around 20,000 young people, but is also estimated to save just £0.1 billion.
Looking to the next five years, Cameron concluded; ‘It’s challenging but doable; optimistic but realistic.’ If the Government is to take £12 billion out of welfare then these reforms certainly are optimistic, but realistic? Less so. We will have to wait until the Emergency Budget on July 8 to find out how the Government intends to balance better outcomes for the “least fortunate” with significant cuts to welfare.
Hannah Titley, Researcher, Reform