UK Chancellor George Osborne made the decision to make a U-turn on the benefit cuts in the UK, designed to hit the poorest working families. He claims the current growth allows for it, but the changes will happen eventually anyway.
In May 2015, the new Conservative Government upset many by announcing plans to cut tax credits, a benefit paid to low income individuals and families in work. The plans would see families lose on average £1,000 from their benefits, making many claim that the number of people relying on food banks would increase. The House of Lords made a shock decision to block the tax credits cut bill, saying that the changes need to happen gradually. Despite claiming a constitutional issue, the Conservative Government has listened to the House of Lords rejection.
During Osborne’s Autumn Statement yesterday, he announced that the benefit cuts would not happen after all, according to the BBC. While families and individuals relying on tax credits rejoiced, there was some bad news. The changes would eventually be phased in as tax credits join with six other benefits to make Universal Credit from 2018. Families have already been warned that they will see a reduction in the amount they can get when this change happens.
Osborne had said that changes to the whole welfare system would help save £12bn. This would help the current UK debt fall significantly. The changes to the tax credit system would mean that £4.4 billion would be saved, but those against the plans said that people would struggle elsewhere and the savings would not end up happening.
After the House of Lords defeat, many expected Osborne to phase in the cuts. However, he said the easiest thing would be just to scrap the plans completely, even though that means the Government would miss its planned targets for cutting welfare spending. According to the Chancellor, better public finances and higher tax receipts have meant that the benefit cuts have not had to go ahead as planned.
There are two main types of tax credits available to people in the United Kingdom: working tax credits and child tax credits. The working tax credits also have a childcare element for those who pay for childcare through a registered childminder or nursery. They are available to people who meet minimum requirements, such as working at least 16 hours a week and being 25 or older (16 or older if they have children). As income increases, the amount of tax credits available decreases. The changes were going to affect how much individuals lost as their income increased, meaning that they could lose out on thousands of pounds per year.
Stuart Hosie of the SNP Treasury said that keeping the pressure on Osborne about these cuts was the right thing to do. The Scottish party continually pushed for the Conservative Government to change the plans, plans that they had previously promised not to make so the party would be elected in as a majority government. John McDonnell says that it is not the full reversal wanted, since Universal Credit will still cause a number of cuts. During the course of the current Parliament, he says that families will see £3bn in total being cut from benefits. Labour arguably did not help matters when many decided to abstain from the vote to stop the tax credit bill going through.
Not everyone on benefits has been protected by Osborne’s U-turn. Housing Benefit will see caps at the local housing rate, according to The Guardian. Many believe that this is where Osborne is planning on making the savings instead. Students will also be affected by changes to government bursaries, but pensioners will see a rise in their state pension.
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