Budget Resolutions and Economic Situation

Kate Green Excerpts

Wednesday 19th March 2014 Commons Chamber

[Kate Green (Stretford and Urmston) (Lab)]

There is little in the Budget for families with children. It follows a series of Budgets and spending reviews that have been difficult and disappointing for children and which, the Institute for Fiscal Studies has predicted, will lead to a substantial rise in poverty over this decade.

I recognise why the Chancellor wants to incentivise saving, and of course we want to ensure that pensioners are protected from poverty, but I am concerned that the Budget exacerbates an increasingly unbalanced approach to support between the generations. The first thing that constituents of all ages say to me on the doorstep is how worried they are about the prospects for the next generation.

I am proud that Labour took more than 1 million children out of poverty. The Budget and the Government’s depressingly weak child poverty strategy that was announced the other day represent missed opportunities, and as a result, the gains made under Labour will be all but wiped out. That is not because there was no option: different choices could have been made. The burden of austerity has been predominantly borne by spending cuts rather than by tax increases for the wealthiest, and that has had a disproportionate effect on low-income families.

We know that family benefits have been an important plank in reducing child poverty. According to the Institute for Social and Economic Research, the UK has the second highest child poverty rate, before taxes and transfers, in the 27 EU countries, yet, by the 2014-15 financial year, working age benefits spend will be £22 billion less than in 2010-11 as result of uprating policies, cuts and freezes. That is having an especially harsh impact in households with a disabled family member. One third of people in poverty live in a household with a disabled member, and a quarter of children in poverty live with a disabled adult.

Localising benefits also makes the situation worse. Council tax assistance and local assistance schemes have been criticised by the Public Accounts Committee and the Work and Pensions Committee respectively. The Committees have expressed concern about their impact on vulnerable families. In the meantime, the cost of living is rising—the impact on families with children is especially harsh—yet for first time since the 1930s, the uprating policy for payments for children is now entirely detached from the price rises that affect them. Uprating at 1% bears no relation to RPI or to CPI; the cost of goods and services has risen 15% in past three years. Indirect taxes have hit the poorest families hardest, as a higher proportion of their income is hit.

The living costs that particularly affect families with children have been rising fastest. They include food, energy, rent and child care. This week’s announcement on child care will still leave families without the help that they need. The Institute for Fiscal Studies has confirmed there is no new money to fund the announcement, and the number of families benefiting from the scheme is around half what the Government said it would be. Figures revealed in the Government’s latest consultation document show that around 1.26 million families will benefit from tax-free child care, not the 2.5 million claimed in the original consultation document. Also, there is no new support for those on tax credits, who will not be able to access the tax-free child care.

I welcome the increase in support for child care costs under universal credit to 85%, but it is a matter of concern that that will be met from within the universal credit budget. It is therefore unclear where the money will really come from. Universal credit is already running late and over budget, so how can this extra sum be afforded? We also have no firm timetable for all parents being migrated on to universal credit; we know that the programme is experiencing significant delays.

The Government say that work is the best route out of poverty, but the majority of children in poverty live in a household in which at least one adult is working. Tax breaks do not do enough to compensate those families. The Resolution Foundation has found that 75% of the benefit of the increase in personal tax threshold goes to the top half of the income distribution. The Chancellor himself confirmed this afternoon that higher rate taxpayers—those earning up to £100,000—will benefit from the increase in the threshold. Only a tiny element of the cost of the initiative will go towards lifting people out of tax altogether. I understand why the policy is popular, and why it has been effective for some low-paid workers, but Ministers need to look carefully at whether this is now becoming a game of diminishing returns. Meanwhile, there is no other effective labour market strategy. There is no strategy on progression, for example, and there has been insufficient action on low pay, zero-hours contracts and part-time work.

The gender pay gap is also widening. The element that is totally missing from this Budget—and all previous Budgets and spending announcements from this Government—is a gender analysis. Their policies fail to recognise that child poverty is a product of maternal poverty. Mothers are usually the main carers of children, yet this Government’s policies are positively inimical to women. Universal credit is to be paid to one member of a household, which provides poor incentives for second earners to increase their pay. The marriage tax break will help only one in six families with children, with 84% of that benefit going to men. Meanwhile, child benefit, which is usually paid to women, has been frozen or removed, and the child tax credit uprating has been held back at 1%. Marriage tax breaks are no help whatever to lone parents, the majority of whom are women, and whose children face greatest risk of poverty. Lone parents are also now having to pay for the child maintenance to help to support their children.

Overall, the value of financial support for families with children is being eroded, compared with the minimum income needed for families to raise their children. This is beginning to create real desperation among those families. More and more parents are going without, in order to provide the basics for their kids.

I was disappointed when I looked to the Budget today for a new approach. But a new approach is affordable and it can be done: we could redirect the ill-chosen marriage tax break to benefit low-paid families; we could do more to attack the basic living costs faced by families, and more to freeze energy prices and support low-income families with the cost of child care; we could rebalance the system to recognise the role of mothers as main carers of children, putting an emphasis on money paid to women in the tax and benefits system, and money paid to mothers which will be spent on their kids; we should look again at the structure of universal credit, and at its disincentives for lone parents and second earners to maximise their income from work; and we should look back to the helpful recommendations the previous Government received from Lisa Harker, which I believe were welcomed by all parties, to design employment support in Jobcentre Plus more effectively to recognise the particular parenting and caring needs of parents—that should also be done in the Work programme.

If those measures were undertaken, we would be on track to eradicate child poverty, to boost parental—especially maternal—employment and to end inequality gaps. I hope that Ministers will begin to re-examine the way in which they achieve a balance of measures that properly reach out to all families, particularly families with children. That has been sadly lacking from the Budget today.