Millions of poor UK households face massive cuts to their incomes under Tory benefit cuts, warn researchers

'Big benefit cuts in the pipeline will leave the lowest income groups substantially worse off'

Rob Merrick
Deputy Political Editor
Thursday 27 April 2017 13:19 BST
Huge benefit cuts are in the pipeline under Conservative plans, the IFS said
Huge benefit cuts are in the pipeline under Conservative plans, the IFS said (PA)

Millions of poorer families face massive cuts to their incomes under Conservative benefit cuts in the pipeline, independent researchers warn today.

Nearly 3m working households with children on tax credits would be an average of £2,500 a year worse off, if the plans go ahead.

And 1m families with children and nobody in paid work would be £3,000 per year worse off on average, the respected Institute for Fiscal Studies (IFS) said.

The plans would turbo-charge the already harsh impact of benefit cuts on Britain’s poorest families during the Coalition’s years in power, it concluded.

The analysis was seized upon by Labour to warn that a Conservative election victory posed a “clear threat to working people’s living standards”.

The Liberal Democrats pointed to the ‘Brexit effect’ – with rising inflation pushing up the cost of a planned benefits freeze, leaving struggling families even worse off than previously thought.

John McDonnell, Labour's Shadow Chancellor, said: “Today’s IFS analysis reveals the stark choice in this election.

“Under Tory proposals, cuts to in-work support will leave working families with children an average of £2,500 a year worse off.”

And Susan Kramer, the Lib Dem Treasury spokeswoman, said: “The Brexit squeeze will hit people in the pocket across the country, with the poorest families hit hardest.”

The IFS study highlights how Conservative tax cuts pledged at the last election have already come into force, delivering a windfall to wealthier families.

But only “small” benefit cuts have been introduced so far – with the benefits freeze, cuts to child tax credit and the expansion of cuts in universal credit still to come.

These would have “a bigger effect on the entitlements of the poorest families than the cuts made by the Coalition”, the IFS warned, with families with children hardest hit.

Paul Johnson, the IFS director said: “Big benefit cuts in the pipeline will leave the lowest income groups substantially worse off.”

And Tom Waters, the organisation’s research economist, added: “While the tax cuts have largely already been delivered, most of the benefit cuts are yet to take effect.”

The IFS study found that:

* Raising income tax allowances will cost the Government around £5bn a year – handing £160 to basic-rate taxpayers and £380 to higher-rate taxpayers.

* The Government's freeze on most working-age benefits has only amounted to a one per cent real cut so far, because of low inflation over the last two years.

* However, rising inflation because of plunge in sterling’s value following the Brexit referendum is set to reduce the value of these benefits by five per cent between now and 2020.

* A ‘two child’ limit to tax credits and the roll-out of the less generous universal credit will each impose cuts of around £5bn a year in the long run.

* Pensioner households are mostly protected from future benefit cuts.

Although Theresa May has broken with policies introduced by David Cameron and George Osborne in other areas, she has stuck with the controversial cuts to benefits set out in 2015.

The IFS stressed that its analysis did not include any potential manifesto commitments, with the Tory manifesto due to be published on May 8.

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