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10.03.16

Welfare reforms will hit poorest areas worse than richest

Charities have warned against the impact of the government’s welfare reforms, as new research shows they will lead to the greatest loss of income in already struggling areas.

The research, conducted by Sheffield Hallam University for the Joseph Rowntree Foundation (JRF) and Oxfam, says that the greatest loss of income from the reforms will happen to families in less prosperous areas such as older industrial areas, northern cities and some seaside towns and London boroughs, and the smallest loss will be in already prosperous areas in the south.

The reforms, which include extensions to the benefits cap and threshold for withdrawal of universal credit, and reduced tax credits, especially for large families, are due to start being implemented next month. They will lead to a £13bn reduction every year in welfare spending by 2021, bringing the cumulative loss to £27bn every year since 2010.

Professor Steve Fothergill from Sheffield Hallam’s Centre for Regional Economic and Social Research said: “Many individuals and households in more prosperous parts of the country will barely notice that welfare reform is under way.  For others however, the financial consequences will be only too obvious.”

For example, the report shows that Blackburn and Blackpool in Lancashire will each lose £560 for every working age adult as a result of the post-2015 reforms, whereas the loss will be £140 for Richmond upon Thames and £130 for Hart district in Hampshire.

The 10 areas which will lose the least amount of money are all in south east England.

Larger families and social tenants to lose most

The report also suggests that there will be an uneven impact on the demographic groups affected, with just under half (£6.2bn) of the loss coming from working-age tenants in the social rented sector.

They will lose almost £1,700 a year, compared to £260 a year for working age owner-occupiers.

Larger families will also be affected worse, with single parents with two or more dependent children losing £1,450 a year and single parents losing £1,750.

In total, families with dependent children will bear 83% of the benefits loss.

Of the 20 places losing the most in the reforms, 15 have more than the British average share of households with three or more dependent children, and 12 have a population of Asian ethnic origin exceeding 10%.

The report says that parallel changes in tax, the minimum wage, social sector rents and childcare entitlement will go some way to compensate, but the winners and the losers will only sometimes be the same people and it is unlikely that the full financial loss will be offset.

National living wage not enough to tackle poverty

Rachael Orr, Oxfam’s head of UK programmes, said: “This report confirms that social security cuts will further entrench deep-seated regional inequalities across Britain, hitting some of our most deprived communities the hardest.

“These cuts suck money out of already struggling local economies and are likely to push people on low incomes, particularly families with children, into hardship.”

She said that the new national living wage was “a step forward” but that a national poverty strategy was needed to prevent welfare cuts having an unfair impact.

A report from the IFS last year said that households affected by the benefits reforms can expect a loss of more than £2,000 a year, despite the wage increase.

A Unison report has backed up the warning.

Brian Robson, policy and research manager at JRF, said: “Positive steps like the national living wage will help to build a society with higher wages and less need for welfare.  But we’re not there yet, and reducing support before people are able to offset the losses will leave many families struggling.”

He added that the government should work with local authorities to achieve full employment.

A Treasury spokesperson said: “The government is determined to deliver a new settlement for the British people, one that will create a higher wage, lower tax and lower welfare economy. Our welfare reforms ensure that the system is fair both for those who need it and the taxpayers who fund it.”

Tax is another issue for low-income families, who pay more proportionately than other income groups and will have to pay the most under council tax reforms.

Paul Dossett, head of public sector audit at Grant Thornton UK LLP, wrote for last year’s PSE about the impact welfare reforms are having on local authorities.

 

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