Impact of UK Government welfare cuts

Low income families across Scotland will be thousands of pounds a year worse off per year due to UK welfare cuts, a new report has found.

The Scottish Government report, ‘the Impact of UK Welfare Policy on Families with Children’, looks at what the policies implemented since 2015 will mean for families.

The post-2015 policy that is having the biggest impact on the people of Scotland is the four year freeze to working-age benefits. This policy is estimated to reduce annual welfare spending in Scotland by £370 million by 2020/21.

Other significant reforms include the reduction in universal credit work allowance (£250 million reduction by 2020/21), the two child limit for tax credits and universal credit elements (£95 million reduction), and the removal of the family element for child tax credit and universal credit (£50 million reduction).

Cabinet Secretary for Communities, Social Security and Equalities, Angela Constance said:

“This report clearly sets out the devastating impact the UK Government’s welfare cuts are having on the people of Scotland.

“By the end of this decade, the cuts being imposed on Scotland since 2010 are expected to reduce welfare spending in Scotland by nearly £4 billion a year.

“As well as moral objections, taking money away from low income families makes no economic sense. This is money taken from the pockets of families that are already surviving on low incomes and pushing them into crisis, debt and is creating problems that have to be picked up by other public services and emergency aid such as the Scottish Welfare Fund and food banks.

“In Scotland we are taking a different approach. Our new social security system will recognise social security as a basic human right and we will ensure that people are treated with dignity and respect.”

Background

This is the first in a series of three reports that will look at the impact of UK welfare reforms, following the publication of the statutory annual welfare report in June[1]. The next two reports will focus on the impact on people with disabilities and examine housing-related policy changes.

The report looked at three illustrative families and estimates the financial impact of post 2015 policies.

By 2020/21, a lone parent bringing up three children, including one born after April 2016, is estimated to lose more than £4,000 per year. This is compared with what they could have been entitled to without policies including the two child limit and benefit freeze.

A couple with two children, with one parent working 16 hours a week, is estimated to be £1,500 per year worse off by 2020/21 when they make a new claim to universal credit. This family would be affected by cuts to work allowances in universal credit, benefit freeze and the removal of the family element for new claims. Their income falls despite the introduction of the National Living Wage.

A couple with four children, where one partner works 20 hours a week and the other 12, is estimated to lose £1,130 per year by 2020/21.

The Institute of Fiscal Studies (IFS) have previously estimated that that UK Government welfare policies will cut, on average, more than 10% from the incomes of low income families with children. IFS projections also indicate that GB absolute child poverty rates (after housing costs) could increase from 27.1% in 2015/16 to 31.6% in 2020/21 due to welfare cuts, signalling a return to levels not seen since the early 2000s.

[1] Scottish Government (June 2017) ‘Welfare Reform (Further Provision) (Scotland) Act 2012: Annual Report 2017’.