Hidden Cuts take away 30% of income for poorest families

Britain’s poorest families are facing hidden cuts worth more than 30% of their annual income by 2017 as public services are rationed or withdrawn to meet the coalition’s tough spending targets, new research commissioned by the TUC reveals.

(From The Guardian). As George Osborne puts the final touches to his autumn statement on 5 December, which is expected to give more details about a planned £10bn of welfare savings over the next five years, the TUC’s analysis shows that reductions in benefits and tax credits are being compounded by the impact of budget cuts across government.

“The chancellor’s fresh assault on the welfare budget is set to cause considerable financial harm for millions of families,” it says. “But unless George Osborne changes course, these cuts will be dwarfed by massive reductions in public services.”

The TUC’s report comes alongside a stark warning from the Joseph Rowntree Foundation about the growth of in-work poverty in Britain. In its annual Monitoring Poverty report, the charity finds that 6.1 million people in working households live in poverty – more than the 5.1 million who live in working-age households where no one has a job.

Julia Unwin, the foundation’s chief executive, said: “The most distinctive characteristic of poverty today is the very high number of working people who are also poor.”

The TUC’s analysis, meanwhile, shows the hefty cost of austerity to low-income households. Through detailed analysis of survey findings on who uses public services, and data from the Treasury, it has built up a meticulous picture of how planned spending cuts will affect households across the country.

By 2016-17, the last year for which the government has so far issued spending plans, the cumulative cost of lost public services for the poorest 10th of households in cash terms will have been £3,995 – or 31.7% of their average annual income.

For those in the top 10th of the income scale, many of whom may use public transport infrequently, opt out of public schooling and healthcare, and are less likely to call on services such as Sure Start centres for children, the impact will be much smaller: £2,805, or 2.5% of annual income. The biggest cuts in percentage terms are in further and higher education, policing and social care.

Nick Davies, policy director at Children England, which represents charities providing services to families, says his members increasingly fear that some children are slipping through the net as services are scaled back or withdrawn.

“Demand has increased, but funding reduced, and that has led to the withdrawal of some services and the rationing of others,” he says. “Local authorities have to focus on their statutory responsibilities and other things get neglected.”

Alison Garnham, chief executive of the Child Poverty Action Group, agreed that the cuts were starting to have a tangible effect on families. “We are hearing reports from welfare rights advisers up and down the country that the services they provide are being cut or closed down. So a perfect storm is brewing: benefit cuts, service cuts and large-scale welfare reform.”

The TUC’s analysis also suggests that much of the pain – in terms of reductions in public services – is still to come. The average household has already lost more than £1,200 in public services, but that’s only about a third of the total cuts they are likely to experience by 2014-15.

With the independent Office for Budget Responsibility expected to lower its forecasts for economic growth, the chancellor is likely to have to extend his austerity plans beyond 2016-17, and announce fresh spending cuts to balance the budget over a five-year period.

After the latest figures showed that the budget deficit for October was £2.7bn greater than for the same month last year, the independent Institute for Fiscal Studies said his forecast for the deficit over the year as a whole was likely to be up to £13bn off target.

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