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FAMILIES WITH BABIES AMONG THOSE HARDEST HIT BY GOVERNMENT CUTS
Fresh analysis of the government's raft of economic cuts identifies families with new babies as among those hardest hit by the cuts package.
Whilst the need for deficit reduction is widely understood, families with children are particularly susceptible to the impact of recent changes in welfare, tax and benefit reform. Whilst there are some measures that will have a positive impact on family income, and will benefit the poorest families and those on low wages, for many families these increases will be offset by losses from other elements of the tax and benefits and credit system.
The Family and Parenting Institute research shows how a broad range of family types will be affected. The report identifies three family types which will suffer the biggest blows to their finances from changes to tax and state benefits:
Expectant parents and families with small babies. Many UK couples dip into poverty when they first have children. Yet families with new babies are to be hit by the loss of the Child Trust Fund, the abolition of the Health in Pregnancy Grant, restrictions on the Sure Start Maternity Grant, and the abolition of the baby element of Child Tax Credits, representing a total loss of £775.3million to the families of 790,000 babies born each year.
Along with all other families with children, these new families with new babies will experience the impact of the three year freeze in child benefit, which will take out a further £1.3bn of support by 2013/14. For a family with two children, this freeze is equivalent to £73 pa in 2011-12 rising to £192.32 pa in 2013-14. For higher earning families, the withdrawal of Child Benefit from families containing a higher rate tax payer will result in an additional loss of £1,752 pa in 2013 for a family with two children.
Families with parents in part-time employment who cannot find extra work. An increase in the number of hours needed to claim Working Tax Credits from 16 to 24 hours will affect 205,000 families with children who currently work fewer than 24 hours per week. If they are unable to increase their hours in response to this change, they stand to lose £3,810 a year.
Large families on low incomes – many of whom are from ethnic minority groups. The cap on total household benefits, likely to apply irrespective of number of children, stands to have a significant negative effect on the income of larger Bangladeshi and Pakistani families.
Dr Katherine Rake, Chief Executive of the Family and Parenting Institute, said: "Families are being asked to absorb much of the pain of the changes to UK tax and benefits. This is in addition to family finances taking a hit from the VAT rise, the widely predicted increases in mortgage payments, rising inflation, and increases in food, fuel, clothing and energy bills. The government must demonstrate an understanding of how these changes affect families of different types."
Dr Rake added: "Beyond this, the Coalition needs to wed these changes to a future vision for families. The Prime Minister has said he wants to make the UK the most family friendly society in Europe. This is a laudable ambition. Now his government must explain how this will be delivered in an age of austerity."
The one off payment of £180 per child in Child Tax Credit in 2011-12 and £110 per child in 2012-13 will benefit £3.9 million claimants, creating a net additional spend on families of £711m in 2011-12.
The £1,000 increase in the personal tax allowance will benefit families on low wages, and an estimated total 880,000 low paid individuals are likely to be exempt from income tax following this change.
The Family and Parenting Institute: working towards a family friendly society.