Families braced for more pain as autumn statement extends cuts
Lauren Higgs
Tuesday, December 11, 2012
The economic announcements made by George Osborne in his autumn statement include further budget cuts. Lauren Higgs, Neil Puffett and Gabriella Józwiak examine the implications for children and families
This age of austerity is starting to look interminable. Chancellor George Osborne’s autumn statement this month signalled a bleak outlook for families between now and 2015, particularly those on the lowest incomes and benefits, who will be hit by real-terms cuts in welfare spending.
Central government budgets are also being raided – in part to pay for capital investment in schools.
Whitehall departments will face reductions of one per cent in 2013/14 and two per cent in 2014/15. At the Department for Education, this equates to £155m savings in the next financial year and £305m the following year.
The Department for Communities and Local Government budget will be protected next year, but will be subject to a two per cent cut, equivalent to £445m, in 2014/15. Youth services and children’s centres, some of the worst hit by cuts to council spending so far, look set to be slashed further.
The government has pledged to protect the schools budget, so the children and families directorate at the DfE is likely to shoulder the bulk of reductions, at a time when the number of staff in the department is due to be cut by a quarter.
The education select committee warned just last month that the department risks neglecting children’s policy at large, in increasing its focus on purely schools and colleges.
National Children’s Bureau chief executive Hilary Emery says children are being hit disproportionately by cuts to benefits and services “yet again”, adding that the government must urgently rebalance its austerity programme and fund services for children and young people other than schools.
She says: “It is essential that in next year’s spending review, the government invests in other services that offer vital support.”
Education
- £1bn capital funding to address population boom
- But London alone needs £2.3bn, councils claim
The Chancellor’s announcement of £1bn capital funding to build and expand schools is intended to alleviate the growing strain on places.
By 2015, the primary school population is set to rise by eight per cent – equating to an extra 450,000 pupils. But local authorities warn that accommodating this increase will cost billions more than the government is intending to spend. London Councils says the capital city alone will need some £2.3bn to create 90,000 school places.
A large proportion of the £1bn announced by the Chancellor will go towards building 100 new free schools and academies, a move that has provoked anger from teaching unions, who say the cash should be shared equally between all schools. But the money will also go towards expanding a number of schools rated “good” or better by Ofsted, regardless of their status.
The autumn statement specifies that investment will go to “areas experiencing the greatest pressure on places”. The Association of Directors of Children’s Services (ADCS) and Local Government Association are urging ministers to work with councils to make sure this happens.
Teaching unions have stressed that the money would go further if used to repair existing school buildings. According to ADCS research, bringing existing schools up to “a safe and structurally sound status” by 2015 would require an extra £15bn.
The Chancellor also announced £270m of capital investment to improve further education colleges.
Education funding
- £1bn capital funding to build and expand schools
- £270m capital funding to improve colleges
- 100 Number of new free schools and academies to be created
Source: HM Treasury
Youth unemployment
- Number of Neet young people rises above a million
- Warning that Work Programme is “not delivering”
The autumn statement was scant on detail relating to youth unemployment. George Osborne’s sole direct reference to the issue – in which he argued that worklessness is falling – proved controversial.
On one measure, his claim is right. In the third quarter of this year, 963,000 young people aged 16 to 24 were unemployed, down 49,000 on the previous quarter.
But according to DfE statistics for the same period, the number of 16- to 24-year-olds not in education, employment or training (Neet) was rising – up to 1,027,000 from 968,000 the previous quarter.
Ian Green, chief executive of YMCA England, says his organisation wanted the statement to include measures to tackle youth unemployment, because the government’s Work Programme is “not delivering”. “The only real long-term solution to reducing welfare spending is to
get people into sustainable jobs,” he says.
Answering questions following the statement, Osborne said any young person who cannot get a job is a “matter of regret”. “Our welfare to work schemes are helping get people back to work,” he said. “I would ask young people to go to their job centre and see the schemes that are available.”
Osborne also said he would consider suggestions by Labour MP David Miliband to rethink the level of the Youth Contract wage subsidy in order to increase take-up, increase voluntary sector involvement in the Work Programme and offer a part-time job guarantee to “give hope to young people”.
He added that wider measures in the statement would allow businesses to create more jobs for young people.
Child poverty
- Real-terms cuts to child benefits and tax credits
- Thousands more children will be plunged into poverty
The goal to halve child poverty by 2020 now appears completely out of the government’s reach.
Alison Garnham, chief executive of Child Poverty Action Group, says decisions taken by the Chancellor in his autumn statement “will plunge tens of thousands more children into poverty”.
The proposed one per cent cap on most working-age benefits represents a real-terms cut in welfare payments over the next three years.
Benefits including Jobseeker’s Allowance, income support and child tax credits would have risen by two per cent or more if they had been linked to the Consumer Price Index (CPI). But the below-inflation cap means their real value will reduce by about three per cent by 2015.
According to the TUC, a family with two working parents and two children on a combined income of £40,000 will lose around £2,800 a year by 2015/16.
Child benefit will remain frozen until April 2014, when it will rise by only one per cent for two years – representing an overall increase of two per cent over five years
by 2015.
Carer and disability benefits, including the disability elements of tax credits,
will however be increased in line with inflation.
Disabled children’s charity Contact a Family welcomes the move, but warns families will be hit by the one per cent cap on other benefits.
Its chief executive Srabani Sen says parents of disabled children are more likely to be on lower incomes and claiming a range of benefits. “Families are facing intolerable day-to-day choices such as whether to heat their homes or put food on the table,” she says.
The autumn statement contained no announcements on affordable childcare – one of the biggest barriers to work for parents. Childcare costs for a child under two add a yearly average of £5,103 to a family’s bill according to the Daycare Trust.
Nick Pearce, director of the Institute for Public Policy Research, says working families would have benefited from “more help with childcare, rather than increases in the personal tax allowance”.
In terms of housing benefit, payments will rise with inflation this year, but by only one per cent during 2013/14 and 2014/15. Private sector rents are expected to increase by four per cent next year alone.
About 60 per cent of children living in poverty have at least one parent in work. But the announced £235 rise in the income tax threshold has a smaller impact on low-earning families, as opposed to middle earners, due to tapers for in-work housing benefit and council tax benefit claims.
Shelter is warning that at least a third of local authorities will be unable to afford to house low-income families by 2023.
Matthew Reed, chief executive of The Children’s Society, says too many children were being made to “pay the price for government cuts”, even before the measures announced in the autumn statement.
“The government has missed a crucial opportunity to take decisive steps to end child poverty,” he says. “It is intolerable that in 2012, parents across this country are unable to feed their children or heat their homes.”