POORER groups have been worst affected by changes to direct taxes, benefits and tax credits despite the Coalition’s promise that the rich would carry the burden of austerity, according to a major new report.
Led by the University of Manchester, with LSE and the University of York, the report shows that poverty has been increasing and will get worse in the next five years.
The report also reveals that families with young children have been hit harder than any other household type under the Coalition’s cuts, despite early rhetoric highlighting the importance of the ‘foundation years’.
Real spending per child on early education, childcare and Sure Start services fell by a quarter between 2009-10 and 2012-13 and tax-benefit reforms hit families with children under five harder than any other household type.
The authors acknowledge that the Coalition faced a high level of debt and current budget deficit following the global financial crisis.
In response, it made some strategic choices: not to cut the NHS (in cash, though not in need terms) nor schools; to increase spending on pensions; to raise the income tax threshold and to cut the top rate of tax.
Its tax and benefit decisions meant that cuts to benefits and tax credits that hit low-income families hardest were offset by tax reductions for better-off households and made no impact on the deficit.
Meanwhile, its choices to protect very large areas of public spending meant that its austerity programme was more limited in practice than its rhetoric suggested, and that austerity measures were concentrated on particular policy areas.
Year-on-year public spending has dropped less than three per cent, but cuts of around a third have been made to ‘unprotected’ services, including those for pre-school children under five, and vulnerable and older adults needing local authority social care.
In practice, people with health and care needs and children as they pass through the education system frequently cross the boundary between protected and unprotected services.
Even ‘protected’ areas such as the NHS have faced rising demands on fixed or falling budgets.
These overall conclusions are based on a comprehensive and authoritative analysis of policy, spending, outcomes, and trends across nine different areas of social policy.
Separate reports are available for each, covering reforms as well as spending and highlighting challenges for an incoming government.
They provide detailed facts and analysis to underpin the debates running up to the general election in May.
The main findings show:
• Although the Coalition stressed the importance of the ‘foundation years’, in fact families with children under five saw significant cuts to services – real spending per child on early education, childcare and Sure Start services fell by a quarter between 2009-10 and 2012-13.
In addition, tax-benefit reforms hit families with children under five harder than any other household type.
• Despite a 10% rise in the population aged 65 plus during the Coalition period, the number of adult social care users fell 7% per year. Care at home and other community-based services were hit especially hard.
• Although one Coalition stated aim was that the better-off would carry the greatest burden from deficit reduction, changes to direct taxes, benefits and tax credits were mainly regressive, as cuts to tax credits and cash benefits took more away from those in the bottom half than they gained through higher tax allowances.
The savings from these cuts were not sufficient to contribute to deficit reduction, however, as they were offset by the costs of lower direct taxes for better-off groups.
Estimates suggest that poverty increased after 2012/13 and will get worse in future years.
• There was a 17% fall in the number of adult learners between 2009/10 and 2013/14 as funding for adult skills was heavily cut.
Despite the controversial hike in tuition fees, increasing numbers of disadvantaged young people are going to university, but the numbers of part-time and mature students dropped by 40%.
• While health was protected relative to other expenditure areas, real growth rates were extremely low by historical standards and a number of key indicators suggest increasing pressure on the system.
Health inequalities remain deeply embedded.
• Steps were taken to stimulate home ownership through Help to Buy, but government spending on housing in the UK was cut by 35% and spending on new homes by 44% in real terms 2009/10-2013/14.
In contrast, and despite welfare reforms, housing benefit expenditure continued to rise.
• Growth in self-employment drove the recovery in the labour market but dramatic falls in average real earnings for all types of workers have affected households’ living standards, consumption and government tax receipts.
The outcome is that household budgets have been squeezed and the government’s deficit reduction plans have been affected.
• Neighbourhood renewal activity has been dramatically cut from around £500m a year to around £32m a year.
It is now seen as a local responsibility, drawing on a strategy of supporting local economic growth and community and voluntary activity.
But so far these new strategies are performing well below expectations
The research follows a similar review of the Labour social policy record, published in 2013, Labour’s Social Policy Record: Policy, Spending and Outcomes 1997-2010. Both were funded by the Nuffield Foundation, Joseph Rowntree Foundation and Trust for London.
There are eight individual papers covering employment, taxes and benefits, health, adult social care, housing, children under five, further and higher education and skills, and area regeneration.
There is also an overview, The Coalition’s Social Policy Record: Policy, Spending and Outcomes 2010-2015.
A further paper on schools will be released on February 10th to take in the detailed 2014 GCSE results published at the end of January.
John Hills, director of the Centre for the Analysis of Social Exclusion at London School of Economics and one of the lead authors of the report said despite coalition promises that the greatest burden of the cuts would fall on those who had more, and that the poor would be protected, that has not happened.
‘While people at the bottom were initially protected with the way benefits were adjusted for inflation, that has not been the case for the last two years,’ he said.
‘That it’s families that are taking the biggest hit is really disappointing and short-sighted,’ said Kitty Stewart, author of the part of the report examining the impact on under-fives.
‘We know that family income and services are important to children’s development.
‘All the research evidence tells us both of those matter and both of those have been hit.’
She estimates some families may have lost out on around £1,200 in their baby’s first year.
Alison Garnham, Chief Executive of Child Poverty Action Group, responded to the report on Tuesday, and also to Cameron’s announcement that same day that in the event of a Tory victory at the next election, he will impose an even more severe benefit cap, cutting it further, from the current recently imposed £26,000 down another £3,000, to £23,000.
Alison Garnham said: ‘Let’s be absolutely clear, the benefit cap is at least nine times more likely to affect children than adults, and the majority of adults it hits are lone parents, many of whom have children so young even the government recognises they should not be required to work.
‘On the day that a major programme of research by academics from leading universities shows families with young children have been more impoverished than anyone else in recent years, we have another policy push that would undercut the most vulnerable.
‘Britain is facing a looming child poverty crisis.
‘Lowering the benefit cap would bring it several steps closer.
‘It would pile on the misery for working and non-working families already struggling to pay for absolute basics.
‘Surely it would also fail the Prime Minister’s own family test.
‘Rather than taking away money from the poorest, politicians of all parties need to tackle the root causes of higher social security spending which include soaring childcare and housing costs and low pay.’
Asked on Tuesday whether lowering the benefit cap would increase the hardship of families with multiple children where no individuals worked, Cameron replied ‘not if they go out and get a job’.
Commenting on the report’s findings, Cathy Jamieson, shadow treasury minister, said: ‘This report makes a mockery of David Cameron’s claim that we are all in this together.
‘The Tories have prioritised the privileged few by giving millionaires a huge tax cut while working families have been left worse off.’
However, Miliband has declared that he intends to continue with the Tory benefit cap.
