Families with young children will feel the impact of today’s budget. A family having a second child could be over £1200 worse off this year than last year (2). These cuts will be deepest for the most vulnerable families.
The overall impact of the Emergency Budget on working and non-working single parent families will be broadly neutral, with the increase in child tax credit offset by the increase in VAT, but families may start to fall behind as benefits rise more slowly over time and child benefit freezes (1).
Gingerbread Chief Executive Fiona Weir said: “Having a baby puts the family finances under pressure. A family having a second child could be over £1200 worse off this year. These cuts will really hit families with young children hard.”
Commenting on the Coalition Government's plans to require single parents to be available for work once their youngest child is in school, Gingerbread Chief Executive Fiona Weir said: "Piling on the pressure for single parents won’t help them compete for jobs that are scarce. The Budget has missed an opportunity to make work pay – particularly part time work that fits with school hours. That would be a much more effective way of getting single parents, most of whom want to work, into a job.”
Tightening the rules on Housing Benefit and cutting working tax credit will also make it harder for working families to meet their bills.
The decision to reduce the 'income disregards' in tax credits (that is, the amount by which a claimant's income can increase from one claim period to the next before tax credit entitlements are affected) could bring administrative problems and instability to working parents.
Fiona Weir said:
“The income disregard was increased to reduce the number of overpayments made to claimants. Tightening it again will significantly increase the number of families who have to pay money back to the tax office at the end of the year – making it harder for families who increase their working hours and whose earnings rise.”
Notes to Editors:
1) The child element of Child Tax Credit has been increased by £150 a year (or £2.88 a week per child). This broadly offsets increases in VAT – expected to be at least £1.30 a week for a typical family, and reductions in Tax Credits for working families caused by increasing the tax credit taper from 39 per cent to 41 per cent.
The change from the retail price index to the consumer price index will see those on benefits begin to fall behind. For example, taking May’s CPI rate of 3.4%, a lone parent over 25 would get an uprating of £2.22 on Jobseeker’s Allowance or Income Support. If you take May’s RPI rate of 5.1.5, her uprating of JSA/IS would be be £3.33. Therefore she would lose around £1.11 per week.
(2) A family on benefits who had a second child will lose £1235 a year. This is made up of cuts to the baby element of tax credits (£545), the Health in Pregnancy Grant (£190) and the Sure Start Maternity Grant for second and subsequent children (£500).
