‘Downturn’ Abbey: born into a decade of austerity

Austerity childhoods

With the coalition now just over half-way through its term in office, the government is now forecasting an age of austerity stretching to 2018. For any child born into-the post Lehman Brothers’ world of belt-tightening, that means their whole lives to the age of 10 will be lived against a backdrop of austerity. So how have coalition policies affected them and their families?

Real-terms benefit cuts

The chancellor announced a one per cent cap on benefits including Job Seekers Allowance, Employment Support Allowance and Income Support over three years designed to raise £3.7bn by 2015/2016.

But with inflation last month running at 2.7 per cent, that means a real terms cut in benefits payments and another shock to parents already struggling to ensure their children are fed and clothed. There are 3.6 million children living in poverty in the UK today and the figures are predicted to climb by another 800,000 in the next five years, according to children’s charities.

“We recognise the economic problems but we don’t think the way to balance the books is by making the poorest children poorer and poorer and damaging their childhoods further,” Chris Wellings, Save the Children’s Head of UK policy, told Channel 4 News.

The gloomy forecast for Britain’s economy will be felt by families nationwide, but particularly by those already living on the brink. One-in-eight of the country’s poorest children go without at least one hot meal a day. One-in-ten of the UK’s poorest parents cut back on their own meals to ensure their children eat, according to a study by Save the Children carried out in May and June 2012.

“Even if benefits rise by one per cent they’d be rising under the rate of inflation, so the worry for us is we’ll see families struggle, that it could hit families in work and out of work,” Mr Wellings said.

Working families

In his statement to the Commons, Mr Osborne said he was “on the side of those who want to work hard and get on”.

But according to think -tank Resolution Foundation, 60 per cent of the effect of the three-year below inflation rise in benefits will fall on working households and 40 per cent will affect those where no-one is at work. According to HMRC figures around 5.8m families receive tax credits, of whom 4.3m have someone in work while only 1.5m are out of work.

Resolution Foundation Chief Executive Gavin Kelly said “it’s completely wrong to say that today was all about helping so-called strivers. The OBR [Office of Budget Responsibility] confirmed they expect to see another year of falling wages, stretching into the middle of 2014.”

Child benefit cuts

Families have suffered from a freeze in child benefit rates over three years, from 2011/12 to 2013/14. The chancellor may have announced that child benefit will now rise by 1 per cent over the next two years, but for higher earners, this will be offset by Mr Osborne’s March annoucement that he plans to claw back child benefit where either parent earns more than £50,000.

According to the Treasury, 15 per cent of families will see their child benefit entitlement change, but it is the way that the withdrawal of this tax is to be introduced that has caused the greatest controversy. A family with two parents earning just below the higher tax limit will retain the full benefit, but a family with one parent earning £25,000 and a second earning £55,000 will receive £527.80 a year for their first child and £348.40 for each younger child.

PricewaterhouseCoopers (PwC) calculated that the long-term cost of the cuts which come into force in 2013 will equate to more than a year’s take home salary for many of those who stand to lose the benefit, by the time their youngest child turns 18.

The TUC calculated that the impact of the new 1 per cent cap on tax credits and child benefit could leave some working families some £3,000 a year worse off by 2015.

Schools

Building Schools for the Future was among the first education schemes in England to be cut back by Education Secretary Michael Gove in July 2010. More than 700 building projects across England were cancelled as a result of his decision, provoking uproar from councils, unions and Labour politicians, who warned it would have a “catastrophic” effect on pupils.

In his December 2012 Autumn Statement, the chancellor announced £1bn of spending to improve schools and build a further 100 free schools and academies.

Housing Benefit

Cutback kids could find they have older siblings living at home with them for much longer because under-25s could also be stopped from claiming housing benefit under planned coalition policy. Work and Pensions Secretary Iain Duncan Smith, who says this is a matter of “principles and fairness” not just about saving money, asked in an article written jointly with the chancellor “Is it right that school leavers should be able to move directly from school to a life on housing benefit without finding a job first?”

Child Trust Funds

Labour set up the Child Trust Fund (CTF) to provide parents of newborns with a minimum £250 voucher to invest for children who could access the money from the age of 18. Parents, families and friends could contribute up to £1,200 a year with no tax on any income or gains in the account.

Faced with a historic government debt, in January 2011 the coalition government stopped all payments to save £520m by 2011-2012. In its place, the coalition announced “Junior ISAs” with a similar cap and restrictions as CTF but without the government contribution and automatic enrolment.