Written evidence submitted by Citizens
Advice
INTRODUCTION
The Citizens Advice service is the largest independent
network of free advice centres in England & Wales. There are
currently around 390 individual bureaux, all of which are independent
charities, providing advice from over 3,300 locations including
GPs' surgeries, hospitals, community centres, county courts and
magistrates courts, and mobile services both in rural areas and
to serve particular dispersed groups.
The Citizens Advice service provides free, independent,
confidential and impartial advice to everyone on their rights
and responsibilities. It values diversity, promotes equality and
challenges discrimination. The service aims:
— To provide the advice people need for
the problems they face
— To improve the policies and practices
that affect people's lives.
Last year (April 2009—March 2010) bureaux
across England and Wales advised 2 Million people on 7.1 Million
new issues—18% higher than in the previous year.
Debt was the largest area of advice, making
up 34% of all enquiries, closely followed by Benefits at 29%.
Both issues saw an increase in enquiries compared to last year:
Debt was up 23% (2.4 million enquiries) and Benefits up 21% (2
million enquiries). Employment is the third largest area of advice
with just over half a million enquiries. But Citizens Advice Bureaux
also provide advice on a huge range of issues in addition to these
including housing, discrimination, immigration and health services.
As well as providing advice, the Citizens Advice
service delivers a range of money related advice services, including:
money guidance, which provides people with generic financial advice
and financial capability training, which provides people with
the skills and knowledge they need to manage their money and choose
financial products.
CAB clients are often disadvantaged and many
are on low incomes or benefits, or are vulnerable in some way.
For example, research by MORI for Citizens Advice found that Citizens
Advice Bureaux users tend to be in social grades DE and be unemployed,
or living in social housing.[1]
The vast evidence base of our clients' experiences
means that Citizens Advice is well placed to comment on the ways
in which Government policy impacts on the poorest and most vulnerable
people in society.
This Comprehensive Spending Review (CSR) will
have far reaching impacts for the people that the Citizens Advice
service exists to serve and for our own services, which are significantly resourced
by public funds. It re-sets the future level of expenditure on
public services at both national and local levels at a significantly
lower level than now, and in a number of areas we are expecting
that the CSR will increase the number of problems our clients
have as a result. This will increase demand for our assistance
and services which, at local level, are also likely to face extreme
financial challenges. We are therefore pleased to be able to submit
evidence to the Select committee. In this submission we focus
on three areas where we see our clients and our own services facing
the most significant challenges going forward.
These are:
1. Welfare reform and cuts to welfare benefit
payments
2. Legal aid
3. Funding for local authorities
In each section of this submission we highlight
the potential impacts based on the announcements made
on the outcome of the CSR. There are clearly decisions to
come on the outcome of a fundamental review of legal aid (to be
launched by the Ministry of Justice) and many local decisions
to be made by councils.
WELFARE
In the CSR, the chancellor announced that £2
Billion has been set aside to cover the costs of the implementation
of a new Universal Credit—a means-tested benefit that will
replace most benefits and tax credits for those of working age.
We welcome the intention to simplify the benefit system, and to
make work pay, and we hope that the universal credit will achieve
these results.
We are concerned, however, that the current
cuts will make the transition period extremely difficult for some
of our clients, causing hardship for many who may spend years
trying to recover. Interim arrangements will add to the complexity
of the benefit system in the short term, as well as creating a
range of problems for government agents trying to manage the changes.
We call for clear and transparent information on how the changes
will be implemented and what contingency arrangements will be
made for the worst affected.
The impact of the changes to welfare benefits
outlined in the Comprehensive Spending Review (CSR) cannot be
viewed in isolation, but only in conjunction with the budget changes
announced in June. The Chancellor called his emergency budget
"progressive", because his headline approach was to
combine a reduction in benefits for all or higher income families with an
increase in the child element of child tax credit for those
on the lowest incomes. The Comprehensive Spending Review (CSR)
announcements in October have brought another £7 Billion
worth of cuts to middle and lower income families, with a total
saving from the welfare budget of £18 Billion per annum by
2014.
We welcome the support provided for pensioners,
who have largely been spared from cuts, with a net increase in
spending on the state retirement pension and pension credit amounting
to £1 Billion a year. We welcome the retention of other pensioner
benefits, including free travel, free eye tests and winter fuel
payments.
We welcome the significant increases to child
tax credits, announced in the June budget. We note the further
increase announced in the CSR, which will account for an extra
58p per week per child from April 2011 and 96p per week per child
the year after. Unfortunately, for many families, this extra will
be completely offset by the freezing of working tax credit and/or
cuts in tax credit help with childcare costs.
Whilst almost one third—£2.5 Billion—of
the £7 Billion cuts to welfare in the CSR comes from cutting
child benefit from families where there is at least one higher
income tax payer, there are some other measures that will have
a considerable impact on low income households. £2 Billion
of the £7 Billion will be taken from means-tested benefits,
which necessarily means cuts to families on very low incomes.
We understand that everyone must share the pain
of the deficit, but we are very concerned that the impact of all
these measures will cause disproportionate disadvantage for some
of the poorest groups in society. It is not fair that these individuals
should face poverty and homelessness, and we urge the government
to fulfil its promise to protect the most vulnerable by making
sure that they are given the support they need.
The number of cuts and the different ways they
impact on recipients is extremely complex. For some groups the
numbers affected are low, but the impact could be devastating;
while for others, a general erosion of benefit support will have
less immediate impact which will become more serious over time.
We have particular concerns that some of these measures—freezing
certain benefits for example—will reduce work incentives
for those already experiencing marginal gains from work.
To convey these concerns, our submission is
necessarily rather detailed, but our main concerns are as follows:
Cuts to housing benefit, particularly:
— The loss of the principle that the amount
of benefit relates directly to actual rent paid
— The impact of the cap to LHA on 10,000
households in central London
— The effect of raising the age limit to
35 for the single room rate
— The unfair proposal to cut HB by 10%
for people on JSA for more than 12 months
Localisation of and Reductions in Council Tax
Benefit
Cuts to sickness/disability benefits:
— The 12 month limit on contribution-based
ESA destroys the principle that those who have paid National Insurance
Contributions will be protected if they become sick
— The removal of DLA for those in residential
care will take away independence for those who rely on DLA for
transport or a motability vehicle.
Cuts to tax credits:
— The cuts to tax credit support for those
whose incomes drop in-year
— The reduction from 80% to 70% of childcare
costs covered by tax credits
— The change in eligibility rules for couples,
who must work for 24 hours instead of 16.
Other key concerns:
— the move to up-rate benefits and tax
credits by the consumer price index (CPI) instead of inflation
rates based on the retail prices index (RPI);
— the cut to child benefit entitlement
destroys the principle of universal benefits, and will be unfair
on single earner households on (or just above) the higher tax
rate, compared with double income households just below the higher
rate;
GAINS FROM
THE BUDGET
AND CSR
We welcome the following gains:
Rise in tax threshold by £1,000 from April
2011
Anybody earning more than £7,475 pa will
gain £3.84/week in their take home pay or £200/year.
However, those receiving housing benefit/council tax benefit will
only see a net increase in disposable income of 58p/week or £30/year.
(Budget announcement)
Increases in the child element of child tax
credit of £150 a year or £2.88 a week for each child
from 2011 and a further £60 a year or £1.15 a week in
2012. The child element is currently worth £2,300/year or
£44.11/ week per child, for all families whose income and
circumstances mean that they are entitled to the maximum amount.
As this rise is above indexation and per child it will provide
extra help to larger families. This will benefit out of work families
most as those in receipt of working tax credit will experience
a cut in real terms due to these payments being frozen. However,
because of the freezing of Working Tax Credit payments, along
with the freezing of child benefit, the relatively small gains
will be negated for some people. (Budget announcement)
A further increase in the child element of Child
Tax Credit of £30 above indexation in 2011 and £50 above
indexation in 2012. This will result in extra tax credit expenditure
of £560 Million a year by 2014. This means an extra 58p per
child per week in 2011 and an extra 96p per child per week in
2012. As this rise is above indexation and for each child it will
provide extra help to larger families. This will benefit out of
work families most as those in receipt of working tax credit will
experience a loss in real terms in the value of working tax credit
which will offset much of this gain. Where relevant, the loss
of help with childcare will be even more significant for families
than this small rise. (CSR announcement)
From 2011-12 basic state pension to rise each
year by the greatest of prices, earnings or 2.5% (the "triple
guarantee"). (Budget announcement)
Pension credit guarantee continues to rise with
earnings, but will include an additional cash increase in April
2011. (Budget announcement)
Cold Weather Payments are paid to people on
certain benefits when the average temperature falls, or is forecast
to fall, below a certain level for 7 consecutive days. The CSR
announced that the temporary rise from £8.50 to £25
introduced by the previous Government would be made permanent
from 2011. This measure is expected to cost £50 million a
year. (CSR announcement)
LOSSES
Unfortunately, for some groups of people, the
losses will outweigh the gains. We group these comments under
the following headings:
— Disability/sickness benefits
General losses
Change in the basis for up-rating benefits and
tax credits from the retail prices index (RPI) and the Rossi index
to the consumer price index (CPI) from 2011-12. For 2011/2012
this will mean a 1.5%[2]
real terms reduction in the value of benefits and tax credits
each year. This amounts to a reduction in spending of an estimated
£5.8 Billion a year in 2014.
Currently most benefits are up-rated by the
retail price index (RPI) measure of inflation. From 2012 pensioner
benefits will rise in line with earnings. Recent research by the
Joseph Rowntree Foundation (JRF) highlighted the huge impact that
up-rating policies have over time, both on relative living standards
of different groups and on public finances.
The budget introduced consistency by moving
to up-rate all non-pensioner benefits by the CPI. But the CPI
tends to rise at a lower rate than the RPI. Estimates from the
Institute of Fiscal Studies (IFS) suggest the change will amount
to a 2% cut each year and JRF Minimum Income Standard research
shows that because of their household spending pattern, people
on low incomes face much higher inflation rates than the CPI,
which means they could fall behind even more. (Budget announcement)
Overall cap on household benefit payments paid
to workless households of working age from 2013. It will be around
£500 per week for couples and lone parent households and
around £350 per week for single adult households, so that
no family can receive more in welfare than median after-tax earnings
for working households. DLA claimants and War Widows will be exempt
from the cap. This measure is expected to result in a reduction
in spending of £270 Million a year by 2014.
The fact that the cap applies regardless of
household size or geographical location means that it will inevitably
fall hardest on larger families and in areas with high rent levels.
Housing benefit is always the last benefit to be calculated, based
on other income. Coming as it does on top of the cuts to housing
benefit announced in the budget, a cap of £500 a week on
household benefits will price many low income families out of
living in London and the south-east of England altogether, and
if it goes ahead will inevitably lead to widespread hardship,
debt and homelessness. It is difficult to see how this fits with
the government's commitment to end child poverty. (CSR announcement)
Warm Front Statements confirmed that the Warm
Front Scheme would be phased out as part of the transition to
the "Green Deal". In the interim period the Government
will fund a smaller, targeted Warm Front programme for the next
two years with a budget of £110 Million in 2011-12 and £100
Million in 2012-13.
This reduction is of great concern. Warm Front
has helped more than two million homes across England since 2000
assisting more than 1,000 homes every single day to save energy.
On average Warm Front delivers savings of almost £400 a year
off the individual household's energy bill. Even under the existing
financial settlement, the level of demand for Warm Front is so
great that the programme has been unable to keep pace. As a result,
waiting times have become longer.
Freezing of child benefit for 3 years from 2011-12.
Child benefit is paid for every child regardless of the income
of the household. It is currently £20.30 per week for the
first child and £13.40 per week for the second and subsequent
children. If CPI is 3.1% this will mean a real terms reduction
in the value of child benefit for one child of £1.83 per
week and for 2 children of £3.04 per week by 2014. Although
Child Benefit is paid to everyone, freezing it has a higher impact
on low income families as it makes up a higher proportion of their
income. For families on the lowest incomes in receipt of maximum
Child Tax Credit (CTC), however, this loss will be more than offset
by the increase in CTC. This will not be the case for families
with a baby under one, as they will no longer receive the £545
baby element of CTC, due to be cut in 2011, as mentioned above.
(Budget announcement)
Removal of Child Benefit from households with
a higher rate tax payer This measure removes the long-established
principle of universal entitlement to child benefit as a recognition
of the extra costs of taking care of children, experienced by
all families. While we welcome the simplicity of this eligibility
criterion, we regret the inequity between a household with a single
earner on, or just above, the higher rate threshold, compared
with a household of two earners just below the threshold. (CSR
announcement)
New child: a low income family with a new baby
could lose up to £1,235 as a result of the combined effect
of the following changes: loss of £190 health in pregnancy
grant (from January 2011); loss of £545 baby element of child
tax credit (from 2011-12); and loss of £500 sure start maternity
grant (SSMG) (which will be no longer payable for second and subsequent
children from 2011-12). (Budget announcement)
Housing Benefit
Caps to Local housing Allowance (LHA): The impact
of these caps will be felt across Greater London but nowhere else.
Within London, only Newham, Redbridge, Havering and Barking and
Dagenham will be completely unaffected. The 4 bedroom LHA rate
for central London (Westminster and parts of Camden and Kensington
and Chelsea) is currently £1,000, so some claimants will
see a £600 per week fall in their Housing Benefit (HB) when
it is reviewed after April 2011. It appears that larger families
will be disproportionately affected—both by the restriction
to the 4 bedroom rate and by the £400 cap on that rate.
We have asked—at the very least—for
implementation of the cap to be postponed until October 2011,
so that there is time to lay the necessary regulations and still
give tenants enough notice to find new accommodation if their
LHA will not cover their existing rent; and to ensure no-one will
face two reductions in their LHA rates between April and October
(ie the cap applied in April, followed by the change in percentile
rate in October).
Reduction in Local Housing Allowance (LHA) rates
from October 2011 The LHA is currently set at the median of local
private rents. This means that 50% of local private rents are
within the LHA rate. The change announced in the budget will mean
that only 30% of local private rents will fall within the LHA
rate. For those renting in the private sector—both in and
out of work—this is likely to have a huge impact.
We calculate that average LHA rates in England
will fall by £5.64 per week for the one room/shared room
rate, £7.73 per week for a one bedroom property, £9.60
per week for a two bedroom property, £13.33 per week for
a 3 bedroom property and £24.26 per week for a 4 bedroom
property. Again, it is clear that the pain will not be equally
spread across the country, with LHA reductions for a one bedroom
property ranging from zero in Southport, Scunthorpe, Bedford,
Northants Central and Rotherham, to £25.50 in the Inner North
London BRMA, and for a 4 bedroom property from £4.37 in Ashford
to more than £50 in South West Herts, East Cheshire, the
Chilterns and much of London.
The lack of transitional protection means that
these caps will be applied to the existing claims on their next
annual review, meaning that some tenants will suddenly find that
their rent is completely unaffordable.
We are very concerned for the 10,000 families who
are likely to have to move out of central London, who will lose
their community networks, and may find it impossible to sustain
existing jobs. The London boroughs likely to receive these families
will have to provide housing, schooling, medical and social services
with very little notice, and on reduced Local Authority budgets.
(Budget announcement)
The extension of the shared room rate (SRR)
to single claimants under 35 (up from 25). This means that the
category of property considered appropriate for her/his household
is a bedroom in shared accommodation, rather than a self contained
bedsit or one-bed flat. This will be introduced from 2012 for
new claimants and at the next review after April 2012 for existing
claimants. Around 88,000 people are expected to be affected—adding
to the 75,000 already on this rate. They are expected to lose
an average HB entitlement of £45 a week, which will reduce
spending by around £215 Million a year by 2014/15. The drop
in income varies in different parts of country. (CSR announcement)
DWP has recently published research comparing
the housing choices made by households in low paid work with those
out of work and receiving HB. This research did not find any "in
work" single people living in shared accommodation where
they would have been entitled to a 1 bed under the HB rules (because
they are aged over 25). In other words, the research published
this month does not support the stated rationale for this change,
that it will "reflect the housing expectations of people
of a similar age not on benefits".
For example: based on the market price, the
current LHA rate for a 1 bedroom flat in outer east London is
£165, which will fall to £160 after cuts announced in
the budget. If someone cannot find shared accommodation, they
are likely to have to pay the 1 bedroom rate, but will only receive
HB at the SRR of £69. The LHA rate for a 1 bedroom flat in
west Cheshire is currently £104, which will fall to £98
following the budget cuts. The SRR is currently £62.50
Furthermore, in some parts of the country shared
accommodation is hard to find. It will also be hardest for claimants
with disabilities, especially those with serious mental health
problems but who don't qualify for the severe disability premium,
who might find it difficult to find a suitable house-share. A
quick survey on a national website advertising accommodation[3]
found 176 advertisements for shared accommodation in Sheffield,
at a rate of between £50 and £60 per week, but only
9 of these would accept HB claimants. In London, 8 of 204 advertisements
would accept HB claimants. In Sunderland, only 1 (of 8 overall)
would accept HB claimants. Many advertisements stipulate a professional
person, which reinforces our concern that it will be hardest for
claimants on low incomes, or with disabilities, to find a suitable
house-share. We urge the government to re-consider this measure
in light of its likely impact on the most vulnerable people.
From 2013, the Local Housing Allowance (LHA)—which
is used to decide the maximum housing benefit which can be paid—is
also to be up-rated in line with CPI, not local rents. This means
that the figure used to calculate housing benefit will move further
and further from a relationship to rent actually paid. The cumulative
effect of this will clearly have a very significant effect on
all low income groups. This change will have two effects: Firstly,
it will erode LHA rates over time as rents generally rise faster
than CPI, and, secondly, by using a national index, it will break
the link with the movement of local rents. So two areas which
have similar rent levels when the change is made in 2013, but
which subsequently diverge as a consequence of differences in
local economic factors, will find their LHA rates stay in step
while actual rents vary. (Budget announcement)
Loss of 10% of housing benefit after 12 months
on JSA from 2013-14. Tenants who are unable to get a job—even
through no fault of their own—will lose £15/week on
a rent of £150/week, amounting to £780/year. In London
they would be likely to lose £25/week or £1300/year.
This seems a crude measure as it appears that it will apply even
where the tenant is fully complying with their JSA requirements
to actively seek work. The cut will fall hardest on those who
face disadvantage in the labour market, such as people in poor
health or with a disability who have failed the harsher medical
tests for incapacity benefit and Employment and Support Allowance,
and have therefore been moved onto JSA. It will also affect lone
parents who will have to claim JSA once their youngest child is
five. (Budget announcement). We urge the government to reconsider
this measure, and to withdraw it.
Reducing spending on Council Tax Benefit by
10 per cent and localising it from 2013-14. This will reduce spending
by £490 Million a year by 2014. Local authorities and the
devolved administrations in Wales and Scotland will be given the
flexibility to tailor their scheme to meet local priorities and
manage spending within lower limits, while protecting the most
vulnerable. The precise flexibilities are yet to be determined,
but we have serious concerns about the implication that local
authorities will have the power to set benefit levels locally.
We would also like clarification on how this will work with the
universal credit, as the implication from the current proposal
is that CTB will be managed separately from the universal credit,
and will therefore involve a separate withdrawal rate, which compromises
the whole point of the simplified system. (CSR announcement)
Sickness/Disability benefits
Introducing a time limit of one year for entitlement
to ESA (CB) for those in work-related activity group. There is
currently no time limit for receipt, and there is a generation
of workers who have paid NICs on the understanding that they will
be protected if they can no longer work because of illness or
disability. Far from acting as a work incentive, this cut is a
betrayal of a generation of manual workers.
If claimants have no other source of income,
and limited savings, they will be able to claim income-based ESA
after 12 months. This new time limit will therefore affect single
people with some savings or other income, or couples where one
partner works. For example, a couple household where one earns
at least £150 and the other is sick or disabled would lose
all £91.40 ESA—an income drop of almost 40%. A single
person with savings of more than £16,000 will be entitled
to no benefit after 12 months. This will affect around 1 million
claimants and reduce spending by £2 Billion a year by 2014.
This figures includes those currently receiving
incapacity benefit (IB), who will be re-assessed for ESA, by 2014.
This re-assessment process will result in fewer people receiving
benefits on grounds of sickness or incapacity, as the assessment
results in more people being found fit for work. (CSR announcement)
A northern bureau recently saw a couple where
the wife earned less than £200 per week and the husband had
already been on ESA(CB) in the WRAG, for more than a year, following
a serious accident. He had worked as a manual worker all his life,
and was desperate to get work, but had great difficulty walking,
used crutches in the house and a wheelchair when outside, so was
at a serious disadvantage in the job market. They also had debts
and were struggling to live on their current income—before
the loss of a further £91.40 when he loses his ESA. Both
were already on antidepressants, and he had made a suicide attempt
the previous week.
DLA mobility for people in residential care
will no longer be paid where such costs are already met from public
funds. The higher rate mobility component of DLA enables disabled
people to access a car through the Motability scheme, which is
vital for many people to control their own lives and maintain
their independence. Access to the Motability scheme must be retained
for this group, in some other way if necessary.
This will reduced spending by £135 Million
a year by 2014-15. It is estimated to affect 58,000 people currently
in care homes and receiving an average of £33.40 a week.
(CSR announcement)
Tax Credits
The rate at which tax credits are reduced as
income rises will rise from 39% to 41% from 2011-12. This means
that instead of losing £390 for every extra £1,000 of
gross income earned over £6,420 pa, households will lose
£410 of every £1,000. Someone earning £16,420 pa
will receive £200/year less in tax credits, which will offset
the gain from the increase in the tax threshold. Someone earning
£26,420 pa will receive £400/year less.
Increasing the rate at which tax credit entitlement
is reduced as incomes rise, means that only those on the lowest
incomes benefit from the announced increase in child tax credit.
It will, however, also cut entitlement to working tax credit for
households without children. The 2% rise in the rate at which
entitlement is reduced as income rises, means that families will
lose £20 more than currently for every £1,000 of income
above £6,420 or £410 instead of £390. So someone
earning £16,420 will lose £200 a year in tax credits.
Someone earning £26,420 will lose £400 a year. (Budget
announcement)
£2,500 of any drop in income will be disregarded
for tax credit purposes from 2012/13. Households will not see
their tax credit award adjusted until their taxable income has
fallen by more than £2,500, and only the value of any decrease
above £2,500 will be counted. This means that anyone whose
income drops by £2,500 or more, will receive £1,025
less in tax credits than they would before the change. This is
because awards fall or rise by 41 pence for every pound rise or
fall of income. (£1,025 is 41% of £2,500.) This may
affect people who take maternity leave, or long-term sick leave
because they are diagnosed with a serious illness, or if one of
a couple is made redundant.
The tax credit system was designed to respond
to changes in a family's circumstances, to help them manage a
sudden fall in income for example, by re-assessing their award
based on their new lower income. This change announced in the
budget means that families will not see their tax credit award
adjusted unless their taxable income falls by more than £2,500,
and only the value of any decrease above £2,500 will be counted.
This means that anyone whose income drops by £2,500 or more,
will receive £1,025 less in tax credits than they would before
the change. This is because awards fall or rise by 41 pence for
every pound rise or fall of income. £1,025 is 41% of £2,500.
This may affect people who take maternity leave, or long-term
sick leave because they are diagnosed with a serious illness,
or if one of a couple is made redundant. (Budget announcement)
Tax credits childcare costs reduced from 80%
to 70% (from Apr 2011). Help with childcare costs through tax
credits increased from 70% to 80% in April 2006. From April 2011
only 70% will be covered. Tax credits—and help with childcare
costs in particular—have significantly improved the position
of lone parents and second earners in relation to financial gains
from working. There are now significant financial incentives for
them to move into both part-time or full time work. This contrasts
with the position in 1997/8 when moving into part-time work would
result in financial losses and much weaker gains from full time
work.
This will particularly affect owner-occupiers,
as families paying rent will have some of the loss made up by
increased housing and council benefit payments. This is because
the net income on which their HB/CTB is assessed will be lower.
If childcare costs are £200:
— Families who only receive help with childcare
costs through tax credits will lose 10% of their help—£20
a week.
— Families with a mortgage but in receipt
of council tax benefit will lose 8% (loss of 10% from tax credits
but gain 2% in extra CTB help)—£16 a week.
— Families on HB/CTB will lose 1.5% (10%
loss in tax credits but a gain of 8.5% in additional HB/CTB) or
£3 a week.
Freezing of both basic and 30 hour elements
of WTC (from April 2011) The June Budget announced that all benefits
and tax credits would be uprated in line with CPI instead of the
usual RPI. The rate of CPI affecting April 2011 rates is 1.5%
lower than the rate of RPI.[4]
The further move to freeze these elements of WTC, instead of uprating
them by CPI, will mean a loss in real terms of £60 a year,
or 1.14p a week, in the basic element, and £24 a year, or
46p a week, in the 30 hour element. These losses together will
be compounded to over £260 a year by 2013. Taking account
of the fact that to maintain the value of the 2010/11 rate it
would need to have been uprated in line with RPI, the overall
loss to a family entitled to both elements would be £391
a year by 2013. By 2014 this change will reduce spending by £625
million a year. (CSR announcement)
Working tax credit for couples with children.
Couples will have to work 24 hours (instead of 16) between them
and one must work at least 16 hours (from April 2012). We hope
that there will be exemptions for couples where one is unable
to work due to disability or sickness. This measure will particularly
affect households who face sudden income falls when the main earner
is made redundant—currently continued entitlement to tax
credits based on a part time (over 16 hours) earner is hugely
valuable to families.
During the recession CAB have seen many couples
who have hit financial difficulties when the main full time earner
is made redundant and they find themselves having to depend on
the part-time earner. Advisers reported that tax credits, based
on an annual income could be very slow to increase following what
was a dramatic cut in a monthly income. However in most of these
cases, the families were still entitled to WTC as well as CTC
because the part time earner worked over 16 hours. (CSR announcement)
Reducing entitlement to the flat rate £10.50
a week family element of tax credits
From 2011-12, families with incomes above £40,000
will see their entitlement reduced. From 2012 there will be no
flat rate of £10.50 a week, as it will be reduced as income
rises in the same way as the rest of tax credits. This will affect
families on much lower incomes and together these savings represent
a reduction in spending of £0.6 Billion a year from 2014.
Almost two million families currently receive
just the £10 a week family element of child tax credit. When
a household's gross income reaches £50,000, this element
is reduced. From 2011 this family element will start to be reduced
at a gross income of £40,000 rather than £50,000. Around
half a million families will cease to be entitled to tax credits.
From 2012, there will no longer be any flat rate entitlement to
the £10.50 family element. (Budget announcement)
CHILD POVERTY
The Treasury asserts that by increasing the
child element of child tax credit above indexation, alongside
the freezing of child benefit for three years, the budget will
cause no measurable impact on child poverty in the next two years.
However, the Treasury calculations are based on modelling these
two changes only. In conjunction with other cuts—including
housing benefit and benefits paid specifically to families with
babies—there is a real risk of an increase in child poverty
as a result of this budget. The CSR was based on the same principle
of cutting or freezing a range of payments whilst increasing the
child element of child tax credit.
Families with children under four face the highest
risk of living in poverty, yet it is these families that have
been worst affected by the budget. Labour's last budget introduced
£4 a week extra in child tax credit for children aged one
and two, on top of a system already providing an extra £10
a week for families with a baby under one. This budget has cut
all these extra age-related payments even for families on the
lowest incomes—those on out-of-work benefits or in part-time
and low paid work.
WORK INCENTIVES
The June budget concentrated on targeting resources
on low income families, by freezing payments made to all children—child
benefit—and increasing means-tested child tax credit paid
to the poorest. Targeted support is achieved through increased
means testing, which reduces work incentives, as it means that
families lose benefit income for every extra pound of income they
earn. Measures announced in Labour's last budget of March 2010
increased by 40,000 the number of households losing more than
90 pence for every extra £1 earned. Treasury figures predict
that the Coalition Government's first budget will increase this
number by a further 20,000.
Further measures announced in the CSR have cut
in-work benefits—freezing WTC, and reducing the childcare
element of tax credits.
For those affected by these measures, the incentive
to work will be significantly reduced.
LEGAL AID
Following the Comprehensive Spending Review,
we understand that cuts to the legal aid budget will amount to
£350 Million. Cuts of this scale can only be achieved by
restricting the type of support and categories of cases—especially
civil issues—that legal aid will provide for. As a result
we may see forthcoming proposals for advice and representation
on many social welfare and family issues to be taken "out
of scope." This will leave many people without any advice
or representation, and injustices will go unchallenged. We are
concerned that such large cuts to civil legal aid provision will
impact adversely on the most vulnerable—people facing poverty,
homelessness, potential deportation, family breakdown and domestic
violence, loss of jobs, imprisonment, debt. People with mental
illness, physical illness, disability; people who lack the education
and experience to deal with the bureaucracy of our society, and
who are bewildered and overwhelmed by the legal problems they
find themselves up against.
Demand for advice is already outstripping supply.
A third of the adult population in England and Wales have unresolved
legal problems, and for those on lower incomes these problems
tend to cluster and multiply. Without the safety net of free legal
advice provided by Citizens Advice Bureaux and others, it is hard
to see how people on low incomes will be able to enforce their
rights. Government should value justice for all because the right
advice early on can save £10 for every £1 invested and
keep families together in their homes, and in work and education.
Over the last year CAB specialist advisers paid
for by legal aid have dealt with 43,234 welfare benefit cases,
56,990 debt cases, 9,129 housing and 2,954 employment cases. Bureaux
deal with many more cases besides these through generalist advice
and referrals to other specialists, but without legal advice or
redress difficult issues may not get resolved. Over 80% of the
these legal aid cases record positive outcomes for clients, with
additional savings for other public services.
LOCAL AUTHORITY
SERVICES
The Spending Review sets out reductions of 28%
in local authority budgets over the next four years. Local authority
core funding from the Department for Communities and Local Government
is due to decline from £28.5 Billion in 2010/11 to:
£26.1 Billion in 2011/12
£24.4 Billion in 2012/13
£24.2 Billion in 2013/14
£22.9 Billion in 2014/15.
We are concerned that local authorities have
borne some of the biggest cuts in the public sector and that most
of the cuts are front-loaded to 2011-2012. This will mean town
halls facing tough choices about which services, they continue
to run and fund in the local voluntary sector. Local Citizens
Advice Bureaux in England and Wales are funded by their local
authorities and the resulting cuts in spending will impact on
the ability of bureaux to provide advice services to the increasing
number of clients knocking on their door for help. Demand for
advice is outstripping supply and with funding for advice services
being discretionary, and bureaux face similar challenges as local
authorities in seeking to protect the most vulnerable from cuts
to frontline services.
The CSR has eased the burdens on local government
and given greater freedoms and flexibilities over local budgets
and this could result in greater differentiation from one local
authority area to another, with opportunities for bureaux to work
to deliver services that meet the needs of local people. The localising
of budgets is seen as key to building a Big Society and bureaux
have a pivotal role in supporting local authorities to shape and
commission the right provision for communities whilst equipping
them to solve problems themselves. The natural synergies between
the work of bureaux and local government provide opportunities
to deliver service improvement collaboratively. Through continued
funding early intervention/preventative services provided by bureaux
will help to realise sustainable improvement by preventing increased
costs for local authorities.
The government announced in the CSR the sixteen
areas that will set up pooled budgets, with the stated intention
that this model of accountability will be rolled out across the
country. The areas are Greater Manchester, Leicestershire, Croydon,
Blackpool, Islington, Hull, Kent, Blackburn with Darwen, Bradford,
Swindon, a group of Westminster, Kensington & Chelsea, Hammersmith
& Fulham, Barnet, Lewisham, Essex, Lincolnshire & Birmingham.
We believe that that this model of accountability should involve
the statutory and voluntary sector in the planning and implementation
and that the government does not limit the policy objectives to
which community budgets can be linked.
November 2010
1 Financial Overcommitment, research study conducted
for Citizens Advice by MORI, July 2003 Back
2
http://www.statistics.gov.uk/cci/nugget.asp?id=19 Back
3
Spareroom.co.uk Back
4
http://www.statistics.gov.uk/cci/nugget.asp?id=19 Back
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