Half of cuts to benefits will hit people in work

While at this stage it is difficult to calculate precisely where welfare cuts will fall, early ippr analysis has factored out the change in up-rating benefits by Consumer Price Index (CPI) rather than Retail Price Index (RPI) and found that more than half of the remaining £12.8 billion of benefit cuts impact people in work. Of those, at least £5.3 billion of cuts will affect only those people who are in work and not people out of work.

Nick Pearce, ippr Director, said:

'The UK faces an employment crisis with record numbers of young people out of work and growing long-term unemployment. When the welfare reform white paper is published next week, the universal credit, though a sound idea, could look like a bit of a sideshow compared to the main event.

Making work pay - the main thrust of the universal credit - will be critically undermined if, as our analysis suggests, more than half of the cuts will come from the working poor and not those described by the Chancellor as making "the lifestyle choice of living on benefits".

'As well as long-term reforms such as the universal credit, ippr wants the welfare reform white paper to outline policies to tackle the immediate employment crisis. ippr has proposed taxing child benefit as well as winter fuel allowances for better-off older people. The money saved could be used to fund innovative approaches to getting people back into work which can also help create growth by targeting the UK's struggling small business sector.'

Notes to editors

In-work poverty in the recession was published by ippr in September. Now It's Personal? The new landscape of welfare-to-work was published in October.

After factoring out the change in up-rating benefits by CPI rather than RPI, ippr analysis shows that more than half of the remaining £12.8 billion will hit working people. The £12.8 billion breaks down as follows:

• £5.3 billion of cuts that will only affect those people who are in work, including £2.8 billion in tax credit payments and £2.5 billion in child benefit from higher rate taxpayers.
• £2.8 billion of cuts that will only affect those people who are out of work, the vast majority of which is the time limiting of contributory Employment Support Allowance.
• £4.7 billion of cuts to benefits that are claimed by those people both in and out of work, including £1.8 billion in housing benefit, £1.5 billion in tax credits, almost £1 billion in child benefit and just under £500 million in council tax benefit.

Contact

Tim Finch, Director of Communications: 020 7470 6106 / 07595 920 899 / t.finch@ippr.org