The impact on 'just managing families'

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham

“This budget clearly does very little to help those 'just about managing' and maintains the austerity policies of the previous government. Cuts to universal credit and other benefits are hitting people hard, both those in and out of work.”

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On 9 September this year, the Prime Minister, Theresa May, promised that her Government would support those families who are ‘just about managing’. This is a key, if rather loosely defined, group previously referred to as ‘hard-working families’ (by Gordon Brown) and the ‘squeezed middle’ (by Ed Milliband). The Resolution Foundation defines “Jams” as the six million or so low-income working families with net income of between £12,000 and £34,000 a year, although in practice many in this group move in and out of work.

What, then, did the government do for this group in the 2016 Autumn Statement? Very little, it seems. The Chancellor announced that the higher rate income tax threshold will rise to £50,000 by the end of the Parliament, but families on these incomes are rather better off than the ‘Jams’. Indeed, if both members of a couple earn £45,000 each and have no children they are among the very best off families in the country - and they will be even better off now as a result of this Autumn Statement. Of course, if there is only one earner on £45,000 and the family have several children then such families may be 'just about managing' but they are still considerably better off than many others. Overall, therefore, this is not a well-targeted policy to support those just about getting by.

The raising of the income tax threshold to £11,500 in April, from £11,000 now, will help some of the 'Jam' group, but this tax change will also help families who are much better off so, again, changes in tax thresholds are not an efficient way of helping those on low and middle incomes.

The increase in the National Living Wage from £7.20 an hour to £7.50 from April next year, will help some people on low wages though the interaction with tax credits lessens the impact here and today’s OBR forecast shows that the average annual wage will be £1,000 lower in 2020 than predicted in this year's Budget. And this is on top of wages still having not recovered to their 2007 levels.

There is one policy change which will definitely help those on low wages but it is a very minor change to the highly controversial reforms of Universal Credit that had previously been announced by George Osborne. This change will mean that for every £1 someone on Universal Credit earns in work over the work allowance (the amount you can earn without your benefit being affected), Universal Credit will be reduced by 63p instead of the present level of 65p. The Resolution Foundation has said that this would save claimants up to £300, but previous cuts may have cost them more than £2,000.

This budget clearly does very little to help those 'just about managing' and maintains the austerity policies of the previous government. Cuts to universal credit and other benefits are hitting people hard, both those in and out of work. And there is every sign that an increasing proportion of the population will find it impossible to manage over the next few years.

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