Working families most hit by Autumn Statement, says think tank

The majority of cuts to benefit and tax credits announced in the Chancellor’s Autumn Statement will fall on working households, warns independent think-tank the Resolution Foundation.

Resolution Foundation analysis shows that approximately 60 per cent of the effect of a three-year below-inflation rise in benefits will hit working households while 40 per cent will affect those where no one is employed.

It says around 5.8 million families receive tax credits – of whom 4.3 million have someone in work and only 1.5 million are out of work.

The Resolution Foundation has also looked at figures published by the Office for Budgetary Responsibility in parallel with the Autumn Statement. It says they suggest a longer squeeze on wages than previously forecast. “In March, the OBR suggested that average earnings would outpace inflation (RPI) from the second quarter of next year. Now that point is delayed until the second quarter of 2014, when the median full-time wage will be 7.4 per cent below its 2008 level. This means that by 2017 median wages will still be below where they were in 2000,” it states.

It adds that it is against this background that new benefit cuts have been announced as part of the Government’s plan to prune a further £10 billion from the welfare budget by at least 2016-2017, in addition to £18 billion of savings already scheduled for introduction by 2014-15.

The Resolution Foundation says that while it supports the principle behind reducing relief on lifetime pension contributions to £1.25 million – it should have been limited to £1 million which would have raised more money. That could have been used, it says, to support working families via expanded childcare.

GavinKelly, chief executive of the Resolution Foundation,said: “The majority of the cuts made to benefits and tax credits will come from working households – it’s completely wrong to say that the Statement was all about helping so-called strivers.”

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