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The Autumn Statement contained cuts in National Insurance contributions and a rise in the minimum wage, but there was little support for the care infrastructure and confirmation of a tougher sanctions regime for the long-term unemployed.
The Autumn Statement included National Insurance cuts and an increase in the national living wage, but the response has focused more on what wasn’t in it than what was, particularly in relation to support for early years providers and public services.
The Chancellor, Jeremy Hunt, said he would abolish “class 2” national insurance contributions [NICs] for the self employed, which count towards their state pension entitlements. He added that “class 4” contributions will be cut by 1%, saving people £350 a year in total. For employees, he will cut NICs by 2% from January [down from 12% to 10%], saving the average worker £450 a year. Experts say the cuts will be offset for many by the freezing of the income tax personal allowance and basic rate allowance.
He also announced that the national living wage will increase by more than a pound an hour from April to £11.44 and that it will be extended to 21-year-olds. Early years organisations have already expressed concern about how they will fund the increase, given no extra support was announced for the sector by the Chancellor. The Early Years Alliance said “urgent action is needed to safeguard the future of the early years sector in England”. The National Day Nurseries Association stated that unless the Government increases the funding rates for all children to include the hike in minimum wages, its childcare expansion policy would be “completely undeliverable”. It singled out the lack of any mention of scrapping or offering a discount on business rates for struggling childcare providers.
Hunt said benefits would be increased by 6.7% in April in line with September’s inflation rate. There had been concerns that the Government would choose the lower inflation figure in October instead, even though it is customary to use the September figure. The benefits rise was accompanied by confirmation that the Government will change the sick note system so that it assumes people can work and will reform the work capability assessment, meaning that by 2028 an estimated 370,000 people will lose around £4,690 per year in income if they are on Universal Credit. The Government says it will provide support to enable them to work. It also plans to introduce changes that mean that if, after 18 months of help to get into work, people are still unemployed they will face mandatory work experience. Those who don’t participate will have their benefits stopped.
The Child Poverty Action Group expressed anger that the Chancellor had left it until late in the day to confirm the benefits rise, said NICs cuts would not help the lowest paid and that there was nothing in the Statement to protect the wellbeing of the poorest children except some help with rents through an increase in the Local Housing Allowance. On the tightening of benefits sanctions, it stated: “Better employment support for people who are sick or disabled but ready to return to work is always a good investment, but that doesn’t consist of punitive sanctions and unpaid work schemes. Nothing in what is proposed meaningfully addresses the very real barriers to work facing people in this group. When will ministers heed the evidence which time and again shows benefit sanctions make it less – not more – likely that people can work?”
Commenting on the changes to Work Capability Assessments, Tony Wilson of the Institute of Employment Studies said: “[Employment support] measures are being more than offset by very significant cuts to benefit entitlements for people with long-term health conditions. Over the next five years the government expects that its changes to the Work Capability Assessment in Universal Credit will save around £2.8 billion, with just £2.6 billion of this being reinvested in additional support. It’s hard to escape the conclusion that the government is giving with one hand but taking even more away with the other.”
On sanctions and work placements, it estimates that they will be “all-but non-existent in practice” because so few people will be affected. It says the proposal to close claims for those under longer-term sanctions could even be more of a cost to taxpayers than a saving. Wilson states: “We’re relieved that the reality won’t quite match the rhetoric, but as we said last week the rhetoric itself will have been pretty damaging.”
Oxfam welcomed the increase in benefits and the minimum wage, but said the focus on tax cuts “contrasted starkly with a lack of commitment to invest more in already under-funded care services, including social care and childcare”.
Hunt also announced that the state pension will rise by 8.5%, in line with the triple lock, which guarantees state pensions go up with wages, inflation or 2.5% – whichever is highest. He said he would consult on the so-called ‘pot for life’ pension and on giving people a “legal right to require a new employer to pay pension contributions into their existing pension”. Some, including Steve Webb, former pensions minister, have warned that this could be damaging for lower earners who might be offered worse deals and could lead to “a fragmentation of the pension system”. Others are more positive.
Lily Megson, Policy Director of My Pension Expert, said: “The ‘pot for like’ initiative is a good one. It will give people choice over how and where they build their pension pot. But on its own, the pot for life is doomed to fail. Further efforts must be made to ensure people engage with their pension, and better plan for retirement. Improved access to pension information and independent financial advice will be vital to this. Without it, we risk seeing pension engagement remain stagnant for the foreseeable future.”
There was criticism that there was no mention of public services and that the measures announced in the Autumn Statement did not go far enough to help people who are struggling get through the winter. Mohsin Rashid, CEO of money-saving consumer app ZIPZERO, said: “The cost-of-living crisis is far from over – bolstering immediate, short-term support like energy bill relief and cost-of-living payments was crucial but did not materialise. Meanwhile, it is plain to see that these cuts predominantly benefit those whose pockets are already well-lined. Time and time again, the people who truly need support – lower income households – are left to fend for themselves by Hunt’s wanting fiscal policies, while he turns a blind eye in the name of ‘growth’.”
On Thursday, it was announced that the energy regulator Ofgem will raise the cap on fuel bills to an average of £1,928 a year, meaning a 5% increase in energy bills from January to March.