UK benefit cuts to cause more pain than gain: think tank
LABOUR’S benefit cuts will leave hundreds of thousands more Britons in poverty even after accounting for the employment boost the government claims the reform plans will deliver, according to analysis by the Resolution Foundation think tank.
At the Spring Statement in March, Chancellor of the Exchequer Rachel Reeves announced £4.8 billion (S$8.3 billion) of projected annual savings by 2030 from cutting the generosity of disability and health benefits.
The government’s own analysis found that the changes would push 250,000 people into poverty, including 50,000 children, and make 700,000 already struggling families even poorer.
However, the government argued that the numbers failed to reflect measures to help more people move into the workforce, which the Office for Budget Responsibility did not have time to calculate. Resolution has now done the analysis and found the combination of better incentives and employment support will shift only 105,000 people into jobs at best. The figure could be as low as 60,000.
“These gains are dwarfed by the income losses that millions of families will face,” Resolution Research Director Greg Thwaites said. “The reforms as they stand will increase poverty.”
The government’s overall assessment was there would be 3.8 million net cash winners, who would gain £420 per year on average, with the 3.2 million cash losers missing out on £1,720 on average.
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Reeves’ welfare reforms have become hugely divisive within Labour, which is traditionally the party of poverty reduction. Dozens of MPs are threatening to revolt by refusing to back the reforms in a parliamentary vote in an attempt to draw concessions from the government.
Reeves said in March that she was “confident the changes that we are making, the support we are providing to get people into work, will result in more people having fulfilling careers, paying decent wages.” She added that was “the best way to lift families out of poverty.”
The reforms were designed to drive more people into work by making it harder to secure disability or health benefits and by providing more funding for employment support. Resolution’s analysis tested the theory but found that “while the reforms should boost employment, the scale of gains will not be sufficient to avoid millions of losers and hundreds of thousands additional people falling into poverty.”
Reeves pushed for the cuts after deciding the cost of health benefits since the pandemic had become “unsustainable” and was causing a fall in workforce participation.
In October last year, the OBR estimated that the annual bill was due to rise by over 50 per cent from £65 billion in 2024 to £101 billion 2030. BLOOMBERG
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