Citizens Advice response to Spending Review

The announcements made today by the Chancellor in the Spending Review and the earlier measures introduced in his Emergency Budget in June of this year will have significant consequences for many CAB clients.  Cuts to public services and in welfare and tax credits spending will have an adverse impact on our clients and will undoubtedly increase the level of demand for the free advice and information services we provide.

Derek Alcorn, Chief Executive of Citizens Advice, said: “We advise thousands of people every year, many of whom are on low incomes or rely on welfare benefits and public services. Our advisers have already started to see the impact of the measures announced in the Emergency Budget this year on clients.  The cut in the interest rate for help with mortgage interest payments through the benefits system is beginning to cause financial hardship for our clients many of whom are vulnerable.  The measures announced today in the Spending Review do little to protect those on the lowest incomes and those in receipt of benefits.” 

A number of the measures announced today give particular cause for concern namely:
• The restriction of contribution-based ESA to 12 months is particularly harsh for those who have paid contributions all their working lives and who have become sick or disabled;
• Benefit Cap of £500 per week introduced from 2013 which will impact greatly on families with children;
• Freeze in benefits – a number of benefits/tax credits will be frozen over the next three years including Child Benefit, the basic and 30 hour elements of Working Tax Credit and the maximum savings credit award in pension credit.  In real terms many people on benefits will see no rise in income levels despite other costs of living increasing the forthcoming increase in VAT in January;
• Tax Credit changes – the basic and 30 hour elements will be frozen over the next three years, couples with children must work 24 hours between them for entitlement to Working Tax Credit from April 2012, the proportion of costs covered by the childcare element of Working Tax Credit will be reduced from 80% to 70% from April 2011.  These changes raise questions about the Government’s guiding rule – “it will always pay to work.”
• Housing Benefit changes - the decision to raise the single room rate to 35 year-olds could impact on homelessness and will hit single working people on low incomes as well as the single unemployed.

Citizens Advice welcomes the principles of welfare reform set out by Iain Duncan Smith in particular the need to simplify the benefits system and to make work pay.  However only the details will show whether the most vulnerable society will be safeguarded.  There is a very real need to recognise that some people will always need help through the benefits system and it is crucial that the most vulnerable and disadvantaged people in our society are protected in any reform of the welfare system.

The organisation welcomes some aspects of the Spending Review including no further changes to Child Benefit or reductions to Cold Weather payments and no changes to the existing waiting period or capital limit through the Support for Mortgage Interest Scheme.