Chancellor Philip Hammond’s first Autumn Statement, which was forecast to ease the impact of benefit cuts, quickly unravelled.
The Chancellor changed Universal Credit (UC) – the flagship single payment being rolled out across the UK – to reduce the “taper rate” from 65% to 63%, meaning benefits will be withdrawn at a rate of 63p for every pound of net earnings.
But a House of Commons analysis, requested by Labour, into the changes to the taper rate revealed many working families will still be worse off. In some cases families hit by cuts of £2,500 a year will only get £150 back.
The analysis showed that a working couple with two children, both working on the National Living Wage (NLW), could be £800 worse off instead of around £1,100 worse off in 2017-18 as a result of cuts to UC work allowances. And a lone parent with two children earning £25,000 per annum might be around £2,300 worse off instead of £2,500 worse off in 2017-18 as a result of cuts to UC work allowances.
Shadow Chancellor John McDonnell said: “If this Autumn Statement is supposed to relaunch the Conservative party on the side of workers, then it has already failed. It appears that Philip Hammond not only takes with one hand, he now pretends to give back with the other.”
He said the reduction in the taper rate would be “too little, too late for those working families who have had to bear the brunt of six wasted years of failed Tory economic policies”. He added: “Despite all their rhetoric last month, and before the ink is even dry on the Autumn Statement, it looks like it will be jam tomorrow for working people under Theresa May and Philip Hammond.”
The Chancellor is believed to have won a Downing Street battle with Theresa May, halving the £2 billion benefit cashback which the prime minister initially wanted to deliver her promise to protect people who are “just about managing” with their household budgets.
His first major economic statement since the Brexit vote unveiled forecasts which are expected to show higher borrowing and slower growth. He warned of “turbulence” and “an unprecedented level of uncertainty” as the UK leaves the EU.
Among the measures to be announced were: a ban on upfront fees imposed by lettings agents in England, an increase in the National Living Wage to £7.50 an hour from April 2017, and £1.4bn aimed at delivering 40,000 new affordable homes in England
Other changes which had already been announced included investing an extra £2bn a year in science by 2020, a crackdown on compensation claims for whiplash injuries aimed at reducing motorists’ insurance premiums and £1.3bn to improve roads.
The government has also faced calls to abandon planned cuts to Universal Credit, due to come into force in April 2017, which critics say will hit people who are “just about managing” – the group Prime Minister Theresa May has promised to protect.
Paul Johnson, director of the Institute for Fiscal Studies, said: “For sure the economic numbers are going to get worse – he’s going to be borrowing more than he wanted to and he is going to be very uncertain about exactly where we will be in four or five years’ time.”
In the build-up to his statement, Hammond vowed to ensure the UK economy is “watertight” for the “sharp challenges” of Brexit and described the UK’s debt – national debt stands at £1.6trn – as “eye-wateringly” large.