Although the Child Tax Credit will go up by one per cent for the next three years, with previously planned freezes going ahead, this is effectively a cut, since the increase is less than the rate of inflation, currently standing at 2.7 per cent.
Mr Osborne also announced that child benefit, which has been frozen since April 2011, will too go up by one per cent for two years from April 2014 – again, well below inflation.
Working parents on low and middle incomes will see their personal allowance increase by £235 in April 2013 to £9,440. Mr Osborne described the rise as ‘a direct boost to the incomes of people working hard to provide for their families.’
The Chancellor went on to say that the Government will increase most working age benefits and tax credits by one per cent for three years from April 2013. He said, ‘Families out of work will not get more than families in work.’
But Alison Garnham, chief executive of Child Poverty action Group, said, ‘Despite all the talk, working families are once again at the front of the queue for spending cuts. With six in ten poor children living with a working parent, real terms cuts to tax credits, housing and child benefits are grim news.
‘To date, we estimate more than 60 per cent of the cuts to benefits and tax credits have fallen on working claimants, but the increased tax allowances don’t fully benefit them – they get only 15p in the pound, while it is the better off again who get most gain from this tax cut.
‘According to the Institute of Fiscal Studies, the single biggest driver of child poverty in the next few years will be the changes already made to how benefits are uprated. Today’s cuts will make this bad situation even worse and will create a child poverty time bomb that will harm children and their life chances.’
Mr Osborne also confirmed today that the Government will next year introduce the Universal Credit system, whose national roll-out is due to start in October 2013, saying that ‘it always pays to work’. He also announced that there will be no increase in petrol taxes.
In terms of education, the Chancellor said that £1 billion will be spent on expanding schools and building 100 new free schools and academies. A further £270 million will go towards funding improvements in further education colleges.
In response to the Autumn Statement, Shadow Chancellor Ed Balls, said, ‘Middle-income families are paying the price… The average family on £20,000 is worse off before the VAT rise… Millions of families are striving to do the right thing.’
Anne Longfield, chief executive of 4Children said, ‘The measures announced in today’s Autumn Statement will provide little cheer for those families who are already struggling to cope with the rising cost of living.
‘Small changes such as reducing the uprating of benefits can make all the difference to vulnerable families, tipping many into poverty or breakdown - a consequence that will see our welfare system ultimately pay a higher price in the long run. It has never been more pressing to start putting families at the heart of the economic recovery.
‘Investing in families now is the only way to get our economy back on track and offer thousands of families a lifeline before their financial difficulties become irreversible crises.’
Hilary Emery, chief executive at The National Children’s Bureau, said, ‘Yet again those children living in the poorest families are being disproportionately hit by further cuts to benefits and services.
‘This Christmas, far too many children will be growing up in a cold home, watching their parents struggling to make ends meet, which will damage their health and well being. There is an urgent need for Government to rebalance the impact of its austerity programme, so that the next generation does not continue to carry the burden.’
Commenting on the Chancellor’s Autumn Statement, Nick Pearce, director at the Institute for Public Policy Research, said, ‘More help with childcare, rather than increases in the Personal Tax Allowance, should have been given to working families, who will also now see their tax credits cut further in real terms.’
Julian Foster, managing director of Computershare Voucher Services, the UK’s largest dedicated childcare voucher provider, said, ‘We work with thousands of hard-working families and it is disappointing to see there is nothing in the Autumn Statement offering them support to deal with their crippling childcare costs.’
'One payslip away from redundancy'
The Pre-School Learning Alliance criticised the Government for not supporting early years settings and cutting benefits to those in low-paid jobs.
Chief executive Neil Leitch said he failed to see why the Chancellor praised the Department for Education for under-spending in the same week that Ofsted said funding for the free entitlement to early education was spread too thinly.
'Having spare cash sitting in the bank appears to many of our members to be a total disregard of the challenges they face at a time when early years services are stretched to the limit,' he said.'We were also disappointed that the Coalition Government appears willing to divide our society into workers and shirkers. Our economy is still in a precarious position where many hard-working families may be one payslip away from redundancy or destitution. To put a negative label on those who may be newly unemployed through no fault of their own is unfair and divisive.
'As an organisation whose members support not just children but their families, we see firsthand the difficulties they face. The Coalition Government cannot argue about the importance of social mobility, early intervention and the right for every child to have a fair start in life, then indiscriminately marginalise these families even further by cutting increases to benefits to 1 per cent – far less than the rate of inflation – for the next three years.'
