Unison: welfare changes will hurt low paid

2 Sep 15

Cuts to benefits announced in the summer Budget will leave thousands of low-income households worse off next April despite the introduction of the “national living wage”, Unison claimed today.

In an analysis of the benefit changes set out by the chancellor in July, the union said low-income households would be worse off every year until 2020 despite the new wage rate. From next April, the National Minimum Wage will be increased from £6.50 an hour to £7.20, and then up to £9 an hour by 2020, equivalent to 60% of median earnings.

However, Unison said that this, even when coupled with an increase in the tax-free personal allowance from £10,600 to £11,000, would not be enough to offset benefit changes for low-paid families.

Assuming that the personal tax allowance reaches £12,500 in April 2019 and that the enhanced minimum wage reaches £9 an hour as scheduled, and changes to the tax credits thresholds and taper are implemented, households will continue to lose out every year, the union said.

The analysis found a family with two children with both adults working 35 hours a week on the NMW will lose £1,615 a year following changes to the tax credits threshold and tapers. This household would have been £850 better off had there been no changes to tax credits next April.

A lone parent with two children, working 16 hours a week on minimum wage rates, are set to lose £445. They would have been £580 better off without the tax credit cuts.

Those under 25 will be hit hardest as they won’t qualify for the living wage rate. A family with one child with one earner under 25 and working 35 hours a week on the minimum wage will lose £1,460, while the same family with an earner over 25 will be £1,277 worse off.

Unison general secretary Dave Prentis said the lowest paid workers in the country had been led to believe they’d be better off next April as the minimum wage goes up.

However, this was a “pay con-trick”, he said. “As the government gives with one hand, it snatches away with the other.

“At first glance, low-paid workers might look quids in, but on closer inspection the chancellor is really rewarding them with an income cut. Many workers on the minimum wage will lose out as a result of the plans. It is dishonest for ministers to claim that people will be better off. They won’t.

“Any gain to families from the enhanced minimum wage and a higher personal tax allowance is going straight back to the Treasury through the changes to tax credits.”

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