How welfare cuts hammer low paid workers
In 2008, David Cameron declared that the abolition of the 10p tax rate for low paid workers was "punishing the low paid". Vince Cable called for "fully costed proposals on how to make those on low incomes better off" and Nick Clegg said that "this was a matter of principles - remember them?"
They were right to do so. So how have they been putting these fine words into action since they took power in May?
The abolition of the 10p tax rate left some low paid workers worse off by up to £4.46 per week. Households with two adults, each earning less than £18,000 per year, were, therefore, hit by up to £8.92 per week - a substantial sum for people in low paid work at a time when the cost of living was rising, as Mr Cameron and Mr Clegg pointed out.
So let's use that as an uncontentious baseline measure for measuring the impact of policies on low income workers. Everyone now agrees that the abolition of the 10p tax rate was a shameful attack on the working poor. Instead of the overheated political rhetoric about social cleansing, or competing graphs from government departments and research institutes, let's just compare any recent policies which the government has announced, and compare them in magnitude to the impact of abolishing the 10p tax rate.
In the Comprehensive Spending Review, George Osborne announced that the percentage of childcare costs covered by tax credits would be reduced from 80% to 70%. A technical sounding change, which a casual listener might presume would have minimal impact.
This will cost a low paid worker with two children up to £30 per week, or rather more than three times as much as the maximum impact of the abolition of the 10p tax rate.
Osborne also announced that after one year, people would lose their entitlement to contributions- based Employment and Support Allowance. Probably fewer than 1 in 100 people know what contributions-based Employment and Support Allowance is. How bad could that be?
It means that a family where one adult is in low paid work and the other is currently receiving Employment and Support Allowance could lose up to £91.40 per week, or rather more than ten times as much as the maximum impact of the abolition of the 10p tax rate. Even if they are then able to claim Jobseekers' Allowance instead, they will lose more than £30 per week.
What of housing benefit? Inside Housing magazine calculates that 936,960 of the 939,220 local housing allowance claimants will lose out by an average of £12 per week - rising to £22 per week in London. The average loss from technical sounding things like "setting rents based on the 30th percentile of private sector rents rather than the median" is more than one and a half times the maximum amount which the abolition of the 10p tax rate cost any family. That's the average - some low paid workers will lose far more.
That's just the initial impact (it is possible to calculate the effect of other cuts using the same measure). It doesn't consider what happens to the low paid lone parent who has to try to find an extra £30 per week to pay for childcare, and is forced to quit her job as a result. It doesn't consider the health impacts where one person is trying to hold down a low paid full time job and care for their sick partner, when they suddenly have to manage with £90 per week less. Or someone who has to find £12 a week or more in extra rent every week out of the wages of their minimum wage job, and who ends up getting into debt and getting evicted.
But even if you just consider those policies in cash terms, without making any further assumptions, then it shows that the government has already, within its first six months in office, announced three separate policies, each of which hit low income workers far harder than the abolition of the 10p tax rate.