Working age benefits

Today Amber Rudd, the Secretary of State for Work and Pensions, announced that the ‘two-child limit’ in tax credits and Universal Credit will not apply to children born before the policy was implemented in April 2017. This tackles the ‘retrospective’ application of the policy that had attracted criticism, and it means that the full impact of the policy will not be felt until the mid-2030s. But that long-run impact remains unchanged: ultimately the two-child limit will, among those families affected by it, reduce their incomes by an average of £3,000 per year. This remains a major reform to our benefits system.

Six years ago today, Child Benefit was first withdrawn from families containing someone whose annual income is above £50,000 a year. This threshold has since remained frozen in cash terms and there remain no plans to change it.

This presentation was given at a seminar at the London School of Economics on 19 November 2018.

This presentation is one of a series on the economics of tax policy.

This presentation is one of a series on the economics of tax policy.

This presentation is one of a series on the economics of tax policy.

It is hard to overstate just how big a change universal credit will be. It will create millions of winners and losers. Any poll tax moment, though, is most likely to occur for administrative reasons.

The nature of low income in the UK has changed radically. The problem of low pay for those in work is increasingly dominating the domestic policy agenda. To mark the end of a programme of research funded by the Joseph Rowntree Foundation, we are setting out and discussing the latest evidence on poverty in the UK and in particular the challenges posed by the rise of in-work poverty. This observation summarises the key points.

This report examines changes in the distribution of household incomes in the UK, and the determinants and consequences of recent trends. This includes analysing not only changes in average living standards, but also inequality in household incomes and measures of income poverty and deprivation.

Next week will see the introduction of significant cuts to the generosity of two parts of the working-age benefits system. These will affect some new recipients of employment and support allowance, and any family receiving tax credits or universal credit who has either a newly born first child or a newly born third or subsequent child. The restriction to new claims or new births means that the changes will not result in existing claimants seeing their benefit income fall. But in the long run, these are substantial cuts: together they are expected to reduce government spending by over £5 billion a year in the long run. This observation discusses these changes.

IFS Deputy Director Carl Emmerson writes for The Times Red Box.

A lower cap on the total amount of benefits that households can receive comes into force tomorrow, affecting four times as many households as the previous benefit cap. Like the previous cap it will apply to out-of-work households of working age (with some exemptions, mainly due to disability). The cap will now be £23,000 a year in London and £20,000 elsewhere (there are lower caps for single adults without children set at £15,410 in London and £13,400 elsewhere). This compares to £26,000 nationwide under the previous cap, which has been in place since 2013. In this observation we look at the implications of a lower cap for government spending, the impact on the households affected, and how they might respond.