The Hanging Axe

Where will David Cameron's £12 billion welfare cuts fall?

Image from the Evening Standard

During the election, the Conservative pledge to axe £12 billion in benefits captured the headlines. But it was also just that– a headline. Beyond the promise to avoid cuts to the state pension, pensioner benefits, and child benefits, the hanging axe had no clear target or detail. The problem for David Cameron was that the three benefits listed above, and in particular pensions, make up the overwhelming majority of the total £220 billion welfare budget. There was always going to be a lot of head scratching about were the savings could therefore come from.

 The suggestion announced today is a £5 billion reduction to the child tax credit cut. The idea stems from the Institute for Fiscal Studies and would mean a reduction of over £800 per child per year from the poorest families. This is a significant loss and is not going to help the nasty party image. Tax credits have never been hugely popular – both left and right have called it a subsidy to business for low pay or that it is a disincentive in the family to find additional work – but they are a vital support to Britain’s worst off. Whether the Government will axe tax credits and walk away or follow it up with proposals to address root causes will be a key determinant on how significant a backlash this will generate.  

Julian

Hill & Knowlton Strategies Search