Autumn Statement: the good and the bad

Monday, 8 December 2014 - 11:11am

We’ve analysed the Autumn Statement, presented by the Chancellor last week, to highlight the details (both positive and negative) most likely to impact your work.

In March, the Office for Budget Responsibility estimated that our structural deficit would be reduced to £83.9bn by the time of the Autumn Statement. However, last Wednesday it was revealed that the deficit currently stands at £91.3bn.

As many commentators have pointed out, the target was missed mainly because of lower than expected returns from tax receipts. Despite rising employment figures, much of the recent increase has come from low paying roles and self-employment, which often contribute less in income tax than other more secure forms of work.

The Office for Budget Responsibility is concerned enough about this to predict that tax receipts are likely to fall by a further £20bn over the next two years. In addition, the government has promised to increase personal tax allowances across the board, while the weakness of the Eurozone continues to hamper exports, another key source of revenue.

As a result, if the government is serious about reaching its target of operating at a “small surplus” by 2018-19, an increasingly significant part of this effort is going to have to come through cuts to public sector spending. Some of this will come through efficiency savings, but there will also need to be a substantial reduction to all departmental budgets, outside of Health, Education and Foreign Aid, to achieve what the Institute for Fiscal Studies estimates will be ‘colossal’ cuts of around £55bn across the next Parliament.

This is important to many our members because local government funding is likely to be affected significantly. For example, according to a report published by the National Audit Office, spending on housing support and advice programmes for vulnerable people has fallen by 45% between 2010 and 2014, while housing services have also been cut by 34%. Unfortunately, these numbers are only likely to increase.

The government has also promised £12bn worth of unspecified welfare cuts. As pensions are protected by the triple lock system, it is likely that some of these cuts will have to come from a further reduction in people’s entitlement to out-of-work benefits, despite payments for things like Jobseekers Allowance accounting for just 0.7% of total government spending, as well as housing and disability benefits.

Employment Support Allowance

The Autumn Statement indicates that the government will look to prevent claimants who have been found fit for work at a Work Capability Assessment from being paid the higher rate of Employment Support Allowance unless their condition changes significantly or a new condition develops. The time period for which claimants may remain on Jobseeker’s Allowance while sick without having to move to Employment Support Allowance will also be extended.

Consequently, only those with the most severe conditions are likely to be eligible once these reforms have been implemented.   

Universal Credit

The statement also confirmed that the work allowance element of Universal Credit will be kept at its current level for a further year, until April 2018. We share the Joseph Rowntree Foundation’s concerns that this decision goes against the prevailing narrative of Universal Credit that work will always pay, ensuring that people will keep less of their earnings before their benefits are withdrawn.

Migration

From February 2015, it has been announced that the Genuine Prospect of Work test will be applied to all European Economic Area migrants who began claiming Jobseeker’s Allowance before 1 April 2014.This effectively ends what we had called transitional protection for people who were receiving Jobseeker’s Allowance and Housing Benefit prior to 2014.

People who do not have clear job prospects will see their claim ended and their right to reside in the UK as a jobseeker withdrawn.

In addition to going against many of the recommendations contained in a recent report by the Social Security Advisory Committee into the changing benefit entitlements of European Economic Area migrants, we are particularly concerned that this decision will almost certainly lead to a significant rise in migrant rough sleeping across the country.

Housing

However, it wasn’t all doom and gloom in this year’s Autumn Statement. Some announcements indicated that at least some of the necessary savings could be made through structural reforms. For instance, the government’s National Infrastructure Plan 2014, which was released the day before the Autumn Statement, includes a commitment to:

  • Directly commission new housing, starting with a 10,000 home scheme on an ex-RAF base in Northstowe. It will also carry out a detailed review, exploring the feasibility of rolling this policy out nationwide. This is significant because this is the first direct intervention by government in the housing market since the 1970s. It indicates that they are concerned enough about the state of the housing market to take the almost unprecedented step of intervening directly.
  • Extend the Affordable Homes Programme for a further two years until 2020, with an additional £957m of grant funding and a target of 275,000 homes over the course of the next Parliament.
  • Conduct a review into the way housing associations are able to value their stock.

We applaud these measures, especially the acknowledgement of the important role that housing associations can play in building more homes to meet rising demands. The first direct government intervention in housing for several decades is also an important recognition of the severe problems that currently exist with the market.

The extension of the Affordable Homes Programme is also welcome, but we still urge the Homes & Communities Agency to make a firm commitment to ensure that a significant proportion of these properties will be available at submarket rents and not just the maximum 80% of market rates.

Multiple and complex needs

The Autumn Statement also mentions positive movement on the issue of multiple and complex needs. The government appears to have incorporated the recommendations from the Service Transformation Challenge Panel’s report Bolder, Braver and Better: why we need local deals to save public services, to which we and our Expert Panel contributed. In addition, our work as part of the Making Every Adult Matter coalition contributed strongly to the government’s recognition of the need to better support adults with multiple and complex needs.

As a result, the government has suggested it will:

  • Complete analysis on the costs and outcomes of key groups of people with multiple needs suggested by the Service Transformation Challenge Panel, and the evidence on the best way to help them.
  • Review the nature of the funding available for service transformation, with a view to improving incentives in future.
  • Look at how best to align inspection and accountability regimes so that they encourage services to integrate around people with multiple needs.
  • Explore options to stimulate innovation to take advantage of the latest digital techniques; this will include implementing digital tools to improve service outcomes and accessibility for local people and enable organisations to deliver services more efficiently.
  • Publish local service budgets for 2015-16 on a single webpage in December 2014.

National Minimum Wage

The government also made a significant commitment to allocate an additional £3 million pounds worth of funding to help enforce the National Minimum Wage.

We support any effort to improve the employment conditions of the lowest paid workers. This is also a step in the right direction in attempting to reduce the number of people who are dependent on Housing Benefit, despite being in employment. The National Housing Federation estimates that the number of people in work who are claiming Housing Benefit has risen by 79% (roughly 570,000 families) between Nov 2008 and May 2014.

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Jonathon Graham

Jonathon Graham

Jonathon was our policy officer until June 2016.