'Nothing to gain' with new benefit

Most families will gain nothing from the Government's new Universal Credit , with ministers overstating the generosity of the benefit, a new report has claimed.

The TUC and Child Poverty Action Group said the new single benefit payment, now being trialled in parts of the country before being introduced across the UK, was in danger of failing to deliver on its key objectives.%VIRTUAL-SkimlinksPromo%
The two groups said that although Universal Credit will improve some aspects of the benefits system, its ability to lift families out of poverty and remove barriers to working will be "severely undermined" by the Government's wider tax credit and benefit changes.

Nine out of 10 families will gain nothing overall from its introduction, with any benefits offset by recent social security cuts, it was claimed.
Requiring people to claim online and make joint claims with their partners will make the process more complicated at a time when advice services are being cut, said the report.

TUC general secretary Frances O'Grady said: "Universal Credit is not bad in principle, but taken together with the other benefit changes introduced by the Government, it will make most people worse off. For all the claims of simplicity, in practice it is such a complex system that the Government has been forced to delay its roll-out."

Child Poverty Action Group chief executive Alison Garnham said: "Universal Credit seeks to address many of the shortcomings of the current benefits system by being simpler and providing incentives for claimants to earn more.

"But Universal Credit lets itself down on many fronts. It introduces new complexities into the benefits system such as joint payments and new rules on savings. In addition, the financial gains for many are underwhelming, and the new system will rely as much on the stick as the carrot to incentivise claimants into work.

"Universal Credit is also blind to conditions outside of the benefits system: a lack of suitable jobs, the high costs of housing, and expensive childcare to name a few. Taken in isolation, Universal Credit may increase some households' incomes, but what financial gains they receive are more than wiped out as a result of the Government's broader programme of cuts."

Citizens Advice chief executive Gillian Guy commented: "We support a simplified benefits system which makes it clear that work pays and provides an essential safety net but the success of Universal Credit will be in its implementation. We are keeping a watchful eye to make sure it truly delivers on its promises and will sound the alarm bell if CABs across the country identify problems."

Budget 2013: Winners and Losers
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'Nothing to gain' with new benefit

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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