Jobless families ‘£18k better off’ than working neighbours post-Budget | Politics | News
Calls for the chancellor to resign have increased since the Budget (Image: Getty)
Britain is experiencing a “welfare crisis” following Rachel Reeves’ “aid budget” with a damning report claiming unemployed families receiving a raft of benefits would be £18,000 better off than their neighbors on the national living wage. The Center for Social Justice claims that a family with three children who are employed and not dependent on benefits would need to earn £71,000 before tax to match the benefit income of an equivalent unemployed family.
The respected think tank says that after Ms Reeves scraps the two-child benefit cap, families on the full benefit will receive £18,000 a year more than their neighbors’ after-tax income on the living wage.
The report comes as Sir Keir Starmer faces calls to sack the Chancellor over allegations he misled the country about the state of the public finances ahead of the tax hike budget.
Ms Reeves is also accused of breaching a commitment in the Labor Party manifesto not to increase taxes on workers by extending for three years the freeze on the point at which people must pay income tax. There are also fears about the future of high street shops, restaurants and bars; many now face higher taxes.
Shadow Chancellor Sir Mel Stride said: “Rachel Reeves delivered a welfare Budget paid for by hard-working people. She misrepresented the state of the public finances to distract from the fact that taxes have risen by billions of dollars to fund a welfare splurge.
“Reeves broke his promise not to raise taxes because he was too weak to stand up to the backbenchers. And he misled the public about why he did it.
“Having broken his promise and manifesto, his position is no longer tenable.”
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Sir Mel wrote to the Financial Conduct Authority expressing concerns that “the Chancellor has presented an inaccurate picture of the economic and fiscal situation and this is motivated by political considerations.” He called for a “thorough investigation by the FCA into possible market abuse by anyone with access to confidential information, including HM Treasury and 10 Downing Street.”
Richard Tice, deputy leader of Reform UK, said: “[The] The Chancellor openly lied about the country’s finances. “His self-confidence has been shaken and his position has become untenable, but this weak Prime Minister cannot be trusted to do the right thing.”
He wrote to the Prime Minister: “The economy faces serious jeopardy with these extra risks as households become poorer. It is time to turn the tide with a new Chancellor to rebuild confidence.”
The Prime Minister will launch a defense of the Chancellor and his budget on Monday, insisting it sets the right economic course for the country. But he will say the Government must go “even faster” in its pursuit of growth by stepping up the industrial strategy.
He will state: “Economic growth exceeds forecasts. The increase in wages is greater in one year than in the ten-year period of the previous government.”
Sir Mel Stride and Kemi Badenoch condemn Budget (Image: Getty Images)
The Prime Minister’s intervention is unlikely to ease concerns about the country’s spiraling welfare bill.
The Center for Social Justice report warns that “spending on working-age health-related benefits will be £22.2 billion higher in 2030-31 than in 2024-25.”
It says: “Britain is in the grip of a welfare crisis. More than five million people are now claiming benefits with no obligation to work, while the number of people on payroll has fallen by 180,000 since October 2024.”
A family with three children with at least one parent claiming average rates of health benefits, including Universal Credit, housing and Personal Independence Payment, will now receive £46,000 by 2026-27, according to think tank analysis.
The report, which sets out what this means for families in Britain, warns: “A working family in which one adult works full-time and the other part-time on the national living wage will take home roughly £28,000 after tax, which is £18,000 less than the benefit income currently enjoyed by an equivalent family of three children working outside of work on combined benefits. A pre-tax salary of around £71,000 would be required to cover this level of support with earnings alone.”
Rachel Reeves has delivered two Budgets now and is determined to deliver more (Image: Getty)
Former Conservative leader Sir Iain Duncan Smith, who founded the think tank, said: “Increasing taxes on working people to pay for £16bn in extra welfare spending is a poor choice… We must pay for the work, and as this Government loses control of a ballooning welfare budget, it will ensure that the work does not pay.”
CSJ Policy Director Joe Shalam said: “Work is the best way out of poverty, but our welfare system is increasingly complicated by perverse incentives that trap people on benefits and fail to help them achieve financial independence. This failure ripples through generations; children who grow up without seeing their parents go to work every morning are twice as likely to be in absolute poverty.”
A Government spokesman said: “We disagree with these findings and our analysis shows that work pays more. We are changing the broken welfare system we inherited by tackling perverse incentives that encourage sickness claims, increasing face-to-face assessments and investing £1bn to help sick and disabled people get into good, secure jobs.
“We are prioritizing getting people into good, secure jobs and raising living standards across the country. While almost three-quarters of poor children live in working households, we have removed the two-child limit and our child poverty strategy will lift 550,000 children out of poverty by the end of this parliament.”
James Cleverly says Rachel Reeves spoiled the manifesto
But an analysis by the Liberal Democrats claims freezes on the point at which Conservative and Labor Governments must pay income tax could lead to “wages being wiped out”.
It says: “A couple where one person earns £26,000 a year and the other earns £60,000 faces an income tax hit totaling £26,800, accruing from April 2022 under the Conservative Party until April 2031, when the current Government’s threshold freeze is expected to end.”
Liberal Democrat Treasury spokeswoman Daisy Cooper said: “This was a desperate Budget that secretly placed greater burdens on working families and our high streets.”
Daisy Cooper says Budget puts pressure on Britain’s working families and high streets (Image: Getty)
A Labor spokesman said: “Kemi Badenoch’s Conservatives have exactly zero credibility when it comes to the economy. Voters expelled them because they crashed the economy and caused mortgages to skyrocket. Now their only so-called ‘plan’ is to take us back to austerity with £47bn of cuts.”
“This Labor government delivers a Budget that cuts NHS waiting lists, cuts debt and borrowing, and lowers the cost of living with an average saving of £150 on energy bills.”
