Poorest areas hit hardest by benefit cuts

The most deprived areas of Great Britain will also be the ones hit hardest by the coalition's policy of cutting benefits and tax credits, according to a new analysis from the Centre for Regional, Economic and Social Research in Sheffield.

The study does not cover the new universal credit system, which is not considered likely to have a major impact before 2018.

Key points

  • The geographical impact of the cuts varies greatly, with the worst-hit local authority areas losing around four times as much, per adult of working age, as the least affected ones.
  • Older industrial areas, a number of seaside towns and some London boroughs will be hit hardest. Blackpool, in north west England, is hit worst of all – suffering an estimated loss of more than £900 a year for every adult of working age in the town. The three regions of northern England alone can expect to lose around £5.2 billion a year in benefit income. In general, the more deprived the local authority, the greater the financial loss.
  • The biggest losses arise from reforms to incapacity benefits (£4.3 billion a year), changes to tax credits (£3.6 billion) and the 1 per cent uprating limit for most working-age benefits (£3.4 billion). When the cuts have come into full effect they will take nearly £19 billion a year out of the national economy – equivalent to around £470 a year for every adult of working age.

The study's authors point out that the loss of benefit income will have knock-on consequences for local spending and thus for local employment, which will in turn add a further twist to the downward economic spiral. A key effect of so-called 'welfare reform' will therefore be to widen the gaps in prosperity between the best and worst local economies across the country.

Source: Christina Beatty and Steve Fothergill, Hitting the Poorest Places Hardest: The Local and Regional Impact of Welfare Reform, Centre for Regional, Economic and Social Research (Sheffield Hallam University)
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See alsoThe Impact of Welfare Reform on Scotland, 2nd Report 2013, SP Paper 303, Scottish Parliament Welfare Reform Committee. This report reproduces more detailed information on the impact in Scotland, drawn from the same study.

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