Government cuts

High-income households in the UK have lost proportionately more than those in poverty as a result of austerity measures, according to new research published by the European Commission.

Researchers compared the distributional effects of 'fiscal consolidation' measures in nine European Union countries (including the UK) that have experienced large budget deficits following the financial crisis of the late 2000s and subsequent economic downturn.

The government has admitted its policy of capping increases in benefits will result in around 200,000 more children being in relative income poverty by 2015-16. The information has emerged in a written answer in Parliament from a junior DWP minister.

Following the recent Autumn Statement, the government is planning to limit the increase in most working-age benefits to just 1 per cent in each of the three years, 2013-14, 2014-15 and 2015-16. This is likely to lead to benefits both being cut in real terms (relative to consumer prices) and falling behind average earnings increases over the period.

The Child Poverty Action Group said the government's child poverty strategy was in 'utter disarray', with its policies overall set to push a million more children into poverty by 2020, and accused ministers of being 'in denial'. The government said it was 'not helpful' to look at relative income in isolation as a way of tracking progress on eradicating child poverty.

Trade unions are warning the government not to count on continuing voter support for capping benefit rises. A new poll commissioned by the TUC has found that those people least able to give accurate answers to basic questions about benefits are the most likely to back cuts. Once people are made aware of the full facts, support for cuts drops significantly.

The YouGov poll found widespread ignorance about benefits:

Most benefits and tax credits for working-age people will be cut in real terms for three years in a row from 2013-14, under plans announced by the Chancellor in his 2012 Autumn Statement on the public finances.

The Chancellor admitted he would fail to meet his pledges on public borrowing as a result of worsening prospects for economic growth. Forecasts of growth from the independent Office for Budget Responsibility were revised down significantly for every year between 2012 and 2016. As a result, the Chancellor said, the government's 'austerity measures' would have to be extended until at least 2017-18 – three years longer than originally promised.

In overall terms, however, the measures outlined in the Autumn Statement were neutral in their effect on the public finances. Instead the Chancellor chose to make significant changes in the way spending cuts will fall on different groups and areas of spending.