The Government began making changes to tax and benefits in January 2011, and reforms will continue until April 2014. This will include the new universal credit, which amalgamates benefits and tax credits.
– By 2015, a family with 2 children will have their annual income reduced by £1,250, the IFS claims. That’s a drop of 4.2%.
– Families with 3 children will see their incomes fall by 6.8%.
– Families without children, on the other hand, will only lose 0.9% of their income (£215).
It looks like the people that will suffer most will be families with children under the age of 5, families with more than 2 children, and unemployed single parents. This last group will lose over 12% of their annual income (£2,000 a year) on average, according to the report.
It is estimated that, by 2015-16, half a million families with children under 5 will fall into absolute poverty.
The IFS warns that whilst the universal credit makes employment more attractive for the majority of individuals, it diminishes the incentive for a second earner in a couple to get into work.
Groups such as the Family and Parenting Institute have also expressed concern that families and children are set to take the biggest hit as a result of the Government’s austerity measures.
Are you worried about changes to your tax and benefits entitlements? If you think you may encounter debt problems as a result of the reforms, get in touch for some confidential advice.