As the Chancellor prepares to deliver the Budget tomorrow, those with the most to lose are the poorest in our society.
Many of you reading this can hardly imagine living on £20,000 a year before housing costs, yet that is the reality for millions. It is roughly 60% of the median income, the level officially defined as “poor.” While the cost-of-living crisis hurts everyone, it hits low-income households hardest. Food, rent and fuel now swallow almost all their disposable income. Far from helping, the government has made life harder.
About 14 million people – one in five – live in relative poverty after housing costs. That includes 4.3 million children, 8.1 million working-age adults and nearly two million pensioners. The Institute for Fiscal Studies reports that child poverty has risen from 27% in 2010-11 to 30% in 2022-23. More than two-thirds of poor children live in households where at least one adult works. Poverty is no longer confined to those out of work; it has become an everyday feature of low-wage Britain.
The Budget is a chance for the government to show that it cares about those on modest incomes. Key issues that could lift or sink struggling families include the frozen personal tax allowance, the two-child limit on child benefit, the benefit cap and funding for social housing. Addressing these would lift thousands out of poverty; failing to act will push many more into hardship.
The Liberal Democrats have long supported raising the personal allowance, reforming benefits and increasing the supply of affordable housing. We have argued for stronger tenants’ rights, better childcare support and investment in early years. These are all crucial to tackling poverty, but we must now go further.
We should demand that the Office for Budget Responsibility be required to publish clear modelling of how every Budget measure affects poverty and inequality, alongside its usual forecasts on debt, growth and inflation. The OBR was created to bring honesty and independence to economic forecasting; it should now bring the same transparency to the social impact of fiscal decisions.
At present, Budgets are judged almost entirely on how they affect markets and the deficit, while the human consequences remain hidden. An annual Poverty Impact Assessment by the OBR would show, in black and white, how policies on tax, benefits and spending change the number of people in poverty or at risk of it. It would allow MPs, journalists and the public to see who gains and who loses, before votes are cast and lives are affected.
The poorest families should never be invisible in fiscal policy. Transparency of this kind would help hold ministers accountable for the human cost of their decisions and allow future governments to design Budgets that support, rather than punish, those who are struggling.
We should also press to abolish the two-child cap, unfreeze the personal allowance and restore real funding for social housing. Why should a person on £20,000 a year be taxed into hardship? Why should children lose support because of arbitrary policy rules?
This month’s Budget is a defining moment. Working people on £20,000 a year should not be asked again to carry the heaviest load. Children should never be treated as collateral damage for fiscal policy. The poorest must not be driven deeper into hardship through frozen thresholds, rising housing costs and benefit cuts.
The Liberal Democrats must lead the call for fairness. If ministers refuse, we must hold them to account and ask Labour why they remain silent. When the poorest have the most to lose, silence is not an option.
We must stand up for poor people.
* Tom Reeve is a Liberal Democrat councillor in Kingston upon Thames
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17 Comments
Labour doesn’t care about most people. It’s constituency are those on welfare and particularly with children. Labour just tax and spend without thought. I have been hoping for years that the party would become defunct and it’s class based policies chucked in the bin.
@David If so, why are so many of them abandoning Labour for Reform? Reform are mobilising millions of people who rarely, if ever, vote. To challenge Reform, we need to speak up for low-income voters for whom cost of living is THE existential issue. Erosion of living standards and the constant threat of economic calamity due to loss of income, an unexpected bill or incapacity have steadily raised anxiety levels. It’s no surprise many people are angry and, in their desperation, turning to charlatans like Farage.
I think it’s often a case of words not deeds when it comes to tackling poverty. After all Gordon Brown scrapped the 10p tax rate spun it as a tax cut when actually it was a tax rise for the lowest paid something that was spotted by Steve Webb and Ming pointed out in his budget response but took a few days for the media and Labour back benchers to get this. Similarly there was not much sign in all the leaks over than on the two child benefit cap lifting that tackling poverty is something they have a clear plan on. But then it doesn’t seem that Starmerism has much of a plan on anything other than using performative cruelty at any opportunity.
Citizens Advice reminds us, that the top 5 cost of living issues facing people today: emergency support (food banks and charitable support), Personal Independence Payments (PIP), fuel, debt assessment and council tax reduction. The Joseph Rowntree Foundation warns that Britain is entering a dangerous new phase in the cost of living crisis with 2.3 million low-income families borrowing to pay basic bills and nearly 6 million low-income families living with unsecured debt. Let that hang in the air for a moment.
Michael, thanks for your comment. Those are very worrying statistics. The JRF and Citizens Advice understand the problem and do a great job publishing reports on this. However, this kind of data would gain more traction with politicians and the media if the OBR published it alongside the Budget.
“ Key issues that could lift or sink struggling families include the frozen personal tax allowance, the two-child limit on child benefit, the benefit cap and funding for social housing. Addressing these would lift thousands out of poverty; failing to act will push many more into hardship.”
I support the benefit cap. It is fundamentally wrong that people can be better off living on benefits than working for a living – the benefit cap was to try to limit that unfairness.
“The Liberal Democrats have long supported raising the personal allowance”
This isn’t true. That’s like saying we’ve long supported the abolition of tuition fees.
At the last election the party officially abandoned it’s support for a high personal allowance when it decided it wasn’t willing to fund a reversal of the real terms cut to the personal allowance and NI threshold or even end the freeze for future years.
Tom, there are or have been historically millions of voters who class or have classed themselves as Labour. Without being patronising some of this may be coming from Labour backgrounds or thinking incorrectly that Labour care about the “working class”. Their policies over the years show that they don’t really care as their tax burden usually is very high and their dislike of aspiration and innovation by wealth creators has led to brain drains so that the burden of tax under their watch falls even heavier on lower and middle income families. In 1974 their surrender to the NUM helped fuel the inflation level to 25 pc by 1975. In 1981 by Healey holding off Benn by less than 1pc in the deputy Labour leadership contest prevented the then Alliance from destroying Labour as a party of government. Labour and Conservative are yesterdays parties and unfit to govern in my humble opinion.
Could I just point out that “the two-child limit on child benefit” doesn’t exist. the two-child limit is on the child element of Universal Credit.
Raising the personal allowance is a very inefficient way of helping the poorest (although it has other merits) given that it does nothing for those out of work, and nothing or very little for part time workers, while giving the same or more to people in affluent households. In contrast abolishing the 2 chlld rule – which looks likely – will take a lot of kids out of poverty. If we really want to reduce poverty without having to raise taxes a LOT on people on average incomes we need lower market rents (we already have the third highest amount of social housing in the world), and that means more housing supply. Pressurise your local councils to say yes to more housing if you care about poverty!
The lib-dems need to have more working-class people in our ranks if we are to properly stand up for them. The party needs to break out of it’s rural stagnation
Tim, thanks for your comment. Raising the personal allowance alone would be inefficient, but as part of a much-needed update to the income tax system, it would help to solve the inequality problem. If you want to talk about economic efficiency, we should have a debate on the raison d’etre of the economy and the relationship between income inequality and social stability.
Regarding housing, I agree 100% – we have a classic supply-demand problem, and the only way to solve that is by either increasing supply (by millions) or decreasing demand. (Hint: this might be part of what’s driving the toxic immigration debate). I say, build more but build well. YIMBY, not NIMBY.
Sadly, it has been confirmed that the Chancellor will place more burden on the least well off in society by freezing the personal allowance. In fact, it is worse than we had feared because she has chosen to freeze it for an additional three years rather than two as had been mooted.
Would Tom Reeve continue with the two child limit, or, if not how would he pay for its abolition ?
She won’t be chancellor in 2031. This is purely a change to the assumptions the OBR are now required to make.
So someone in employment and earning £15k per year has to pay £486 of Income Tax and £194 of National Insurance. However, someone living on benefits getting £15,000 in Universal Credit gets to keep all £15,000 tax-free.
Not sure why working people are taxed when non working with the same income are not taxed. And this budget has done nothing to address this.
A family entitled to £15,000 UC when unemployed would still receive £7,124 if they earned £15,000 so they would still get £6444 net. It’s not a lot but it’s a fairer way of looking at it than looking at tax and benefits separately.