Welfare shakeup 'will push a quarter of a million children into poverty'

Patrick Butler and Anushka Asthana
The two-child restriction would inflate current child poverty figures by 10% by the end of the parliament, the study predicts. Photograph: Christopher Furlong/Getty Images

A government shakeup of welfare payments being introduced on Thursday will push a quarter of a million children into poverty while wiping thousands of pounds off payments for bereaved families, according to research.

Analysis for the Guardian reveals that a family whose third child is born before midnight on Wednesday could be up to £50,000 better off over 18 years than one whose child is born on Thursday.

Meanwhile, a terminally ill man has told the Guardian that his wife and children will see tens of thousands of pounds wiped off their bereavement benefits if he survives beyond this week’s welfare deadline.

The man, from Barnet in north London, who spoke under the pseudonym Alan in order to protect his family, hit out at the “callous and brutal” reforms that will limit payments to widowed parents from many years to a maximum of 18 months.

The crunch for families celebrating a new birth or grieving the loss of a parent is a result of changes coming into effect on 6 April. They were announced when George Osborne was chancellor and are being enacted by Theresa May’s government. One of the changes means all households that have a third or subsequent baby will – aside from a limited set of exemptions – no longer be able to claim child tax credits.

Policy in Practice found that more than 600,000 families – championed as the “just about managing” households, which the prime minister vowed to protect on her first day in government – would be hit by the child welfare cuts, while many more could be affected by other cuts.

An expected 8,000 third or additional children are expected to miss out on support of up to £2,780 a year in April, a figure that could climb to 104,000 over the next 12 months, said the authors of the study.

The two-child restriction would inflate current child poverty figures by 10% by the end of the parliament, the study predicts, with a knock-on cost to public services of around £270m a year as a result of increased support spending in other areas such as housing and schools.

“The impact of growing up in a family that struggles to provide basic necessities will mean this policy is likely to have financial and social consequences well into the future,” said Deven Ghelani, director of Policy in Practice.

Osborne announced the two-child policy in 2015 as part of a £12bn programme of social security cuts. It is expected to save £1bn a year for the Treasury by 2021. Also coming this week is a freeze to working age benefit levels, at a time when, according to the Resolution Foundation, the wealthiest will benefit from over £2bn a year in income tax cuts.

Families with children in which one parent dies are currently eligible for a £2,000 lump sum followed by a taxable benefit of approximately £112 a week until the youngest child leaves full-time education, which can stretch over 20 years.

For those who die after midnight on Wednesday, the lump sum will rise to £3,500 but the payments will be cut to £350 a month (about £80 a week) with a dramatically shorter time limit of just 18 months.

Alan, a 51-year-old with children aged 10 and 14, was told he had between one and five months to live in December after cancer of the tonsil spread to his lung and chest.

“My death, on or before Thursday, changes my family’s wellbeing to the tune of tens of thousands. It is utterly unbelievable,” he said. The lifelong Conservative voter described his distress after a pleading message to his local Tory MP, Theresa May and the chancellor, Phillip Hammond, received no response.

Rebecca Williams, a mother of two young boys from Bangor in Wales whose husband has terminal bowel cancer, also contacted the Guardian to describe her shock at realising she could be hit by the changes.

She discovered the policy shift as a result of a tweet describing how angry Rio Ferdinand, who lost his wife and mother of his three children to breast cancer, was about it.

“The government reform tells me we will be OK after 18 months when the allowance will be stopped completely and we will have to ‘get on with life’. Eighteen months is such a short time. Being worried and stressed about finances on top of dealing with such devastating loss is cruel and unfair,” she said.

Both families stressed that their loved ones had paid into the system for decades through national insurance.

The shadow welfare secretary, Debbie Abrahams, said the cuts were a “new low for this Tory government”, urging the prime minister to scrap them if she wants to help the just about managing.

The government said the new benefit was tax-free and simpler, claiming the system needed to be modernised to take into account the fact that many more women work. Not all families will lose as a result of the changes, with some being compensated through other benefits, but charities estimate that 75% will be worse off in cash terms with more than 90% receiving support for a shorter period of time.

The number of children affected from Thursday will depend on how many families decide to forgo having a third or additional child after deciding that tax credit restrictions make an extra family member unaffordable. The study says it is difficult to know how many potential parents are aware of the changes and are thus able to make an informed decision.

Ministers have argued a two-child limit will act as a “behaviour change” incentive to persuade poorer families to have fewer children, although the government’s own impact assessment says there is no evidence to suggest this is likely. They claim the policy will “enhance the life chances of children” because it will ensure that parents “make choices based on their circumstances rather than on taxpayer subsidies”.

But the Child Poverty Action Group charity (CPAG), whose own estimates predict the policy will put an extra 200,000 children into poverty by 2020, said it would damage children’s life chances.

Alison Garnham, CPAG’s chief executive, said: “This is a particularly pernicious cut because it suggests some children matter more than others. It’s also illogical because no parent has a crystal ball. Families that can comfortably support a third child today could struggle tomorrow and have to claim universal credit because, sadly, health, jobs and relationships can fail.”

There are four circumstances in which families can claim tax credits for a third or subsequent child: instances of multiple births after the first child; children formally looked after by relatives under “kinship caring” arrangements; adopted children; and children born as a result of rape. There are increasing fears that officials will not be able to guarantee the privacy of women who are forced to apply for an exemption after giving birth to a third child from what the government calls “non-consensual conception”.

Ministers have also faced objections from faith groups who believe the policy will discriminate against parents who have conscientious or religious objections to birth control.

The Money Advice Trust estimates the cost of providing for a child under 16 is around £2,448. Without tax credits, low income families with three or more children will have to rely on £711 a year from child benefit to support the youngest child, leaving them with a £1,700 shortfall.

Scottish National party MP Alison Thewliss, who has led a campaign against the rape clause, said: “When Theresa May stood on the steps of Downing Street last year, she said that her new government would strive to help the ‘just about managing’ in society. It appears that this was just empty rhetoric.

“Just about managing families don’t need warm words, they need action from the UK government to tackle low pay and child poverty. On Thursday, Theresa May will whip away vital child tax credit payments with a two-child policy that is tantamount to social engineering. The government say this is about cutting welfare, but the reality is that two-thirds of those affected are already in work.”

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