Report finds 'work doesn't pay' due to welfare cuts

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Some working people are losing 97p of every £1 earned after being hit by a combination of welfare cuts, a committee of MPs has found. 

The public accounts committee warned today that cuts to council tax benefit means ‘work does not pay’ for those worse affected by the reforms.

In a damning report, the scrutiny group attacked the Department for Work and Pensions for ‘not fully understanding’ the impact of council tax benefit cuts when combined with other welfare reforms. 

In April 2013, the government transferred council tax responsibility to 326 local authorities, while simultaneously cutting its support by 10 per cent.

This meant councils were forced to start charging council tax to some or all of their previously exempt residents. 

The PAC report has found that despite government tasking authorities with protecting the vulnerable people, 133 councils offered no protection except to pensioners and war pensioners.

In 19 local authority areas, 225,000 people would lose more of their earnings than under the previous scheme.

It found some working people were losing 97p of every £1 earned when national insurance and income tax were combined with cuts to housing benefit and council tax support.

Margaret Hodge, chair of the committee, warned the government would ‘have their work cut out’ trying the combine the cuts with universal credit.

‘This just goes to show, for some, work simply doesn’t pay under the new scheme. For them, work incentives have actually weakened rather than strengthened – the opposite of what the government intended,’ she said.

The report called for a timetable to be set out for an independent review of the policy.

Brandon Lewis, local government minister, said: ‘Spending on council tax benefit doubled under the last government costing taxpayers £4 billion a year – equivalent to almost £180 a year per household. That’s why, as part of our long-term economic plan, we are fixing the welfare system to make work pay and reducing the deficit to safeguard our economy for the long term.

‘Our council tax policies are working. Localised council tax support has also given councils stronger incentives to support local firms, cut fraud, promote local enterprise, get people into work and end the “something for nothing” culture.’