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Budget 2013: What it means for carers

20 March 2013

March 20 2013 : In addition to downgrading forecasts for economic growth, the Chancellor announced a number of tax changes including some tax cuts, additional cuts to public spending, support with childcare vouchers, and the bringing forward of significant policies including State Pension reform and a cap on the costs of care.

The following is a short summary of how the announcements in the March 2013 Budget will affect carers and their families.

Income tax  

Raising the income tax threshold: The Government has been raising the threshold below which people do not pay income tax – this means that people earning less than the threshold do not have to pay any income tax at all. Existing announcements mean that, in April, the threshold is due to rise to £9,440 a year, and the Chancellor announced that the Government would bring forward a rise to £10,000 to 2014.

Verdict: This is potentially good news for carers who are juggling part-time work with caring for older and disabled loved ones. But the benefits of paying less or no income tax for some of these families could be partially or completely reversed by cuts to spending on tax credits and benefits.

Cost of living

Inflation and scrapping a rise in fuel duty: The Budget cancels a planned rise in fuel duty (a tax on the cost of fuel) which was due in September. This will be of some comfort to families struggling with the costs of running a car – particularly carers whose petrol bills are higher than average because of frequent trips connected to caring, including doctors’ appointments, in-patient hospital visits, day centres or for those visiting loved ones in hospital.

However this week has also seen new inflation figures showing that the cost of living rose by 2.8% in February, more rapidly than the 2.7% rise in January. The Budget predicts that inflation will remain high until 2016.

This reflects the huge challenges families are already facing with rising utility and food bills. Measures in the Chancellor’s Autumn Statement last year meant that many benefits will not increase to match the rising cost of living – which amounts to a real-terms cut in the support many families in difficult circumstances receive.

Whilst Carer’s Allowance, Disability Living Allowance and some carers and disability premiums to means-tested benefits are rising with inflation, the complicated way in which the benefits system works means that many carers and their families will still see a below-inflation rise in their benefits. This is because whilst the ‘top-up’ premiums to benefits like Income Support will rise with inflation, the ‘personal allowance’ which forms the main part of the benefit payments will only rise by 1%.

Verdict: Whilst families with cars will be relieved that petrol is not going to get even more expensive in September, many carers will get little respite from the rapidly rising costs of living – particularly those seeing a real-term cut in their families’ benefits.

State Pension reform

Pensions reform brought forward: The Chancellor announced that the Government’s plans to replace the current system with a ‘flat-rate pension’ of around £144 a week, would now be implemented in 2016 rather than 2017.

Verdict: Carers UK has welcomed key parts of the reforms as a way of better protecting people with broken National Insurance records – including many carers. Introducing the reforms sooner should mean that more people benefit, including some groups who were due to retire before the changes were implemented and were at risk of missing out.

Cap on care costs

Cap on lifetime care costs brought forward: The Budget confirms that the Government plans to introduce the cap proposed by the Dilnot Commission on the lifetime costs of care and support services for older and disabled people and that this would be implemented sooner than expected.

The Chancellor said that the cap will be introduced in April 2016 rather than 2017 and will be set at £72,000, slightly lower than the expected £75,000. The means-test threshold (above which individuals are not entitled to any state support) will rise from £23,500, to £118,000.

Verdict: Carers UK has welcomed the cap as a significant first step in protecting families from catastrophic care costs and the Government has said that the reforms will help an extra 100,000 people who would not receive any support under the current system. Bringing in the cap earlier is welcome, however it is essential that this action on care bills is followed by urgent action to address a crisis of chronic under-funding for existing care services.

Spending cuts

Higher cuts to spending in 2015-16: The Chancellor announced that, when the Government reviews spending later this year, he will now be asking departments to find £11.5 billion of cuts in 2015-16 rather than the £10 billion previously announced. But where these cuts will fall will be decided at the Spending Review in June, however the Chancellor said that schools and the NHS will be protected.

Verdict: We do not know which areas will be cut, but are concerned that this will lead to further cuts to social care budgets if local government funding is reduced further. Already, spending on social care has fallen by £1.9 billion in the last three years with many families seeing cuts to care and support services or rising charges. Carers UK will be making a strong argument to Government for the Spending Review that social care must be protected and that Government must deliver funding which meets growing demand for care.

New limits on spending including benefits: The Chancellor announced that the Government would introduce ‘a firm limit’ on an area of Government spending described as ‘Annually Managed Expenditure’ (AME).

This is the money that Government spends according to what is needed in certain areas year-to-year, rather than on a budget that has been set out in advance. The largest part of AME spending is on benefits.

So, for example, if unemployment suddenly rose or fell then spending on unemployment benefit would rise or fall in response - as it is not just based on a set budget for unemployment benefit.

The Chancellor’s announcement in the Budget stated that the Government will put a limit on ‘a significant proportion of AME, including areas of welfare expenditure.’ This means that, instead of the welfare budget responding to need at the time, the Government will decide in advance how much can be spent.

Verdict: This is all rather technical, but it suggests that the Government intends to make further cuts on top of the existing £18 billion of cuts to the benefits budget. It also suggests that the Government plans to make decisions on welfare according to policy rather than need. This is concerning because we know that there is a rising need for disability and carers’ benefits (because of our ageing population and people living longer with disabilities and long-term conditions). Carers UK believes that spending should respond to the number of people needing support not political decisions about welfare spending.

Carers UK has already warned about the potentially disastrous impact of the current set of benefit cuts on carers and disabled people. We would strongly oppose any further cuts to financial support for families caring for older and disabled loved ones – reducing this support even further risks pushing carers already struggling to make ends meet into financial crisis.

-ENDS-

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