Household bills targeted by chancellor as Labour raises fears over benefit cuts

George Osborne is to announce market reforms aimed at reducing household bills by about £470 a year, on the same day a House of Commons analysis for Labour shows thousands could be worse off by £2,500 a year because of in-work benefit cuts.

On Monday, the chancellor and business secretary Sajid Javid will launch a plan designed to help people pay less for their water, banking, broadband, legal services, medicines, dental treatment, school uniforms, energy and car insurance.

In total, they estimate the package of measures could help people save about £470. The measures include working towards competition in the water industry by the end of this parliament so customers can switch supplier, encouraging clearer pricing for broadband deals and dental treatment, and trying to end the practice of mobile phone suppliers locking handsets at the end of contracts.

Other proposals include ending the right to cash compensation for minor whiplash injuries, which adds to the cost of motor insurance, boosting competition in banking to encourage switching, and reducing the cost of environmental tariffs on energy bills.

Osborne said the package of reforms would “drive competition to improve choice for people and ensure they get a better deal”.

Javid added: “Consumers will have more choice and be able to shop around for the best deals across a number of markets, such as legal services, banking and broadband. We want to see new firms entering these marketplaces to keep them sharp and competitive, thereby giving people the best value for money.”

The package of measures comes amid further scrutiny of the government’s plans for in-work benefits, after Osborne scrapped cuts to tax credits that would have cost 3 million families around £1,600 a year. He ditched the plans following pressure by Labour, the House of Lords, and even some Tory MPs.

But Labour has released research showing how new claimant families will get lower in-work benefit entitlements when tax credits are replaced by the universal credit benefit system.

Owen Smith, the shadow work and pensions secretary, said research commissioned from the House of Commons library shows that next year, thousands of working families will be up to £2,500 a year worse off as a result of the government’s cuts to universal credit.

“It is now quite apparent that the chancellor only offered a partial reversal of his cuts to working people’s incomes in last week’s statement. Next year, half a million families may be hit by cuts to tax credit’s successor, universal credit,” said Smith.

“This newly commissioned research shows that working families on universal credit still face devastating losses next year. A 23-year-old single parent, with two children working 30 hours a week on the minimum wage, is set to lose £2,500.”

Both the Institute for Fiscal Studies (IFS) and the Resolution Foundation thinktanks last week said they believe millions of working families will be worse off by 2020 because of welfare changes than they would have been under the current system.

There are 2.6 million working families who stand to lose an average £1,600 as a result of benefit changes due to come into force under universal credit, while 1.9 million would be £1,400 better off, the IFS noted.

It stressed that no family will take an immediate cash hit, but the “long-term generosity of the welfare system will be cut just as much as was ever intended, as new claimants will receive significantly lower benefits than they would have done before the July changes.”

The Resolution Foundation said the changes will cost working households £1,000 on average in 2020 and the losses could rise to £3,000 for some families.

However, the Treasury and the Department for Work and Pensions hit back at the independent studies, saying it was “completely misleading” to suggest families would lose money, because the universal credit rates will only apply to new claimants.

Powered by article was written by Rowena Mason Political correspondent, for The Guardian on Monday 30th November 2015 00.01 Europe/London © Guardian News and Media Limited 2010