SNP and Tory ministers will hold a showdown over benefits cut tomorrow, as they meet for the first time since the budget dropped a '£1bn bombshell' on Scotland.
Scottish Social Justice Secretary Alex Neil will confront Scottish Secretary David Mundell in London to demand a halt to the UK government’s “inexcusable attack on low-paid families”.
Neil was last night backed by charities and poverty campaigners, who warned the £1bn of cuts imposed on Scotland by George Osborne will see a “devastating impact” on the working poor.
Mundell responded by calling for an end to “contrived complaints” and urged the SNP government to work in a “shared space” with Westminster on the welfare changes.
The gulf between the two sides suggests tomorrow’s meeting of the Joint Ministerial Working Group on Welfare will be a stormy one.
Co-chaired by Neil and Mundell, the group was set up in February to smooth the transfer of limited welfare powers to Holyrood flowing from the referendum ‘Vow’ and the Scotland Bill.
It includes representatives from the Treasury and the Department of Work and Pensions.
However the Chancellor’s plans to cut £12bn off the UK welfare bill by 2019-20 mean there is now a risk it could become a forum for arguing over the budget.
Scotland’s £1bn share of the cuts includes £410m from tax credit and universal credit cuts, £315m from a four-year freeze on working age benefits from 2016, and £230m in other squeezes, including housing benefit cuts and a £20,000-a-year benefit cap.
The Institute for Fiscal Studies (IFS) estimates that UK-wide some 13m families will be an average £260 a year worse off, while 3m families will be more than £1000 a year poorer, as the cuts more than outweigh the impact of a higher minimum wage for the low-paid.
Recent Scottish Government analysis suggests the tax credit cuts alone will reduce the incomes of between 200,000 and 250,000 Scots households and “increase inequality”.
While the benefits freeze will hit around 577,000 households with children.
The analysis also warns the changes will reduce people’s incentive to work - the opposite of the Tories’ professed aim - as those on low pay could face an effective tax rate of up to 90 per cent, because the overall changes would see them lose 90p in every extra pound they earned.
The effective tax rate for a higher rate taxpayer is just 42 per cent.
Neil, who will be joined in London by Fair Work Secretary Roseanna Cunningham, said the “shocking reality” of the budget was that it would widen the gap between rich and poor.
“It will push more families into desperate situations,” he said.
“Tax credits can be a lifeline for families on low incomes.
“By cutting tax credits, households across Scotland will be faced with nearly £700 million cuts and additional worries and stress about caring for their families.
“On Monday, I will urge the Scottish Secretary to call a halt to the UK Government’s inexcusable attack on low-paid families.
“We have long pushed for more powers over social security and this shows exactly why the Scotland Bill does not go far enough.
“We will be highlighting these concerns and once again urging the UK Government to clarify how its budget cuts and proposals will affect any new powers we will receive.”
Martin Crewe, Director of Barnardo’s Scotland, said 63 per cent of children in poverty were in working households, and it was “a myth that work alone provides a route off the breadline”.
He said: “We work with these families every day and they are very clear that any reduction in their income will have a devastating impact. The UK Government’s plans to cut tax credits to working people will make it an even greater struggle for those who rely on them.”
Peter Kelly, Director of the Poverty Alliance, added: “If this UK Government is serious about helping working families then they need to raise the minimum wage for all employees and ensure that for those on the lowest incomes that tax credits are still there to make work pay.”
Mundell said the SNP should stop moaning and spell out how they intend to use the £2.5bn of welfare powers coming soon to Holyrood, as well as a new power to create Scotland-only benefits and top-up existing UK benefits
He said: “Welfare provision in Scotland is about to become a shared space where the UK and Scottish Governments will need to work together. If we are to provide the best possible service for people then Holyrood Ministers need to start sharing their plans instead of looking for contrived complaints on the process.
"What new benefits are you planning? Which existing benefits do you want to top up? How are you going to pay for it?”
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