Up to 48,000 families set to lose all tax credits in the North East

 

Catherine McKinnellFamilies with children to lose £511 per year from tomorrow, new IFS figures show

Families with children will lose an average of £511 a year from changes to tax, benefits and tax credits being introduced from tomorrow (FRI), according to new figures from the Institute for Fiscal Studies being highlighted by Labour today.

The analysis follows last month's Budget and is on top of tax rises already introduced, like last year's VAT rise which is costing a family with children an average of £450 per year.

New government figures obtained by Labour also show that up to 48,000 families in the North East are set to lose all of their Child Tax Credit or Working Tax Credit from tomorrow:

-Over 38,000 families on modest and middle incomes will lose all of their Child Tax Credit - worth around £545 per year.

- And up to 9,310 working couples earning less than around £17,000 per year will lose all of their Working Tax Credit - worth up to £3,870 per year - if they cannot increase their working hours.

Figures also uncovered by Labour reveal that, following tomorrow's changes to working tax credit, a couple with two children on the minimum wage will be better off quitting their jobs if they cannot work at least 19 hours per week.

The IFS figures also show that government policies mean pensioners will be an average of £315 a year worse off from April 2014 once cuts to their allowances announced in last month's Budget - what has been dubbed the 'granny tax' - have kicked in.

Catherine McKinnell MP, MP for Newcastle North and Shadow Children & Young Families Minister said:

"The new tax year is going to bring unhappy news for struggling families across the region. The Conservative-led government is completely out of touch with the reality here in the North East.

Many households are already facing a huge challenge to get through the month and the Chancellor's tax changes are going to make life harder for 48,000 families in this region.

At the budget the Chancellor had a chance to help the North East and instead he chose to give tax cuts to millionaires. This was the wrong choice and now ten's of thousands of families will suffer."

Ed Balls MP, Labour's shadow chancellor said:

"Families on middle and low incomes are this weekend facing a tax credits bombshell from David Cameron and George Osborne.

"For all the government's talk about increasing the personal allowance, these independent figures show that w hile they may be giving one with one hand they are taking much more away with the other hand. That is why families with children will be an average of £511 a year worse from tomorrow.

"There do need to be tough decisions on tax, spending and pay. But why are people earning over £150,000 soon to get a £3 billion tax cut from this out of touch government while parents on middle and modest incomes are being clobbered?

"It cannot be the right priority to make millions of families and pensioners pay more so millionaires can pay less - over £40,000 less in the case of the 14,000 richest people in the country.

"It is no wonder that the Chancellor cannot bring himself to say the words 'we're all in this together' again. His empty slogan has been exposed by the reality of his policies which are hitting women harder than men and hitting families with children hardest of all.

"And these cuts to tax credits for parents on middle and low incomes are breaking yet another promise David Cameron made during the general election campaign."

ENDS

 

Notes for Editors

 

1. Figures from the independent Institute for Fiscal Studies have just been updated, at Labour's request, to include for the first time cash figures of the net loss or gain from changes taking effect from April 2012 and April 2014.

 

2.  The two main changes to tax credits being introduced from tomorrow are a reduction in the income limit for Child Tax Credit from around £40,000 to around £26,000 for a family with one child and an increase in the number of hours couples with children have to work to be eligible for Working Tax Credit from 16 to 24 hours per week. Details of the changes can be found on HMRC's website here: http://www.hmrc.gov.uk/taxcreditsbudget/index.htm.

 

3. Government figures, revealed in answers t o parliamentary questions from Labour MPs, show 852,900 families will no longer be eligible to any tax credits from next month: http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120327/text/120327w0003.htm#1203281002117.

 

Figures by constituency can be found here:

 

http://www.parliament.uk/deposits/depositedpapers/2012/DEP2012-0328.pdf

 

In addition, 212,000 families will lose all their Working Tax Credit if they cannot increase their working hours to the new minimum of 24 hours per week. Figures by constituency can be found here: http://www.parliament.uk/deposits/depositedpapers/2012/DEP2012-0031.doc

 

HMRC has confirmed to the House of Commons Library that there is "no overlap between losers" in these two groups.

 

Figures for the North East region:  (UK figure in bracket)

   

 

No of households no longer entitled to tax credits from April 2012: 38,800 (852,900)

   

 

No of households working currently entitled to Working Tax Credit and working between 16 and 24 hours per week:9,310 (212,000)

   

 

Total set to lose all their Child Tax Credit or all their Working Tax Credit if they cannot increase working hours: 48,110 (1,064,900)

 

4. Answers to parliamentary questions from Labour MP Ann Coffey show that, following tomorrow's changes to working tax credit, a couple with two children on the minimum wage will be:

 

    £14 per week better off on benefits if they work 16 hours per week

    £8 per week better off on benefits if they work 17 hours per week

    £2 per week better off on benefits if they work 18 hours per week

 

They will only be better off in work if they can work 19 hours per week. Links to the relevant parliamentary answers can be found below:

 

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120229/text/120229w0004.htm#12022982001826

 

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120321/text/120321w0001.htm#12032182001187

 

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120320/text/120320w0003.htm#12032089001473

 

5. Before the 2010 general election, David Cameron and the Conservatives repeatedly promised that only families earning over £50,000 lose their tax credits. But despite these promises families on much lower incomes will lose their Child Tax Credit and thousands of working couples only earning the minimum wage will lose their Working Tax Credit under changes coming into effect tomorrow:

 

"They [Labour] say our policy will take away tax credits from families with incomes of £31,000 or more. That is a lie, and it is irresponsible for Labour to be scaremongering in this way and worrying families needlessly... No families with a combined household income of £40,000 or less will be affected by our policy."

 

Theresa May, The Blue Blog , 11 February 2010, http://blog.conservatives.com/index.php/2010/02/11/labour-lies-on-child-tax-credits/

 

"On this issue of tax credits, we are saying, we like tax credits, we'll keep tax credits. But for families earning over £50,000, we think we can't afford the Child Tax Credit. That's one of the savings that we're being upfront and frank about. But for Gordon Brown to say that actually the changes we're making would hit low income families is simply not true."

 

David Cameron, Leaders debate, 29 April 2010

 

DavidCameron: Shineoncrazydiamond and others who asked about tax credits, here's a straight, non-waffle answer. As a part time worker and a lone parent, you should not lose out. We recognise that tax credits help families, that's why we introduced the first one way back in the 1990s. We would stop the payment of tested tax credits to families of incomes of more than £50,000. We've got a massive debt crisis in this country, and so I think that those paymen ts aren't really affordable any more.

 

David Cameron, Mumsnet Live Webchat, 19 November 2009, http://www.mumsnet.com/onlinechats/david-cameron-nov-09