Tax Credit Cuts

During the general election the Prime Minister told the country the Conservatives would not cut tax credits. However in July the Chancellor announced the changes which will come into effect next April.

I share the concerns about these deeply regressive cuts. Currently around 3 million families receive tax credits. Almost all in-work families in receipt of tax credits will be affected by the Government's changes and will lose, on average, £1,300 from April. A family with one earner on average earnings and two children will lose over £2,000 in tax credits next year from the changes, and some families on middle incomes may lose entitlement to tax credits altogether.

The Government’s answer to questions about tax credit cuts is their planned increases in the minimum wage. It is of course important to make sensible savings in social security spending and we all want to see a higher wage economy where people are less reliant on tax credits to get by.  However, as the independent Institute of Fiscal Studies has stated, the claims that those increases will close the gap is ‘arithmetically impossible’. For example, a couple on the minimum wage who work full time and have two children will gain £1,500 from the change to the minimum wage but lose over £2,200 next year from the changes to tax credits. It is also concerning that this ‘work penalty’ will increase work disincentives and that as a result of the higher tax credit taper rate, some people will only take home 7p for every additional pound they earn.

I know from the many letters and e-mails I have received that many constituents are worried about the Government’s changes. I voted against the Government’s Budget in July, and against these cuts to tax credits in the House of Commons on 15th September, and I also supported the Opposition's motion on 20th October calling for the Government to drop their plans.

As you may be aware, on Monday 26 October Members of the House of Lords voted by a majority of 17 to halt the cuts, until the Government produces a scheme to compensate low-paid workers, for three years. The House of Lords also voted for a delay in the cuts until an assessment of their financial impact is carried out.

As a result of the concerted opposition from both inside and outside Parliament I hope the Government will now think again. The Government should listen to the concerns of families across the country and reverse in full the cuts to tax credits in the upcoming Autumn Statement in November.

I will continue to press the Government on this extremely important matter and highlight the impact these changes could have on low and middle income households in our constituency and across the country.

Hilary Benn
MP for Leeds Central

 

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