Last night, peers voted 307 to 277 in favour of a motion put forward by Baroness Meacher to put on hold Government plans to cut tax credits next year because the Government has not responded to an analysis by the Institute of Fiscal Studies that showed that three million families would lose £1,000 a year.
They also voted in favour of a motion tabled by the former Labour social security minister Lady Hollis insisting the Government provide all low-income families and individuals currently receiving tax credits with three years compensation.
The Children’s Society and Child Poverty Action Group (CPAG) have welcomed the Lords’ decision to delay the changes, which would see the income threshold for those claiming Child Tax Credit cut from £16,105 to £12,125 a year and the threshold for Working Tax Credit from £6,420 to £3,850 as of April 2016. However, they are now urging the Government to make sure work pays for hard-working families.
New analysis (see table) published by CPAG shows that nursery nurses are among those that would be worst hit by changes to tax credits, typically losing £1,788 a year.
The charity’s calculations are for solo earners working full-time, either single parents, or a sole earner in a couple-family.
They are based upon data from the Office of National Statistics and House of Commons Library on typical gross earnings.
A spokesperson for the Child Poverty Action Group said, ‘We hope ministers take a deep breath and admit that these cuts will pull the rug from under the feet of working families. Ministers should now bring forward new measures to help working families, investing in tax credits not cutting them.
‘Nobody who supports hard-working families can think it’s right to suck £1,788 from the tax credits of a nursery nurse’s annual income. These are grafting parents, often working long hours and trying to provide for their children. And if they are struggling now to pay for food, utilities, fares and children’s clothing, these kind of losses will make them fear for the future.’
The Children’s Society echoed CPAG’s call for the Government to make sure work always pays for families.
Its director of policy and research, Sam Royston, said, ‘We urge the Government to rethink its damaging approach to tax credit changes before children are made to pay a heavy price.
‘In the run-up to the election, the Prime Minister promised he would not cut child tax credits, but these regulations, if they go ahead, would do just that. Cutting families’ income in this way would damage children’s lives, as well as undermine incentives for parents to move into work or earn more.
‘It is now clear that children would be the biggest losers as a result of these changes, with around 4.5 million affected.
‘If the Government is serious about being the champion of hard-working families, as it claims to be, it must make sure that work always pays — and not push children in working families into poverty.’
This afternoon during Treasury questions, the Chancellor George Osborne said he was determined to press ahead with the changes to tax credits, however committed to 'lessening' the impact on families, details of which he will reveal in his Autumn Statement next month.
Facing MPs he said, 'We will continue to reform tax credits and save the money needed so that Britain lives within its means, while at the same time lessening the impact on families during the transition.'