Tax Credit Cuts February 15

During the general election the Prime Minister told the country the Conservatives would not cut tax credits. However, in July the Chancellor announced deeply regressive cuts to the tax credits system, which were due to come into effect next April. Currently around three million families receive tax credits and these changes would have seen almost all in-work families in receipt of tax credits lose, on average, £1,300 from April 2016.

I know from the large number of letters I have received that there is real concern about this issue. Four out of five families in my constituency receive tax credits because of the low-income nature of my area—my constituency is among the 20 most deprived. Roughly half of those families are working families. We have one of the highest levels of people relying on Tax Credits to make ends meet and these cuts will be a hammer-blow to a lot of families in our area.

The Government says that we are all in it together. We are not “all in it together”, because 12,300 children from my patch will be affected by the proposed cuts to tax credits. That is important because my patch is the second most deprived area in the United Kingdom in terms of child poverty in low-income families, which is a matter of great concern. Those kids are not in it with those whose families have higher incomes and should be shouldering a fair share— nothing more—of the tax burden in our country.

As a result of concerted opposition, led by my Shadow Frontbench colleagues in the House of Commons, in the House of Lords and outside Parliament, the Government was forced to think again. In November, as part of the Spending Review and Autumn Statement, the Chancellor announced a partial reversal of his changes to tax credits. The Chancellor has decided now not to proceed with the reduction in the income threshold and an increase in the taper rate for tax credits, however, the proposed changes will still apply to those in receipt of Universal Credit. Other changes to tax credits and Universal Credit announced in the Summer Budget, such as the scrapping of the family element of child tax credit, will also still go ahead

Tax credits were introduced by the previous Labour Government in order to make work pay - particularly for single parents - and to tackle poverty. There is strong evidence that it has done both and I believe it would be quite wrong for the current Government to now target low-paid households who rely on tax credits to get by. Instead of attacking the low paid, the Government should be boosting low pay, including by incentivising a living wage and strengthening enforcement of the minimum wage. The Government should also be addressing the wider causes of high welfare bills such as rising housing costs that have caused welfare spending to be £25 billion higher than the Government had planned.

 

I have opposed these cuts to tax credits in the House of Commons and I have also spoken against the proposed cuts in the House of Commons in October. You can watch the speech in full here: http://goo.gl/jbN9KQ

While it is welcome that the immediate unfair cuts to tax credits was reversed, this is not the full reversal that we needed to protect hard-working families. The Head of the Office for Budget Responsibility has stated that while these changes will reverse around 80% of the welfare savings set out in the Summer Budget in 2016, by the last year of this Parliament it will only reverse 8%.

The IFS have stated that as tax credits are being replaced by Universal Credit in the coming years, the reversal announced in the Spending Review and Autumn Statement makes no difference in the long run, with more than 2.6 million families set to lose on average £1,600 a year from cuts of £3 billion to Universal Credit.

 

I can assure you that 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.

Thank you once again for contacting me and for sharing your views on this.