Tax credits: everything you need to know

Chancellor George Osborne
Chancellor George Osborne
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The top 5 things you need to know about today’s tax credits debate in Parliament.

1) Chancellor George Osborne is cutting tax credits to tackle the deficit and has said his reform would save £4.5bn. Changes made since 2010 have saved around £10bn.

From April, the threshold at which tax credits begin to be withdrawn will fall from £6,420 to £3,850, and people’s credit entitlement over this amount will be reduced more steeply. Millions of people are due to learn how much money they will lose in letters sent to households before Christmas. Child tax credits will be limited to two children.

2) This has caused outcry with families, campaigners and the Labour Party, and one or two Conservatives, who would prefer a softer approach. Some have described today as significant a moment for the Conservative Government in terms of popularity as Margaret Thatcher’s poll tax plan. Boris Johnson, London Mayor, has asked for the reforms to protect the most vulnerable while Zac Goldsmith, Conservative mayoral candidate for London wants reforms to be phased in. George Osborne has said families won’t lose out in the long term because they are raising the living wage to £9 an hour by the end of the Parliament and the general tax threshold has risen.

3) Today Labour has scheduled a debate in the House of Commons, called an opposition day debate. This is where it gets the chance to determine business for the day, and has the right to do this 20 times per session. The last time an opposition day debate overturned a Government policy was on the settlement right of the relatives of Gurkha soldiers. Labour’s key message is that the tax credits cuts will see 3 million families £1300 worse off a year.

4) Frank Field. That’s a name you need to remember today. This Labour MP is in some ways making George Osborne’s job much easier by presenting him with something that could work for both parties. He’s come up with a plan he says is economically viable to tackle the deficit through tax credit reform and help vulnerable families. and he will be asking for support on this today from fellow MPs. It will be interesting to see whether the Government holds firm in the long-term or whether they’ll take some inspiration from today’s debate before committing a final policy in April 2016.

5) The vote. How people vote this evening will be under close scrutiny. Two Conservatives voted against the plans last time, including David Davis, MP for Haltemprice and Howden, and they will be under some pressure to defeat the Labour motion. Labour will come out in force and back their own motion naturally as it is a policy they are entirely united on. Leeds West MP Rachel Reeves, former shadow work and pensions secretary, taking a one day hiatus from maternity leave to come and vote.