Cameron shrugs off attack over ‘Bad Friday’ tax credit changes

PRIME Minister David Cameron has dismissed the findings of a respected think tank as “rubbish” after the Institute for Fiscal Studies claimed families with children would lose £511 a year on average under tax and benefit changes coming into force today.

The IFS report was, however, backed by Shadow Chancellor Ed Balls, who described the new system as a “tax credits bombshell” for a million households in the UK.

Mr Cameron said he did not accept the figures and claimed millions of taxpayers would actually be better off.

Hide Ad
Hide Ad

“If you are looking at what we are doing with the personal allowance we are actually raising it in this tax year, so 24 million taxpayers will benefit to the tune of £6.50 per week,” he said. “We are actually taking difficult decisions on public spending and on tax credits – but we are taking two million out of income tax.”

Anti-poverty campaigners dubbed the start of the financial year today as “Bad Friday”, warning cuts totalling more than £2 billion were taking effect over the Easter weekend.

During a visit to a children’s centre in Leeds, Mr Balls said the IFS figures revealed a “bombshell” and contrasted them with the decision to cut the top rate of income tax from 50p to 45p

“Families on middle and low incomes are this weekend facing a tax credits bombshell from David Cameron and George Osborne,” the Morley and Outwood MP said. “For all the Government’s talk about increasing the personal allowance, these independent figures show that while they may be giving with one hand they are taking much more away with the other.

Hide Ad
Hide Ad

“Instead of cutting the top rate of tax for the richest and giving the highest earners a £1.6 billion tax cut on their pensions, the Government could stop these unfair and perverse changes.”

Labour pointed to Government figures suggesting more than 850,000 families stood to lose their child tax credit – worth around £545 per year – from the start of the financial year.

Another 212,000 couples on less than £17,000 a year would lose working tax credit unless they were able to increase their hours of employment.

A minimum-wage earning couple with two children would end up better off quitting work altogether unless they could do at least 19 hours per week between them.

Hide Ad
Hide Ad

Child Poverty Action Group chief executive Alison Garnham, said: “This year’s holiday will feel more like Bad Friday for millions of families as they come to terms with over £2 billion of cuts.

“Some of the poorest working families will lose thousands of pounds from their annual income, leaving them in a desperate struggle to pay for basics like groceries, clothes and household bills.

“It is astonishing that the people making the smallest contribution to deficit reduction are in the richest half of the population. Ordinary families and children are now carrying the greatest burden.”

The Resolution Foundation think tank, which focuses on the experiences of low and middle earners, said thousands faced losing a quarter of their income.

Hide Ad
Hide Ad

Chief executive Gavin Kelly said: “Friday’s increase to the personal tax allowance provides a small boost to most people in work but millions of low to middle-income families will have their tax credits cut at the same time.

“Those working under 24 hours a week face the most brutal cuts of thousands of pounds if they cannot find extra hours – a real problem given rising under-employment.”

Treasury Chief Secretary Danny Alexander said the Government had taken some “very difficult decisions” on tax and benefits but insisted they had been “fair”. He said the coalition was still spending £31.6 billion on tax credits, a £3.2 billion cut in real terms.