Tax cuts promised as PM warned on poverty

A damning report warns of greater poverty spreading through the UK as a result of changes to direct taxes, benefits and tax credits.

Researchers from three universities, including York, say that cuts to tax credits and cash benefits took more away from those in the bottom half than they gained in higher tax allowances.

They add that savings from these cuts were not sufficient to contribute to deficit reduction as they were offset by the costs paying for lower direct taxes for better-off groups.

The LSE, Manchester University and York University poverty study said: “The Government’s tax and benefit decisions meant that cuts to benefits and tax credits that hit low income families hardest were offset by tax reductions for better-off households and made no impact on the deficit.”

Programme leader, Professor Ruth Lupton of the University of Manchester, said: “ There is more to the Coalition than cuts. Its major legacy may turn out to be its rapid reforms of the schools system, the NHS, and welfare benefits. But its decisions on where to cut and where to spend have limited its scope either to reduce the debt or protect the poor”.

In a campaign speech yesterday Mr Cameron restated his pledge to raise the personal allowance threshold below which workers pay no income tax to £12,500 and to increase to £50,000 the level at which the 40p tax rate kicks in.

He added: “How are we able to make them? Because we have a strong economy and because people can see the record of this Government. Under this Government, we’ve cut the deficit. We’ve had to make difficult decisions on spending to do that.”