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Tax Credit Cuts, People Lose Money: Official

The headline figure is that 3 million families will be £1,300 a year worse off.  This blog gives extra information on tax credit changes.


The parliamentary Social Security Advisory Committee said there was lack of evidence to support the changes.  They asked for more information on the changes and their impacts.  The House of Commons Library produced additional analysis with seven cases.

The gain or loss is the change from tax years 2015-16 to 2016-17 after considering child benefit and tax credit only.

  • Two earner family: couple, 2 children.  Both work 35 hours on national minimum wage or the national living wage (minimum wage)
    •  £1,774 loss
  • Part-time second earner: couple, 2 children, first earner on median salary, £27,820, second earner works 16hrs on minimum wage
    • £1,345 gain
  • Single earner family: Couple, 2 children, the earner working 35 hours on minimum wage
    •  £1,279 loss
  • Single person on minimum wage
    • £539 loss
  • Working lone parent with 1 child.  Parent works 35hrs on minimum wage
    • £1,279 loss
  • Out of work couple, 1 child
    • No change
  • Single earner lone parent on a salary of £20,000, with two children
    • £2,104 loss

Payment of housing benefit reduces the losses to a worst case of £736.   However the housing costs were not credible.  For some families with two children a two bedroom council house was assumed.  This  only permissible if the family has two children of the same sex or both children are under 12 years of age.


The analysis gives only one case of part time working on minimum wage, and that is the partner of someone earning £27,820 a year.  The analysis cases are selective, but still show significant loss of income in over half the examples.


Another analysis by the Institute for Fiscal Studies suggested that among the 8.4 million working households now eligible for benefits or tax credits the National Living Wage would, on average, only compensate for 26% of the losses from the planned cuts.


The Tories claim the majority of working households will be better off as result of other measures:

  • The new National Living Wage,
  • The ambition to increase the income tax Personal Allowance to £12,500 by 2020,
    • No comment
  • Free childcare for 3-4 year-olds.
    • Only  applicable to 2 of the 18 or more years children are dependant on parents.

It seems Gideon Oliver (George) Osbourne cannot tell the difference between a war on poverty and war on the poor.

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