Tax credit cuts 'may leave millions of working families significantly worse off'


Two in five working families with children could lose £3,000 a year under cuts to tax credits, the Government has been warned.

Research by Unison found that 2.7 million low to middle income working families, and their 5.2 million dependent children, will be "significantly" worse off when the cuts come into effect next April.

London has the highest number of working families - 357,000 - who will be hit by the changes, followed by the West Midlands (269,000) and Yorkshire and the Humber (255,000), said Unison.

Its research, based on HM Revenue and Customs figures, showed that the most deprived parts of the UK have the largest number of families who will be affected by cuts to the point at which tax credits start to be reduced.

Unison said affluent parts of the country would be least affected by the cuts, adding that £4.4 billion a year will be taken out of the pockets of low to middle income families.

In some cases, people stand to lose more than 10% of their take-home pay, said the report.

Unison general secretary Dave Prentis said: "Many of the millions of families who will be the victims of the Chancellor's cruel tax credits snatch and grab still have no idea that they are going to lose out next year. When they start receiving letters in the post from HMRC just before Christmas, it will mean chaos for family finances.

"Tax credits are a lifeline for these families - quite simply they are the difference between them keeping their heads above water and going under.

"The huge loss of income - of between £1,000 and £3,000 a year - will have a devastating impact upon the millions of family budgets that have yet to recover from the living standards crisis. Parents, who will go without in a vain attempt to make sure their children don't, will be forced deeper into debt.

"The Government is full of praise for people who go out to work to try and provide better lives for their children. Yet these are the very people these punitive changes will hurt. It's time for the Chancellor to admit that he's got this one very wrong, and back down before it's too late."

Labour has launched a campaign against tax credit cuts.

Seema Malhotra, shadow chief secretary to the Treasury, said: "David Cameron, George Osborne and the rest of the Tory MPs who voted for these pernicious cuts to the incomes of millions of hard-working families throughout out the UK should be ashamed of themselves.

"Over the next weeks and months Labour will be taking its campaign to stop the tax credit cuts to high streets and homes across the UK.

"If George Osborne doesn't back down we will make sure that the millions of those low and middle income families know exactly who is to blame for the savage cuts that will hit them next April."

A Treasury spokesman said: "Tax credit reform is an important step in the Government's plan to move Britain from a low wage, high tax, high welfare economy, to a higher wage, lower tax and lower welfare economy where work will always pay more than a life on benefits.

"These reforms are fair and necessary, and will take tax credit spending back only to 2008 levels, with most working households better off once all welfare reforms have come into force by 2017.

"Alongside this, our new National Living Wage is expected to be worth over £9 an hour by 2020 and will mean pay rises of up to £5,000 for low-paid workers. Some 2.7 million people are expected to benefit directly and the independent Office for Budget Responsibility estimates six million in total will see pay rises as the living wage pushes pay higher up the income scale.

"We are also helping families by increasing the personal tax allowance to £11,000 from next April and introducing thirty hours of free childcare for all working parents, worth thousands of pounds a year, to support them into work."