£30 child tax credit ‘increase' is a £1,500 loss for low income working families

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date: 20 October 2010

embargo: For immediate release

Plans to increase child tax credit by £30 a year in 2011/12 will be dwarfed by childcare cuts of up to £30 a week - or £1,560 a year - according to plans announced in the Comprehensive Spending Review (CSR) today (Tuesday), says the TUC.

The Chancellor announced a series of changes to working tax credits today, including a 10 per cent cut in the level of childcare costs that working parents can expect to be covered by tax credits. This change alone will mean that low income families with two children could lose up to £30 a week - or £1,560 a year.

The Treasury's own Equality Impact Assessment of the CSR says that this move will hit lone parents particularly hard.

Other cuts to tax credits include a freeze in the annual value of several tax credit elements and a requirement that couple households with children do 24 hours of work a week (compared to the current 16 hour limit) before qualifying for working tax credits (and consequently receiving any childcare support at all).

The CSR says that changes to the tax credit system will save £1.4 billion by 2014/15, compared to the £560 million cost of increasing child tax credits over the same period.

Today's cuts to working tax credits are in addition to the scrapping of child benefit for higher rate taxpayers, which will affect 830,000 single income families - and 1.5 million children - earning less than £87,750 (the maximum a two income family can earn and retain their child benefit).

TUC General Secretary Brendan Barber said: 'Low income families will have welcomed a £30 a year increase in child tax credit - even if it is only 60p a week. But they will be shocked to learn that buried in the small print are other tax credit cuts of up to £1,500 a year.

'This is a classic conjuring trick - distract the audience while making what they are really interested in disappear.

'This cut is part of a theme to single out women, children and families to bear the brunt of the cuts.'

NOTES TO EDITORS:

- The childcare element of tax credits currently covers up to 80 per cent of £300 a week (£240 a week) for families with two or more children, and up to 80 per cent of £175 a week for families with one child (£140 a week) for families with one child. These amounts will be cut by 10 per cent as a result of the CSR. The actual amount families receive depends on their incomes - HMRC state that 'the lower your income the more tax credits you can get'. The lowest income families will therefore see the greatest falls in their entitlements. Further details of childcare support currently available through the tax credit system are available here: www.hmrc.gov.uk/leaflets/wtc5.pdf

- Further analysis of changes to the tax credits system is available at www.touchstoneblog.org.uk/2010/10/csr-2010-tax-credit-cuts

- The Equality Impact Assessment of the CSR can be downloaded at www.hm-treasury.gov.uk/spend_sr2010_equalities.htm

- The TUC is a member of the End Child Poverty coalition. The Campaign to End Child Poverty includes children's and other charities, social justice groups, faith groups, unions, businesses and many others concerned about the unacceptably high levels of child poverty in the UK. For information visit www.endchildpoverty.org.uk

- The TUC believes the government should commit to a Fairness Test on any tax rises or spending cuts they introduce. For more information please visit www.equalitytrust.org.uk/fairnesstest

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk
Elly Gibson T: 020 7467 1337 M: 07900 910624 E: egibson@tuc.org.uk

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