So who pays?
Gavin Kelly
Date: 29. November 2011 / Category: Living Standards
This post first appeared on Gavin's New Statesman blog.
Just in case you were under any doubt about where the burden of today's widely expected cuts to tax credits will fall, the chart below should make it clear. Over 75 per cent of the pain of today's changes to tax credits is felt by the bottom half of the income distribution. The vast majority of these from families with children.
The decision to scrap the planned increases in Child Tax Credit (hitherto the coalition's one emblem of its commitment to tackle child poverty), together with other cuts to Working Tax Credit, will mean more than £1.2bn of cuts in 2012.
The changes to the child tax credit will mean families lose the extra £110 per child that they had been expecting in 2012; and the freezing of the Working Tax Credit will reduce the incomes of working families by a further £100. How many will be affected altogether? Around 5.5 million families will lose as a result of the changes to child tax credit, with 2 million facing a double hit because of the working tax credit changes.
This latest squeeze on family finances comes on top of a raft of other already announced cuts to tax credits, many of which don't bite until April 2012. Together they add to up to approximately £2.9 billion of cuts in 2012-13, roughly 10 percent of the total tax credit budget.
There were actually a number of relatively small announcements that should be welcomed today - above all the doubling of childcare places for disadvantaged two year olds. But the wrong people where paying for this.
If you really want to unpick what is going on in politics -- above all on the day of spending announcements -- it is always best to ignore the words spoken and instead follow the detail of the choices made. Today revealed one thing above all else -- when put in a corner, and forced to find new resources, the coalition's instinct is clear: take them from the tax credits going to low-to-middle income families.
#ows £10000 10p 2011 2012 50p 99% Affordable Housing America andrew haldane apprenticeships assets Audit Australia autumn statement bank of england below minimum wage borgen Boris Johnson budget 2011 Budget 2012 cameron care assistant centreforum child benefit child poverty childcare CiF citizens UK coalition Commission cost of living Cost of Motherhood costs cpi daniel chandler David Cameron david willetts de-coupling Debt degree dependency dilnot Donald Hirsch earnings economy Ed Miliband education employment enforcement equity release felicity dennistoun female employment first-time buyers Gavin Kelly generation rent gingerbread giselle cory good life great stagnation growth growth without gain Guardian HELP Committee higher rate higher rate tax relief hmrc holmes hourglass household finances household income household spending Housing housing market IFS illegal income income inequality income tax increase indignados inequality inflation institutional investment interest rates international ippr Ipsos MORI James Plunkett jared bernstein joe coward John Van Reenen jrf Labour labour market lane kenworthy lee savage Left Foot Forward Lib Dems liberal democrats living living costs living standards living wage living wage foundation Low earners low middle earners low pay Low Pay Britain low to middle income low wage low wage work marginal tax rate matt whittaker Matthew Whittaker mayhew measuring poverty median wage Mervyn King middle class minimum income standards minimum wage missing out mobility monetary policy mortgage market netmums new statesman new statesman blog new year newby newham Nick Clegg number paid below minimum wage Obama OBR occupy occupy wall street OECD pension Pensions pensions relief personal allowances personal finance polarisation policy politicans politics poll predistribution prescription charges priorities prospect public services q2 growth recession recovery reduce credit card reform Rented Sector resolution foudnation Resolution Foundation robin wales routine jobs rpi rss savings Senate shereen hussein skills social social care social housing social mobility social mobility foundation society southern cross Squeezed Britain Squeezed Middle standards state sutton trust tax tax and benefit changes tax and benefits tax changes tax credits tax cuts tax relief The Spirit Level think tank think-tank threshold travel time trends uk underemployment unemployment unison Universal Credit university USA van reenen VAT Vidhya Alakeson voters voting wage inequality wages welfare state White Paper women Work Working part time lower skilled job Youth unemployment zero hours
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