In a debate in the House of Commons, MPs voted in favour of Chancellor George Osborne’s plans to cut income tax credits by £4.4 billion in a move which is believed to be part of a wider plan to raise rates of pay and to incentivise people to get back into working.
Labour. and opponents to the move, believe that the decision to cut the threshold could cost around three million families an average of £1,000 per year when the plans are introduced in April 2016.
However, ministers are saying that the public had “relied on the tax credits for too long”, with the motion going through after a vote which totalled 325 in favour, and 290 against.
The plan is to reduce the earnings level above which tax credits are withdrawn from its existing level of £6,420 to £3,850 – a move which Labour, and new leader Jeremy Corbyn, claim to be an attack on working families.
The new Labour leader said in an interview after the 90-minute debate “What they are is poverty deniers – ignoring the growing queues at food banks, ignoring the growing housing crisis, cutting tax credits when child poverty rose by half a million under the last Government to over four million. Let’s be clear austerity is a political choice.”
Seema Malhotra, the new Shadow Chief Secretary to the Treasury, echoed those thoughts and said “It is part of an on-going attack on the incomes of some of the most hard working families in our constituencies – those very strivers the Chancellor purported to support.”
Jon Stone, writing in the Independent, said that “An analysis published last week by the Institute found that even people who took a significant wage rise because of the new ‘National Living Wage’ would be significantly worse off after Mr Osborne’s budget. He raised the National Minimum Wage – now known as the “National Living Wage” – to £7.20, a figure actually below the independently calculated Living Wage rate.”
However, it’s estimated that the higher minimum wage would only cover around 25% of the cash cut from in-work tax credits, leaving low income households worse off by remaining in work.