Tory Working Tax Credits Cuts will Leave you Worse Off

A new study was conducted by the Resolution Foundation think-tank, which was released the day after David Cameron promised an “all-out assault on poverty” at the Manchester Conservative Conference.

The study found that, in spite of a higher National Living Wage, the Working Tax Credit cuts would mean 200,000 children, predominantly from working households, will be pushed into poverty in the following year.

The Institute of Fiscal Studies (IFS) also conducted their own study, which obtained similar results. The evidence suggests that the tax credit cuts would have a negative impact on the low earners.

How Will The Tax Credit Cuts Impact The UK?

The study shows that the cuts, which are set to be introduced in April 2016, will result in over 3 million families losing £1,300 a year. It is the single biggest cut any government has imposed on Britain; five times more the Bedroom Tax.

The cuts form part of a £12billion cut to the social security budget that the Government is due to make – specific reasons for these cuts has been somewhat vague. The Treasury select committee chairman, Andrew Tyrie, wrote to Osborne for a full distributional plan of the budget but the government provided no response.

Labour says being firmer on tax avoidance and corporate subsidies would replace tax credit cuts to the lower-paid individuals. Owen Smith has demanded a full independent report by the Treasury, which would encompass the full impact the cuts will have on individuals.

Mixed Opinions Of Working Tax Credits

The working tax credit was firstly introduced by Gordon Brown in his first term as Chancellor to encourage the jobless to get back to work and give up on life on benefits. It was so successful that it reduced child poverty from 35 to 19 per cent.

However, critics of Working Tax Credit claim this is simply a way of allowing businesses to get away with low wages. Therefore, increasing the new minimum wage would counterblow the effects of the cuts.

Meanwhile, experts such as Paul Johnson of the IFS, suggested that someone working and claiming benefits and tax credits would lose £750 from the cuts, but gain £200 a year from the national living wage, therefore leaving them £550 worse off.

Ultimately, many fear that the cuts would lead to further divide and possible civil unrest from the constituents, as it once happened before for Thatcher’s poll tax in 1990.