Tax Credits: a battle won but the war goes on

Government fury over Lords revolt

Chancellor George Osborne has said he will act on concerns about the impact of tax credit cuts after peers forced the Westminster government to think again last night – but he has vowed to press on with changes designed to slash billions from the country’s welfare bill.

In a dramatic night the House of Lords defeated the government in two votes over the controversial legislation, forcing the government climbdown.

The Chancellor has now agreed to offer ‘transitional help’ for those hundreds of thousands of people affected by cuts – but the government was angered by the defeats in the unelected ‘other place’ is now considering a review of Lords conventions to address what is sees as ‘constitutional issues’.

The proposed cut to tax credits is the most controversial piece of legislation introduced since the Conservative government’s election in May.

Tax credits were introduced by the last Labour government to help low-paid families. There are two types: Working Tax Credit for those in work, and Child Tax Credit for those with children.

Tax credits are gradually being included within Universal Credit, which is currently being rolled out across the country. Under the government’s plans, the income threshold for receiving Working Tax Credits and Child Tax Credit is due to be cut from April next year.

4.5 million people are currently eligible to claim tax credits.

Campaigners and respected think-tanks argue that the proposed tax credit cuts would deprive low-income workers of up to £1,300 a year but the Westminster government says the cuts are essential to tackle the UK’s massive deficit. It says most claimants will be better off when other changes, such as the introduction of the new national living wage, are taken into account.

Tax credits were worth around £2 billion to Scottish households in 2013/14, with two thirds of support directed at low income working families.

Scotland’s Social Justice Secretary Alex Neil called for for the UK Government proposals to be ditched in a letter to the Secretary of State for Work and Pensions earlier this week.

Me Neil said the UK Government should urgently rethink tax credit changes which will punish families and push even more children into poverty and urged the UK Government to rethink its plans to cut tax credits which mean households with the least money will face the biggest losses.

 

Mr Neil said: “Cutting tax credits is a thoughtless approach which may save the Treasury money in the short term but will have heart-breaking long-term consequences that could rebound on other public and charitable services.

“Tax credits can be a lifeline for families on low incomes that rely on them to get through daily life, put food on the table, heat their home and pay their bills.

“Removing this vital support from thousands of families will widen the gap in inequalities and push even more people into poverty.

“The UK Government’s plans are a clear attack on low income working families and those families must be protected as a matter of urgency.

“The Scottish Government has made clear its opposition to these changes and I urge the UK Government to reconsider the severity and timing of these changes and make changes before the Welfare and Work Bill reaches its next legislative stage, so that the poorest households in receipt of tax credits can be protected from this fall in their incomes.

“This shows why we need more social security powers through the Scotland Bill and why, we will ensure our approach to social security will be based on fairness and that people are treated with dignity and respect.”