‘THIS year’s holiday will feel more like “Bad Friday” for millions of families as they come to terms with over £2 billion of cuts.’
This was the comment by the Chief Executive of the Child Poverty Action Group, Alison Garnham, on the multi-billion pound coalition welfare cuts.
She added: ‘Some of the poorest working families will lose thousands of pounds from their annual income, leaving them in a desperate struggle to pay for basics like groceries, clothes and household bills.
‘It is astonishing that the people making the smallest contribution to deficit reduction are in the richest half of the population.
‘Ordinary families and children are now carrying the greatest burden of deficit reduction. The Chancellor’s own analysis shows he is failing the fairness test and that many of the wealthiest are let off lightly.
‘Ministers should think again about the fairness of their deficit reduction plans and act quickly to prevent the most shocking rises in child poverty for a generation.’
The cuts are targeted at families struggling to get by on low earnings. The targeting will be through the tax credits system. It will mean that many families will no longer be better off in work.
And yet, even worse pain will still come further down the line. Most of the cuts to social security, welfare benefits and tax credits in the coalition government’s plans have yet to be implemented, or to have their full impact on families.
A total £20 billion of cuts to social security, welfare benefits and tax credits is planned by 2014.
This means that the annual spend by government on direct support for families will be £20 billion lower in 2014 than it was in 2010.
The families who will be losing out most on ‘Bad Friday’ are:
l Couples with between 16 and 24 hours work on low pay.
The government states that up to 210,000 families (with 470,000 children) face the possibility of losing all £3,870 of their working tax credit due to the hours rule change.
But do employers have the extra working hours to give? The shop workers union, Usdaw, found that 78 per cent of their members who are in this situation say that their employer has told them there are not sufficient additional hours available for them to work.
The majority of families in this situation stand to lose their tax credits entirely.
• 1.3 million families receiving child tax credit
Families will usually get some child tax credit, provided they are not over the income limit of £41,300. But from ‘Bad Friday’, the income limit will be reduced, taking a total of £465 million out of the purses and wallets of UK families.
HMRC have published advice on their website estimating that this will mean that families will lose their child tax credit if they have one child and their annual income is more than around £26,000, or if they have two children and their annual income is more than around £32,000
• Families whose annual earnings fall – due to either a lower rate of pay or loss of working hours
If your earnings fall, then previously you could have had your tax credits claim adjusted to take account of this.
But from ‘Bad Friday’ you will not be able to have your tax credits adjusted unless your gross earnings have fallen by at least £2,500. This means that you could lose out on nearly £50 a week in gross earnings without being able to have your tax credits adjusted to cushion you and your family against the loss of income.
