How proposed government cuts to Tax Credits will harm people

How proposed government cuts to Tax Credits will harm people

Below is a Guardian article by journalist  who reports on the real consequences for families should cuts be made to Working and Child Tax Credits. Source

What to cut down on first: nappies, food, clothes or powdered milk? Speculation around possible cuts to working and child tax credits has been circulating the Audley and Queen’s Park children’s centre in Blackburn this week, and parents voiced unease about the prospect of losing an income stream they regard as vital.

Days before the budget – when the chancellor, George Osborne, is expected to set out some of the ways the government will start to make £12bn of cuts to welfare spending – reports that cuts to these benefits could be among the first to be announced have been widely shared here. Blackburn with Darwen council has the second highest number of families receiving child and working tax credits in the country – after Newham in east London – with 7,600 households, 13.3% of the area’s total, receiving one or both benefits.

Parents recoiled at the implicit suggestion that the current payments are excessively generous, and set out in detail how little money there is, even before cuts are made.

Kulsum Patel, 32, who had brought her two-and-a-half-year-old daughter and four-month-old son to sing nursery rhymes at the pre-school play session, said she relied on working tax credits to top up her husband’s wages; he works as a part-time office assistant, earning the minimum wage, and his income is not enough to support the family. She has been out of work since losing her job as a receptionist for the council last November, after being diagnosed with diabetes.

“The child tax credit just covers their clothes, food and milk. They’re forever growing. None of the money gets saved. A cut would have a major impact for our family,” she said.

The absence of clear information about the extent of possible cuts to these payments was making most of the 22 mothers at the afternoon session anxious. It has been reported that Osborne is considering making £5bn of cuts to child tax credits, returning them to 2003-04 levels. The changes would cut entitlements for about 3.7 million low-income families by about £1,400, according to analysis by the Institute for Fiscal Studies.

Conservatives have said they would like to see the burden moved away from the state to large, profitable companies. The Resolution Foundation, a think tank that specialises in living standards, predicted that more than two-thirds of the families affected by the cuts to child tax credits under consideration would be in work, and that families with two children could lose up to £1,690; their research also suggested that almost two-thirds of the cut would be borne by the poorest 30% of households.

Child tax credits are a means-tested benefit paid to hard-up families with children, regardless of whether anyone in the family is in work. Working tax credits are paid to people who are in work but whose incomes are low; the amount payable for each benefit depends on the number of people in a household. The titles of the benefits are slightly confusing, since they have no direct connection with taxation. Working tax credits are also set to face cuts.

Touching on this issue in a speech on welfare last week, David Cameron said he wanted to end the “merry-go-round” that saw “people working on the minimum wage having that money taxed by the government and then the government giving them that money back – and more – in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity – helping to create well-paid jobs in the first place.”

Kulsum Patel struggled to see how reducing the amount her family received would prompt her husband’s employer to pay him more; she didn’t think there was any prospect of them giving him a pay rise. “They put his hours down already. Maybe they are struggling with their overheads. We’ve had conversations about it, that he needs to go and ask for a raise, but I don’t think he’s confident that they will. The job opportunities in Blackburn aren’t great,” she said.

Farzana Bathan, 39, said there was no prospect of her husband – a part-time chef in an Indian takeaway restaurant, on the minimum wage – progressing up the pay scale or getting more hours from his employer. Bathan, who was at the play session with her two daughters aged two and eight months, said she and her husband received working tax credit and child tax credit because his earnings were not sufficient to feed and house the family.

Before her second child she worked as a care assistant for an Age UK day care centre, also a minimum wage job, which she hopes to return to when her children are a bit older. But she does not believe that either Age UK or the restaurant where her husband works have the capacity to increase wages to compensate for a reduction in tax credits. “He used to get 20 hours but it has gone down to 16 hours, and they say there is no more work,” she said.

She was alarmed at the suggestion that the benefits might be cut. “There is nothing left at the end of the week, after the nappies, and the powdered milk. We don’t have holidays. There’s never any money to save,” she said.

A mile away, in a side street off Blackburn’s central shopping area, a statue of William Gladstone, erected by public subscription in 1899, the year after he died, is inscribed: “Four times prime minister of Great Britain. ‘The most brilliant intellect that has been placed at the service of the state since parliamentary government began’ (Salisbury).”

If the stone statue were able to peer down the streets nearby, Gladstone’s effigy would see a rapidly changing city centre: the Lyca mobile outlet (“Call the world for less”), the Godfather pizza and kebab house, all the cheap shops, charity outlets and betting shops that have thrived in town centres since the recession began – Poundland, Brighthouse, Pound Crazy, Ladbrokes, Cash Generator, Nobles Amusements, Cancer Research, Age Concern.

Hartley’s cafe, behind Gladstone’s back, has struggled since the recession, and owner Christine Pickup, who opened the cafe 20 years ago, laughed at the idea that she might be under pressure to pay a living wage to staff. “I think employers pay out enough money already. We pay the minimum wage. I couldn’t afford to bump up the wages,” she said. “We’re keeping our head above water but business isn’t what it used to be. We would have to cut down staff if we were forced to raise wages. There would be fewer jobs, we’d put people out of work.”

Kate Hollern, the Labour MP Blackburn, said: “It’s going to be impossible. We have got 14,000 children who come from working families who are dependent on that tax credit just to make ends meet. There’s going to be a devastating effect on those families, but also on the local economy, because these people spend that money – they don’t put it in an ISA and stash it away for a rainy day.”

In the Mall, the covered shopping precinct in the city centre, parents calculated how a tax credit cut might impact their finances. Gianna Jones, 27, is studying to get a childcare qualification while also working 20 hours a week as a nursery assistant. Her husband, Steve, 35, is a joiner. The child tax credits they receive pay for childcare for their three-year-old daughter while Gianna is at college and at work.

“It pays for a huge chunk of childcare. If it was cut, I might end up not working. It allows me to go to work, otherwise I would be better off staying at home,” she said.

Abby Fielding, 37, a part-time school cleaner whose husband works full-time as a labourer, wondered whether reducing tax credits would act as a disincentive to staying in work for a lot of people. They receive child tax credits of about £539 a month, for their three children, 11, nine and two, but their income is just over the threshold for working tax credits. Her husband has recently taken a £7,000 pay cut after losing a higher-skilled position as a heating engineer.

“A lot of the jobs you can get here are minimum wage jobs. If you cut working tax credits, it may not make sense for a lot of people to work,” she said. “I don’t expect to get stuff for free – we are trying to work, and trying to do the right thing.”

Evangelina Read, 20, shopping with her 18-month-old son, gets child tax credit of around £68 a week, she estimates, as well as income support; she is studying health and social care at college. She said she had heard – wrongly – that the payments could be replaced with food bank vouchers, and said that would be fine by her. “It all goes on food anyway, so what’s the difference?” she said.

Rebecca Jackson, whose husband is a support worker in a hospital, works part-time in a bar to supplement the family’s income. Their children are 10, nine and four. The family gets child credit of about £60 a week, although the sum has been reduced recently because of Jackson’s rising income. “It goes on food and clothes. We don’t go out much,” she said. “People will struggle.”

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