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Working Tax Credits

Volume 557: debated on Wednesday 30 January 2013

The Petition of residents of Middlesbrough and Redcar and Cleveland,

Declares that changes to tax credits will plunge thousands of working families into poverty.

The Petitioners therefore request that the House of Commons urges the Government to reverse these changes; to provide real incentives for people to work; introduces measures to clamp down on tax avoidances; and ensures that the Government honours its commitment to end child poverty in accordance with the Child Poverty Act 2010.

And the Petitioners remain, etc.—[Presented by Tom Blenkinsop, Official Report, 17 October 2012; Vol. 551, c. 445.]


Observations from the Chancellor of the Exchequer, Treasury:

The Government thank the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) for his petition on tax credits.

The Budget 2010, Spending Review 2010 and Autumn Statement 2011 made reforms to the tax credits system. These changes help to tackle the deficit in a fair way to ensure that tax credits are targeted at those who need them most.

At Autumn Statement 2012, it was announced that elements of tax credits will be uprated by 1% for three years from 2013-14, although planned freezes of certain elements will go ahead and all disability premia will uprated by CPI (Note: the family element of CTC and childcare element of WTC do not uprate). The uprating measures announced at Autumn Statement are forecast to save over £2.5 billion in 2015-16. This is a permanent reduction to welfare spending. The Government also announce a package of measures to reduce tax credits error, fraud and debt by around £1 billion in the next four years.

The budget deficit we inherited from the previous Government has meant we had to make some very difficult choices. The Government have been clear that they see reducing the deficit as their most urgent task. Total expenditure on tax credits in 2012-13 is estimated to be around £30 billion, this has increased by £14 billion in nominal terms over the last 10 years. We have ensured that everyone who is able to contribute to the deficit does so, whilst those with the lowest incomes continue to be supported.

This Government are committed to making work pay. Since 2010, the Government have announced successive increases in the personal income tax allowance totalling £2,965. This includes a further £235 increase announced at Autumn Statement 2012, in addition to £1,100 announced at Budget 2012. This means that the personal allowance will rise by £1,335—the largest cash increase in history—to £9,440 from April 2013.

The Universal Credit will unify the current complex system of means-tested out of work benefits, tax credits and support for housing into one single payment. The award will be withdrawn at a single rate, with the aim of offering a smooth transition into work, and encouraging progression in work.

The Government are committed to eradicating child poverty, by tackling its root causes and ensuring that children born in low-income families realise their full potential.

The Government published their Child Poverty Strategy in April 2011. As the strategy set out, poverty is about more than income; it is about a lack of opportunity, aspiration and stability. The Government will fundamentally change the prospects of children. They will do this by offering real opportunities at every stage of childhood and education to raise children out of long-term poverty.

This is why we have already committed £7.2 billion for the “Fairness Premium” to support the poorest in the early years and at every stage of their education—through free education and care at age two, funding for a Pupil Premium for school-age pupils, and a new national scholarship fund to support students in Higher Education. We have also protected funding for Sure Start services.

We are now extending the offer of 15 hours free education and care a week for disadvantaged two-year-olds, to cover an extra 130,000 children. This doubles the offer announced at the Spending Review, to cover around 40% of all two-year-olds in England.

The Government are committed to tackling tax avoidance and are already reinvesting over £917 million in HM Revenue and Customs (HMRC) to better tackle evasion, criminal attacks, unpaid tax debt and avoidance. As announced last December, HMRC is receiving a further £77 million in new investment by the end of 2014-15 to expand its anti-avoidance and evasion activity, bringing in £2 billion per annum in additional revenue by the end of 2014-15. This means that HMRC will now aim to raise total additional revenues of £22 billion per annum by the end of 2014-15. This is £9 billion more than it would have been without this Government’s near £1 billion investment, a 70% increase since 2010-11.