Little-known about cuts to tax credits could see around 800,000 working people lose up to £300 a week, despite a promise from George Osborne that the in-work benefit would not be touched.
The Chancellor was forced to abandon plans to cut tax credits by £1,300 a year for 3.2 million working people in the Autumn spending review, but proposals to halve the ‘income rise disregard’ went ahead with very few commentators noticing.
Yesterday, MPs in the House of Commons voted to back the changes, by 272 votes to 228. The policy was brought forward in the form of a ‘Statutory Instrument’, rather than an ‘Act of Parliament’, which meant MPs were unable to debate the controversial measure.
Mirror Online reports Labour opposed the changes, while Conservative MPs were ordered to vote in favour.
The changes mean the amount a person’s pay can rise before an award for tax credits is cut will be halved, from £5,000 to £2,500.
Working people who see their annual income rise by what many would describe as a modest amount face being ordered to repay tax credits.
An Impact Assessment shows that the changes will generate £935 million for the Treasury by the end of the 2020/21 tax year, with a spokesperson insisting the cuts to tax credits are about “fairness and common sense”.
Last month, Shadow Chancellor John McDonnell accused Osborne of slashing support for low-income working families while gifting tax cuts to the rich.
John McDonnell said: “It’s completely shameful when you consider that 800,000 working people, almost the equivalent of a city the size of Leeds, face losing £300 a week when the Tories are cutting taxes for a wealthy few.
He added: “This is something George Osborne needs to urgently reverse in full in the budget next month, and it’s something he could easily do if he wants to.
“There will be many Tory MPs who told their constituents that their Chancellor was not cutting their tax credits who’ll now be left looking silly.”
A Treasury spokesman told Mirror Online: “It is a simple matter of fairness and common sense that tax credit awards are reviewed as people’s incomes change.
“It isn’t right that someone earning significantly more should do just as well in terms of tax credits than someone earning less.
“Lowering the maximum annual pay rise that is disregarded to £2,500 will simply return the system to the same level as when tax credits were first introduced.
“By definition there will be no losers because people’s increase in income will outstrip any reduction to their tax credit award.”