Belfast Telegraph

Only thing clear about new tax credits is who will suffer

By Eamonn McCann

A threatening letter has fluttered onto doormats across the UK as Her Majesty's Revenue and Customs alerts families to changes in tax credits.

Actually, the letter might not be as threatening as it first seems.

It appears that HMRC may be in something of a muddle about the way the new measures will work. Which raises the question of what chance the rest of us have.

The letter tells families claiming tax credits that their entitlement will come to an end next month if they don't get in touch with HMRC - and pronto. At the latest, by March 31.

It goes on to say that 'for Child Tax credit the income limit [will be] £26,000 for both single and joint households'.

The £26,000 figure has been so widely and fractiously publicised that some will have assumed upon reading the letter that it's an across-the-board upper limit. Indeed, this is the literal meaning of the HMRC text.

But if you have two or more children, pay registered childcare costs, qualify for the disability component of tax credit, or have children who qualify for the child disability element, you might well qualify for significantly more than £26,000.

Against the background of loud ugly abuse of families claiming £26,000, the letter could have frightened some claimants off from pursuing their legal entitlement.

(It's worth noting that the regular anti-'scrounger' campaigns are more aggressively conducted than the occasional efforts to highlight the fact that far more money is left unclaimed every year than is lost through fraud. Taking everything into account, benefit claimants are not ripping the state off, but letting it off lightly.)

The new measures, Work and Pensions Minister Iain Duncan Smith assures us, will free millions from a "benefits trap" and provide new incentive to work. But will they?

In broad terms, the changes will make things better for 2.8 million households, mean no difference for about 2.7 million and leave around two million worse off.

Of the last category, 1.1 million will be households with children.

The system and the changes are so tangled that it is only through detailed scrutiny of specific examples that the human costs can be established.

Take a single mum with three children who works 35 hours-a-week at just over the minimum wage. She will have weekly earnings of, say, £245.

Benefits will bring this up to £370 after housing. Under Universal Credit, this would plummet to £302. She will be £68-a-week worse off - a catastrophic fall.

Iain Duncan Smith's mantra is that this won't really spell disaster, because extra payments will be available to those who would lose out under strict application of the new regime. In practice, he says, there'll be nobody worse off.

But, again, not so. Under Duncan Smith's plan, as explained by the Department of Work and Pensions, 'top-up' payments will be offered for a limited period - it's not yet clear how long. Only current claimants will be eligible.

If their circumstances change, the payments can be withdrawn. And new claimants won't be eligible at all.

This is a classic case of confusing and delaying the full impact of a regressive measure, so that people will have become used to it by the time it fully kicks in.

Research released this week by Save the Children leaves little room for doubt that, while the impact will vary wildly from family to family, the changes will hit particularly hard those poor and near-poor households with children.

The charity, along with Gingerbread, the Daycare Trust and Netmums, has launched a campaign in advance of next week's Budget, calling on the Government to change its proposals so as "to make work pay for mothers who want to work their way out of poverty".

They suggest that single mums be allowed to keep more of their earnings before losing benefits; that where both parents are working, each be allowed to retain the first £2,000 of earnings; and that support for childcare costs be raised from 70% to 80% for low-income households.

Not exactly a revolutionary programme. Rather, exactly in line with what Iain Duncan Smith repeatedly claims is the main objective of the measures he wants to bring in.

So how come major charities have to come together to make the case for the same objective? Work it out.

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