Vicious and unacceptable tax credit cuts will affect the poorest working families in Lewisham, Labour councillors have warned.
A total of £20m will be lost in tax credits with cuts estimated to hit 15,000 families in the borough if the Government’s plans to slash the income threshold for the benefits go ahead, said Councillor Joe Dromey, cabinet member for policy and performance in Lewisham.
He told EastLondonLines that the changes were the most “inexcusable of the government cuts.”
Under government proposals, from next April the income threshold for working tax credit, a benefit designed to help low-paid families in work, will be cut from £6,420 to £3,850 a year.
The income threshold for those only claiming child tax credit, a benefit introduced to help low-paid families with children, will be cut from £16,105 to £12,125. At the moment, anyone who receives child tax credit is entitled to a sum of £545, plus up to £2,780 per child per year.
Under the new changes, the government will also limit the number of children families can claim for child tax credit to no more than two, starting from April 2017.
The Treasury has said that the changes to tax credits will save £4.5 billion a year from 2016.
However the proposed changes have been sharply criticised, with peers in the House of Lords backing a motion yesterday (Monday October 26) to delay the cuts, paving the way for a constitutional clash.
The IFS has said that the changes could hit three million working families who are likely to lose an average of £1000 a year.
Paul Johnson, director of IFS, said that families receiving tax credits will be “significantly worse off” under the changes.
Dromey explained that the current tax credits, which were introduced by the last Labour government in 2003, are “what make work pay”.
“By removing them, the government will be forcing people into poverty, forcing children into poverty, but also they will stop making work pay.”
“So for many people it will no longer be worthwhile going out and working.”
He added: “We [Labour] think it is counter-productive but most importantly it is vicious, it is going to increase child poverty by 200,000 children and that’s just totally unacceptable”
A London-based poll, conducted by research company YouGov, and released by campaigning group 38 Degrees, has found that 58 per cent of Londoners think that tax credit cuts should not go ahead in their current form.
Another 23 per cent of respondents said that cuts should go ahead at a later date, or with a lower rate of cuts.
Prime Minister David Cameron explained during his third Prime Ministers Questions on October 22 that the cuts to tax credits “are part of a package, a package that includes a higher living wage and tax reductions”.
Dromey responded to Cameron’s comments calling them “ignorant.”
“If I was being kind I would say they are ignorant, if I’m not being kind, they are lying.”
“The Institute for Fiscal Studies have shown that for every pound people lose for tax credits, they will get back 24 pence in the introduction of the National Living Wage, which incidentally isn’t a living wage.”
“We [Lewisham Council] pay the living wage in the council but the National Living Wage isn’t enough to live on, particularly in London.”
“So people will get back some money but as I say they will get back about a quarter of the amount they lose.”
In July this year, Chancellor George Osborne introduced the National Living Wage, which will see the minimum wage for over 25s rise from £6.50 an hour to £7.20 in April next year.
The figure will eventually rise to £9 an hour by 2020.
Councillor Jonathan Slater, of Whitefoot in Lewisham, echoed Dromey, calling the cuts to tax credits “the final nail in the coffin”.
“What they [the Government] are doing isn’t bringing in a living wage, it is just a marginal increase on the minimum wage.”
“The London living wage is £9.15 now, which we pay our staff at the council, so even if you increase the minimum wage to £7.20, that is in no way going to compensate for the loss in tax credits.”
Labour have launched an online petition against the cuts, which according to Dromey, has already gained hundreds of thousands of signatures.