Families 'set to lose tax credit'

Rachel Reeves said a tax credits bombshell will hit parents in the 'squeezed middle'

Published: 12:08am, 11th February 2012
Updated: 9:34pm, 11th February 2012

More than 200,000 families will lose tax credits worth almost £4,000 a year unless they significantly increase their working hours, according to figures highlighted by Labour.

Under changes due to come into effect on April 6, couples with children will have to work a total of 24 hours a week to qualify for Working Tax Credit, rather than 16 hours as at present.

Official figures obtained by Labour's Treasury spokeswoman Cathy Jamieson showed that 212,000 households, including 470,000 children, could lose the £3,870-a-year credit as a result of the change.

In a speech to shopworkers' union Usdaw, shadow chief secretary to the Treasury Rachel Reeves will describe it as a "tax credits bombshell" which will hit "parents in the squeezed middle who are working and trying to do the right thing".

Ms Reeves is expected to say: "This is a deeply unfair change from a Government that is increasingly out of touch with parents feeling the squeeze and struggling to juggle work and family life. Raising taxes and cutting spending too far and too fast has seen unemployment rise and the economy go into reverse, and many employers are cutting people's hours.

"In this climate, very few people in part-time work will be able to increase their hours by up to 50% at the moment. And for a couple with children losing around £4,000 a year, or £75 a week, from this change could mean going out to work makes no sense."

She added: "This tax credits bombshell is now just a few weeks away. For thousands of families it means going out to work won't pay and they'll be better off on benefits. That makes no economic sense at all. The Government urgently needs to think again."

At present, anyone responsible for at least one child and working at least 16 hours a week can get Working Tax Credit.

Imran Hussain, from Child Poverty Action Group, said many families would struggle to meet the new requirement of hours.

He told the BBC: "A lot of families who are doing the right thing, who are working, are going to suddenly be faced with losing quite a significant amount of money, nearly £4,000, unless they can get their hours increased and we know the state of the economy, for many people that's very, very hard."