Tuesday, 22 June 2010

Ok, we're screwed...


Middle Income Earners Lose Child Tax Credits

"Although the Chancellor mentioned only cuts in tax credits for those earning £40,000, a table at the back of the Budget information book showed that those earning over £30,000 with one child would receive no tax credits from April 2012, while those earning £25,000 would see their entitlement cut.

The move looks like a compromise between the Tory and Liberal Democrat policies. Both parties went into the election pledging reductions in tax credits, but the Lib Dems wanted to go much further, cutting all payments to families with a total income of more than £25,500.

The Budget table shows that a family earning £50,000 or more would currently receive £545 a year in tax credits if they have one child over the age of one. This amount will fall to zero next year, while a family earning between £25,000 and £40,000 will continue to receive the payment. However, in the financial year between April 2012 and 2013, families earning £30,000 and over will receive nothing, and those earning £25,000 will see their entitlement cut to £460 a year...

...Families will also see child benefit frozen for three years. The allowance is currently paid at a rate of £20.30 a week for the eldest child and £13.40 a week"

So let me get this right: the two payments that go directly to the carer of the child will now be frozen/reduced/cut. Well that's gonna do a lot to get rid of child poverty, isn't it?

The thing is, it isn't about how much the family earns, but how much of those earnings get to the children. And Child Tax Credit and Child Benefit get to the children.

Makes me wonder how many home edders will now have to put their kids in school and go back to work full time.


Liz said...

I don't want to be a govt apologist here, but they are actually raising Child Tax Credit for those who still receive it by (I think) £150 above inflation, next year, while freezing Child Benefit, in order that the non-means-tested one becomes in real terms effectively less and the means-tested one becomes effectively more. Plus, with the tax-free personal allowance being raised by £1000 next year, this will more than balance out the loss of child tax credit for midde-earners for most people, plus actually benefiting very low earners much more.

And, although there's a lot of whingeing going on, I personally don't think that anyone earning over £30,000 should be getting a load of state help anyway, in hard times it should be reserved for those who really need it, on much lower incomes that that. I'd rather see these kinds of benefits cut than lose a load of public services (which is also going happen), which really will affect those of us on very low incomes disproportionately.

Big mamma frog said...

Ok...long rant coming up :)

I can see your point, Liz, and I dont' think you're alone thinking it.

But I suppose the point I'm making is that it doesn't matter how much the income of a family is on paper, often that money does not reach the mother and child and this is why it is paramount that child benefit and child tax credit remains - these go direct to the carer of the child. Child Tax credit is means tested on income, not the amount of money that the carer actually sees, or the amount of money that is left over after essentials!

For example, I know many women whose partners earn 25000 plus. BUT the women are given NO money for food, the kids etc.. I don't have a joint bank account and until recently was given no regular money from my partner (i.e. housekeeping allowance or whatever you want to call it) to pay for food, transport, kids clothes or activities. Hence I have always had to work any hours that I could (as well as home educate, keep house, home-bake, grow our own food etc) and I depend very much on the child tax credits/child benefit to pay for essentials. It's not a top-up luxury.

The tax-free personal allowance is only really relevant for those working full time - low earners and those working part-time (i.e. usually women/childcarers) wont benefit because they already don't earn enough to pay tax.

Also if you look at the small print, from 2012 those 'middle income families' on £25,000 plus will have their child tax credit reduced, and those over £30,000 will no longer be eligable at all. Which will hit alot of people.

Where I live the cost of living is high and you wont find many houses under £280,000 (on our street most are £310,000 plus). Most people I know are paying over £1000 a month for rent or their mortgage. Unlike London, local wages don't reflect this, so the option is either to not work and rely totally on benefits, or to have two parents earning. A wage of £25,000 doesn't go a long way here. Those earning this sort of money dont 'get alot of state help' - they pay their taxes and NI like anyone else and receive a small amount in child tax credit which goes directly to the child carer. The options are for them to work less (and therefore be eligable for more benefits) to not work at all, or for two parents to work. Child Tax credits can make the difference between it being worth working and it not.

I suppose what pees me off is that if the benefits (tax allowances) are given to the people who are earners, then those who are most vulnerable (carers, those looking after children, those unable to work,low earners) and whose partners don't share the wealth will be v.poorly off. Inevitably the children are the ones who suffer.

This in addition to the increase in VAT is going to hit poor-middle income homes the worst.

I understand that cuts have to be made and am aware that it will be painful. But I also know that if child tax credits are cut my children will lose out as a direct result. I will most likely be better off not working at all. But to those earning £40 -50,000 plus it will feel like nothing more than a little scratch.

Liz said...

Well, our household income is a lot less than £25,000, both of us work, we live in one of the most expensive parts of the southeast though outside of the London Waiting zone for wages, the increase in tax allowance will benefit us despite me not earning enough to pay tax, and if my partner earned a load of money and didn't give me anything for housekeeping or the children, then he'd be booted out and then wouldn't be counted as part of our household income at all.

We are very much low-earners, not at all middle-earners, and as such I'm glad that the Lib-Dems obviously managed to have some influence at least in protecting us, though I'm muchmore worried about the upcoming cuts in public services, which will affect us very low earners disproportionately.

Big mamma frog said...

Well I'm sure some of those women have booted out their partners, but single parenthood puts more people on benefits and more children into poverty - not necessarily a desirable or easy option. Plus it's a little difficult to boot someone out when they own the house and they are the father of your children lol.

But yes I do understand your point, and having survived on a low income (rather than the middle income we are on now) I know exactly where you are coming from. I do think that those on low incomes should be protected. But perhaps there are some things we'll have to agree to differ on, because I still think that the issue is not always as straightforward as it seems.