Hard working families will be absolutely staggered to learn that they are next on the Chancellor’s hit list.
Hidden in the fine print of George Osborne’s budget is nothing less than a £3.5billion tax bombshell for low income families already feeling the squeeze.
The government is failing to get the economy moving, they are failing to get people into work, and they are failing to bring welfare spending under control, and because of that failure they are going to hit 5.7 million low income families for over £600 pounds.
After this disastrous budget has become absolutely clear that this government has now completely lost touch with ordinary people lives.
Spending cuts in the next Parliament
Because of George Osborne’s failure on jobs and growth, Britain’s squeezed middle families will have to pick up the bill by having their tax credits cut. In Wednesday’s Budget the true extent of the future squeeze was revealed.
When George Osborne first unveiled his cuts in the 2010 Spending Review, he boasted that he would cut welfare spending in order to protect departmental spending (schools, hospitals and police). Osborne said: “As I said in June, the more we could save on welfare costs – the more we can continue other, more productive areas of government spending.”
But what Osborne failed to tell us was that not all of this was welfare spending. One third of it – roughly £5.8 billion – came from cutting the tax credits of squeezed middle families.
However, in the Autumn Statement, when it became clear that George Osborne’s plan had failed and borrowing was revised up by over £150 billion, it also became clear that he would no longer achieve what he set out to achieve of eliminating the structural deficit in this parliament and so he would be cutting spending in the first two years of the next parliament as well.
In the Autumn Statement, he said nothing about what these spending cuts would be. There was no indication as to whether these were cuts to departmental budgets like schools, police or the NHS (which is not protected in the next Parliament), or welfare or tax credits. It just said that there would need to be £28 billion of spending cuts in the next Parliament to eliminate the structural deficit.
However, in this week’s Budget the consequences of George Osborne’s failure became clear. Welfare spending is now much higher than originally expected because of the Government’s failure on jobs and growth and with more people on the dole.
Buried in the Red Book is the admission that in order to simply cut spending on public services by the same rate as he has done in this Parliament, George Osborne would need to cut £10.5 billion out of welfare and tax credits: “For illustrative purposes, the annex shows that AME savings of £10.5 billion in 2016–17 would need to be delivered to ensure that the average annual rate of real reductions in resource DEL is no greater in 2015–16 and 2016–17 than in the Spending Review 2010 period.”
Savings must be made in the welfare budget, but if George Osborne was to simply do what he’s done in this parliament and split this between welfare and tax credits and taking a third from tax credits, this means cuts of £3.5 billion to tax credits.
On average this amounts to a tax rise of £614 on 5.7 million low income families currently claiming tax credits.