Tax credits no more

UPDATE:  A number of folk have been looking for the original paper – here is the link

And belated thanks and dues to Hannah Jordan at SCVO for originally circulating it to folks she thought might be interested.

Also, it seems the number might be even higher – according to HMRC last December, it estimated the number of families in Scotland losing out to be 84,900.  It’s worse than we thought!


I’ve been sitting on this information for more than a week now, in the hope that someone, somewhere would also come across it.   It is taken from a paper that was lodged in the House of Commons publications store (I’m sure it has a suitably fancy name.. answers on a postcard please).

Because it is dynamite.  And I really cannot believe that no-one else has seen it (they have) and thought it was newsworthy.  Or at least blogworthy.

In the last few weeks, thousands of families all acros Scotland have been receiving missives from HMRC, regretting to inform them (not really, not at all in fact) that their tax credits are no more.  For every family it will have come as a shock.  But taken together, the scale of the impact of this cash grab from hardworking families (TM Labour/Conservatives/Lib Dems/take your pick) all across Scotland is quite shocking.  The table below sets out how many families in each local authority area in Scotland will no longer be in receipt of child tax credits come the start of April.

Aberdeen City 2200 Edinburgh 4500 Orkney Islands 300
Aberdeenshire 3400 Eilean Siar 200 Perth & Kinross 2000
Angus 1800 Falkirk 2900 Renfrewshire 2600
Argyll & Bute 1200 Fife 5600 Scottish Borders 1800
Clackmannanshire 900 Glasgow 5000 Shetland Islands 400
Dumfries & Galloway 2500 Highland 3600 South Ayrshire 1400
Dundee 1800 Inverclyde 1200 South Lanarkshire 5200
East Ayrshire 1900 Midlothian 1400 Stirling 1100
East Dunbartonshire 1600 Moray 1700 West Dunbartonshire 1400
East Lothian 1500 North Ayrshire 2000 West Lothian 3000
East Renfrewshire 1200 North Lanarkshire 6000

I should point out that several times while compiling this table I went back to check that the figures really are “thousands”, for 200 families in the Western Isles and 400 on Shetland just seems a huge amount, relatively.  But in terms of actual numbers, the worst hit local authority areas are North Lanarkshire with 6000 families losing their child tax credits, Fife with 5600, South Lanarkshire with 5200, Glasgow with 5000 and Edinburgh with 4500.

Also of interest is the impact on many rural areas in Scotland.  Dumfries and Galloway and East Ayrshire are largely comparable in population terms; usually, in league tables like these the picture will be worse in East Ayrshire because of higher deprivation levels.  But Dumfries and Galloway will be hit harder in terms of the income loss to families, partly because it has marginally lower unemployment and therefore more parents in work, but also because areas like these are low wage economies.  Lots of people earn just enough to get by – tax credits have helped make incomes stretch further.  No more.  And what will happen is that young families will leave these areas or not move there in the first place.  The same applies to all the peripheral regions of Scotland.

The change applies to any lone parent family earning over £26,000 per year and any two parent family earning over £32,000.  Previously, the cut off point was £42,000.  At the same time,  the amount that can be received for childcare costs is being cut from 80% to 70%, meaning that families have to meet nearly one third of such costs themselves.

Now, people on these kind of sums are not living in poverty but for two parent families in particular, £16,500 each is well below the national average.  The ones who will feel it most are still on fairly low incomes.  And it’s the impact.  Going without several hundred pounds a month – as will be the case for some – just like that, will be tough.  Especially in an era of largely frozen pay and rising household costs.  This is the Institute of Fiscal Studies’ predictions of middle-range income families being hit the hardest by the Coalition government’s austerity measures.

This is indeed the squeezed middle so one wonders where are all the strident political voices protesting on their behalf?  Where is the media?  Or do we only care about those lambs about to lose their child benefit on much higher incomes?

The fact is that such decisions have a knock-on effect.  For some, it will be to choose not to work – or rather to be forced into deciding that work does not pay.  This will be particularly true in many two parent families, and often, it will be the woman who stays at home, creating greater economic dependency and disparity between men and women’s earnings, yet again.

Tax credits have always been somewhat controversial.  Hugely bureaucratic, costing significant amounts to administer, some even argue they have contributed to in work poverty, keeping people on low incomes and allowing unscrupulous employers to avoid their responsibilites to ensure that people are paid a decent wage.  But they have served an essential purpose for many families, who would be on low incomes anyway.  They have brought more money into families for the benefit of children, centred around the fact that there are children who have the right not to grow up in poverty or indeed, in workless households.  This will all now change.

The coalition government might argue – and they do – that they don’t like doing this, that this is the necessary consequence of the previous Labour government’s profligacy, that we must all contribute to getting our collective indebtedness down.  But you cannot escape the suspicion that they are hurting where they can get away with it.  Families like these rarely complain, they just get on with it.  And – as we have seen – they are largely ignored.  The ones who cope and can be relied upon to cope.

But with the gap between rich and poor getting wider, with obscene banking bonuses still being paid out, with football clubs and megabucks players enabled to avoid their tax liabilities, with discussions swirling over removing the 50p tax rate for the best off, they will be wondering why they – and their children – are the ones having to carry the biggest load.

How many families in Scotland will be affected?  The UK government’s own figures suggest 73,300.  73,300 about to lose thousands of pounds of income a year.  73,300 for whom the balance will be tipped from coping just to not.  Does nobody care?

A budget dress rehearsal

I can’t tell you how much I enjoy it when the Tories and the Lib Dems indulge in a little grandstanding before the budget.  It’s like watching Laurel and Hardy attempt a polka and if it was spontaneous, well, it really would be funny.

What is amusing is that they think such choreographed manoeuvres come across to the electorate as accidental.  Sorry, but we don’t zip up the back.

This time, it’s over the cutting of child benefit for higher rate taxpayers. The Chancellor has knitted his brows and pronounced himself to be worried about the impact on all those poor families with someone earning over £40,000 to be hit when it kicks in next year.  Poor wee lambs that they are.

Meanwhile, Nick Clegg puts on his best sonorous tones to suggest it is unfortunate but that he and his party are more concerned at raising folk out of paying tax altogether and speeding that along.

Ultimately, we’ll get a lot of huff and puff and very little movement when the Budget is announced, and a lot of handwringing afterwards.

Yes, it is unfortunate that the last great universal benefit is under attack.  And yes, it is a tad unfair that the threshold captures some just over the £40,000 limit but exempts two earner families on over £70,000.  But tax is like that:  wherever you put in a cut-off, it hits some and relieves others.  Until a wholesale shift is made to a progressive tax regime, there will always be such anomalies:  like that is about to happen anytime soon.

But on the whole?  No, I don’t feel sorry for anyone earning over £40,000 nor do I lie awake at night worrying how they will manage the school fees, ballet lessons and Waitrose shop without the additional income.

I’m too busy trying to work out how to manage my own loss of tax credits – and more pertinently, worrying that if it’s bothering me this much, what must it be doing to families a whole lot worse off than me.

Ed Balls, who is beginning to manage to carve out a credible shadow Chancellorship, acknowledged this in his response.  Terrible, he said that they are taking child benefit away from some families, but much worse that they are also hitting families on much lower incomes.  His estimate is that some families on £17,000 could be worse off by £3,000 per year.  It won’t pay them to work, he suggested.  And he’s probably right.

There is something nauseating about watching the rich kids in the Cabinet wring their hands over the impact of the loss of child benefit to better off and downright wealthy families while staying schtum on the matter of tax credit loss to families on much lower incomes.  And simultaneously pushing through reforms to benefits which will remove several thousand pounds a year from families with disabled children – families who need the income most, who because they have a disabled child, have much higher living costs than the rest of us.

Like I said, I enjoy it but only to a point, given that their actions have dire consequences for many.

This annual tea-dance confirms what those Tory sceptics north of the border have always believed.  Nasty party.  It also justifies the decision of many voters in Scotland last year to punish the Liberal Democrats for their compliance and complicity in the whole charade.  They can push and prod all they like for a faster phasing of the commencement point for paying tax but it is theatrical.  It’s their way of assauging their consciences.  But what is the point of raising the level at which people pay tax, if it is effectively taken back off them through other methods?  If the Lib Dems think this – admittedly welcome – measure is going to redeem them in the eyes of Scottish voters, they are sadly mistaken.  The parlance, I think, is dream on.

There will be more like this in the next two weeks.  More shuffling from foot to foot.  More seemingly chaotic rehearsals from the coalition partners, with legs and arms swinging in the opposite direction.  But on the day?  It will all go smoothly.  They will dance the perfect polka, showing synchronicity in every step.  The poor and lowly paid will bear the brunt;  the wealthy will largely escape fiscal censure.  It was always thus.

Expect low scores and boos from the majority but maximum scores and enthusiastic applause from their rich friends in the shires and in the city.



The worst of times are just around the corner

The UK Government’s response to the rise in unemployment is a remarkable example of the triumph of spin.

Highlights include the central assertion that the “rise in employment and vacancies shows a stablising labour market“, the suggestion that 1,000 more young people becoming unemployed and 22,000 more full-time students looking for work represents “a more stable picture“; and the trumpeting of there being 11,000 more jobs in the economy while hiding the fact that over the year to December 2011, there were actually 21,000 fewer jobs available (in the footnotes).

But the most astonishing claim was that its welfare reforms are working.  The UK Government used the fall in the number of people designated as economically inactive to point to its success (sic).  The number of people claiming incapacity benefits – disabled people to you and me – fell by 43,000 while the number of lone parents fell by 84,000.  Cheerily, the media release points to a further fall of 15,000 in the number of lone parents on income support for November 2011, “driven by welfare reform“.

What all this means is that in the last quarter of 2011, there were at least 150,000 more people chasing just 11,000 more jobs.  Far from the picture being rosy, it is terrifying.  There might be 476,000 vacancies in the economy but there are now 2.67 million unemployed people in the UK to fill them.  You don’t need your Standard Grade in Arithmetic to work out the supply is nowhere near being able to meet the demand.

The UK Government also suggested that the number of people claiming Job Seeker’s Allowance (JSA) rose, partly because of the shift of people off of incapacity benefits and income support on to JSA.  This might be true, but if there are only 1.6 million on JSA, it begs the question – what are the other 1 million unemployed people now living on?

Sorry, but however the latest Labour Force statistics are viewed, they are far from good.  Unless, of course, you are a Conservative or Liberal Democrat and want to point to the impact of the toughness of your austerity measures in all their technicolour glory.  They might see this all as very good news, but the rest of us can only watch from behind a cushion.  It’s beginning to feel like we’ve been pushed down Alice’s hole and are now hurtling ever faster without any sense of how and when we are going to hit the bottom.

As Polly Toynbee pointed out in an excellent Guardian article a week or so ago, the cuts have barely got going yet.  Only 6% of public service cuts have actually filtered through (it’s probably less in Scotland) and in benefits, 88% of already announced cuts and changes are still to come.  April is going to be a bit of a shocker for many individuals and families, as reality bites.  In fact, that moment for many came yesterday, when epistles from HMRC indicated an end to people’s entitlement to tax credits.  The cut off point is £26,000 for joint and single incomes:  a lot of families are going to hurt.  My own hit is in the region of £50 a month.   Still, let’s look on the bright side, there’s another budget looming – there will be more goodies coming our way from 2013 and 2014.

Everywhere you look, people really are starting to struggle.  A recent Netmums survey found that one in four families are living on credit cards and one in five mothers regularly go without meals in order to feed their children.  Anyone shocked at the latter finding shouldn’t be.  Such behaviour has always been with us:  I remember doing it too, a while ago.  You wait to see what they leave before you decide whether or not to make yourself something to eat.  More often than not, you make do with a half portion of food off of your child or children’s plates.  It ain’t pretty but it’s survival and it makes sure that your children get what they need.  The feckless poor and single parents huh?

The gulf between the haves and have-nots all across the UK has never been greater.  What has kept the system of inequality in place, the demographic glue of it all, has been the existence and mobility of a big group in the middle. Folk shifting their status a bit, from lower middle class to nearly the top, by dint of a university degree, a decent berth, promotion, credit, fortuitous house purchase etc, with the prospect of more to come, particularly if employed in middle management in the public sector or the financial services industry.

They are the ones about to slide right back down the ladder, for whom the haves were tantalisingly in reach and are now still sitting pretty while they and their families suffer.  The haves remain at the top, still untouchable in every way it seems.

Many, including myself, have been astonished at how calmly we have taken every insult and injustice thrown at us since 2008.  Self-interest and self-preservation has played its part in ensuring that we have chattered and grumbled but shown no real outward sign of our pain and displeasure.

All that might well change from April.  Middle income families – that’s people on between £15 and £45,000 per year – are about to get hammered.  It’s a big pool but the Tories are keen not to discriminate for once; while people at the lower end of the band will face real hurt, the impact might well be most keenly felt by families at the top end.

A two parent family could lose one worker, endure another pay freeze, lose the tax credits and find the credit cards maxed out.  Just like that.  Such a scenario takes them from the top end of that income band into its lower steps but with all the trappings of greater prosperity – cars, mortgages, holidays, nursery fees.  In the coming year, notorious lag indicators like homelessness and repossessions will undoubtedly start to rise.

The worst of times really are just around the corner – we might well be about to see deprivation creep in from the margins of our towns and cities and into suburbia.  Poverty is bound to get more visible, more pervasive and it will be interesting to see if folk continue to seethe silently or become more vocal about it all.