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Labour leader challenges the Prime Minister on Working Tax Credits

Date: 07 March 2012 Labour leader Ed Miliband used today's Prime Minister's Questions to challenge David Cameron to say what advice he would give to the thousands of couples on low incomes who will lose nearly £4,000 when cuts to Working Tax Credits are introduced in April.

Couples currently receive Working Tax Credit if they work at least 16 hours a week, but from next month this will change to 24 hours. A survey of Usdaw members affected by the change found that 78% say they are unable to find the additional hours they need to avoid losing their Working Tax Credit. A survey of employers just released by Working Families has found that only 17% are confident of being able to meet the requests for the extra hours their staff need.

Citing the example of Usdaw member Tim Howes, whose family will lose over £60 a week, Ed Miliband asked the Prime Minister what advice he would give Mr Howes and his wife who, despite trying, have been unable to find the extra hours of work they need.

Mr Cameron avoided addressing the key point that because of the economic downturn many people simply can't get extra hours from their current employer or find alternative employment and instead reiterated the Government's position that the cuts to tax credits were 'fair'.

Tim Howes is a delivery driver for a major national supermarket. He works 20 hours a week, four hours over five days from 5.00pm until 9.00pm. Tim's wife Sam used to work in a supermarket as well, but found that their hours of work clashed and that childcare was very difficult to arrange, so Sam had to give up her job last year. Since then Sam has been looking for a job that will fit in with school hours so that she can be there for their three school-age children, but she has been unable to find one as employers require total flexibility which she is not able to offer.

Tim says "I have approached my employer to increase my hours but have been told that there simply isn't the hours there. In fact most of my work colleagues are on part time contracts. I would love to work full time!"

"My family at the moment is just about keeping its head above water, with myself the only earner. I feel this cut in Working Tax Credit and just not being able to secure four extra contracted hours a week could finally be the last straw."

John Hannett, Usdaw General Secretary said:

"Once again the key point that Usdaw and other organisations are making has been missed by the Government. Couples faced with losing their Working Tax Credit are desperately trying to find extra hours of work or other jobs but because of the economic situation they are simply unable to do so."

"Ed Miliband met with Mr Howes and other Usdaw members affected by the changes this morning and I hope both David Cameron and the Chancellor George Osborne will do likewise and respond positively to the request to meet affected families that we made yesterday."

"I'm sure that before making a final decision that will consign thousands of families to poverty, they will wish to listen to the problems couples are facing in finding extra hours of work, and the consequences of the loss of nearly £4,000 from families only just getting by on incomes around £18,000."

Notes for Editors:

1. Yesterday, Usdaw, Barnardo's, Child Poverty Action Group, Church Action on Poverty, Contact a Family and Working Families wrote to the Prime Minister and Chancellor asking them to meet with families who stand to lose their Working Tax Credit next month. See: http://www.usdaw.org.uk/newsevents/news/2012/mar/primeministerandchancellor.aspx

2. Details of the survey of employers by Working Families can be found at: http://www.workingfamilies.org.uk/about-us/press-room/working-families-concern-over-changes-to-working-tax-credit

3. In April 2012 the rules for Working Tax Credit for couples with children will change. Currently, couples have to work at least 16 hours a week between both parents. From April they will have to increase their working hours to at least 24 hours, or they will lose their whole entitlement to Working Tax Credit, worth £3,870 a year.

4. Key problems with the change:

  • 894,000 people will be affected. Official figures placed in the House of Commons Library show that 212,000 couples (424,000 adults) will be affected. These households include 470,000 children. This is an average of 1,375 people in each parliamentary constituency. A spreadsheet showing the number of affected families and children by parliamentary constituency is available on request.
  • 78% say they cannot find the extra hours of work they need. Most people working 16 - 24 hours on a low wage work in the service sector, which has been hard hit by recession. In retail, where a high proportion of the affected families work, additional hours are being cut as much as possible and no extra hours are available in most stores. Very high levels of unemployment mean there are no additional or alternative jobs. Usdaw surveyed members who know they are affected by the changes and 78% said they would not be able to find the additional hours of work they needed. Rising 'underemployment' - people who cannot get all the hours of work they want - is a growing problem.
  • Child poverty will surge. The families affected by this change are likely to already be close to the poverty threshold. The loss of Working Tax Credit of £3,870 (even with some counteracting increase in housing benefit as a consequence) will mean many, if not most, of these couples and their children will be plunged below the poverty line, or far deeper below the poverty line than they were already. This would cause a surge in the extent of child poverty and the depth of child poverty.
  • Some families will be better off out of work. The current margin between those out of work on benefits, and those in work between 16 and 24 hours, will be erased by this change. A parliamentary answer to Ann Coffey MP has confirmed that the change will make many households worse off in work than on benefits (see 'Social Security Benefits', column 395w http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120229/text/120229w0004.htm).
  • Families with disabled children and full-time carers are not exempt. Families with disabled children or other caring responsibilities are obviously less able to do more hours of work. However they have not been exempted from working additional hours, even where one partner is a full-time carer. The loss of £3,870 WTC will be a devastating additional blow to these hard-hit families.
  • Universal Credit will abolish the criteria for working hours in 2013. One of the key points about Universal Credit is that it will reward people for however many hours work they can do. The criteria for set hours of work will be abolished and families will receive support that is tapered at a set rate depending on their earnings rather than their hours of work. This change will therefore create untold misery for hundreds of thousands of working families and their children for a small and temporary gain to the Treasury.
  • The strong economic situation needed to support this change has not been reached. The Government first announced this change in November 2010 in the Spending Review. At the time the Office for Budgetary Responsibility (OBR) was predicting that the economy would be back in strong growth now of 2.1% in 2011 and 2.6% in 2012. But the economy grew at just 0.9% in 2011 and we have just had a contraction for the most recent quarter. The OBR have also significantly revised upward the job losses they expect in the public sector, many of which will be implemented in the form of reduced hours. The argument by government that the change would incentivise increases in working hours no longer makes in sense in the current economic context.

5. For up-to-date background facts and stats on UK poverty, visit: http://www.cpag.org.uk/povertyfacts/index.htm

6. Usdaw (the Union of Shop, Distributive and Allied Workers) is the UK's fourth biggest and fastest growing trade union with over 410,000 members. Membership has increased by more than 17% in the last five years and by nearly a third in the last decade. Most Usdaw members work in the retail sector, but the union also has many members in transport, distribution, food manufacturing, chemicals and other trades.

 

 

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