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More than 200,000 working couples with children plunged into poverty by tax credit cuts

Date: 01 May 2012 Figures released by the Treasury this afternoon reveal that more than 200,000 couples with 449,000 children have lost up to £73 a week in Working Tax Credit because they have been unable to increase the number of hours they work.

Cuts to tax credits made by the Tory-led Coalition mean that from 6 April, couples with children had to increase their working hours to at least 24 hours a week or lose all their Working Tax Credit, worth up to £3,870 a year. Despite warnings from the shopworkers' Union Usdaw and a number of charities that most of the 212,000 couples affected would struggle to do this in the current economic climate, Government Ministers insisted that extra hours of work and alternative jobs were available to the families affected.

However, the figures published today show that on 1 April there were still 203,000 couples with 449,000 children who were working between 16 and 24 hours a week. These families will have lost all of their Working Tax Credit from 6 April unless they fulfilled a small number of exemptions for disability or caring, likely to affect less than 10,000 couples.

This means that despite Government claims to the contrary, the net effect is that less than 5% of the 212,000 couples with children faced with losing Working Tax Credit were able to find additional hours of work or alternative employment with longer hours.

The majority of families with children affected by the changes are already living in poverty. Last month, their typical household income was around £17,000, but the loss of up to £3,870 in Working Tax Credit has cut their incomes by more than 20%.

Usdaw has been campaigning against the cuts to Working Tax Credit, pointing out to the Government the injustice of making the change at a time when there are 2.6 million unemployed, workers are facing cuts to hours and overtime and a record 1.4 million people are working part-time because they are unable to find full-time jobs. 53,000 new jobs were created in the last quarter, but this figure results from of an increase of 80,000 part-time jobs and a decrease of 27,000 full-time jobs.

John Hannett, Usdaw General Secretary said:

"The Government defended its shameful attack on working couples trying to do the right thing by insisting they would be able to get extra hours of work. The Government's own figures released today blow that claim out of the water."

"If they have an ounce of decency or concern for real people then Ministers should accept that they have got this wrong and should immediately suspend the changes until Universal Credit is introduced in 18 months time."

"Thousands of our members have been affected by the cuts. The Government's decision to ignore the advice of Usdaw, businesses and charities that substantial numbers of families would face severe hardship, debt and even the loss of their homes, shows how out of touch they are – both with economic reality and with the appalling hardship their policies are causing."

Rebecca, an Usdaw member who lives in Ipswich works 18 hours a week in a convenience store. Her husband has been trying to find another job since he was made unemployed three years ago, but it is increasingly difficult to find work as there are now eight JSA claimants for every vacancy in Ipswich.

Rebecca said:

"I am more than willing to work extra hours but apparently our store can't give me the six hours that I need. They have been told to cut their wages budget so even though two members of staff who worked for 34 hours between them have left, and another on 16 hours a week is leaving soon, they still can't even give me another six hours. We have lost all our Working Tax Credit of £71 a week and I don't know how we will get by unless I can find some extra work very soon."

Notes for Editors:

1. A breakdown of the numbers of families affected by Parliamentary constituency can be accessed via: Couples who will lose WTC by constituency 010412.pdf.  In December 2011, the Treasury said 212,000 couples with a total of 470,000 children would be affected by these changes.

2. Details of the number of jobs created in the last quarter, December 2011 to February 2012, can be found in Table 3 at: http://www.ons.gov.uk/ons/dcp171778_260957.pdf

3. On 5 March 2012, a group of organisations including Usdaw, Child Poverty Action Group (CPAG), Citizens Advice, Carers UK and a number of family and children's charities wrote to the Prime Minister calling on him to postpone the change to the hours' threshold for couples claiming working tax credit. Still no substantive reply has been received to that letter.


4. In correspondence, media interviews and statements in Parliament, Government Ministers have insisted that extra hours of work and alternative jobs were available, by inference saying couples with children would therefore be able to avoid the loss of over 20% of their income. On 5 March 2012, Economic Secretary to the Treasury Chloe Smith MP said:

"Increasing the working hour requirements for a couple is entirely fair. It is right that they should put in more hours than a lone parent before receiving the working tax credit. That also creates a clear work incentive signal, which many Members have sought in this debate, to potential second earners who could benefit from tax credits if they moved into work or increased their hours—and hours are available. Let me answer this one. In the quarter to January, there were 11,000 vacancies across the economy, meaning that 1 million people moved into work." Hansard 5 March 2012 Col 679 – 680.

In reply to a letter from John Hannett, Usdaw General Secretary, Chloe Smith said:

"The Government believes it is reasonable to ask a couple to work 24 hours between them in order to qualify for Working Tax Credit and believe a large proportion of people will be able to increase their working hours."

5. Figures released on 20 March by Usdaw and the CPAG revealed that two thirds of the families set to lose all of their Working Tax Credit were already living in poverty. See: http://www.usdaw.org.uk/newsevents/news/2012/mar/twothirdsoffamiliesabout.aspx

6. 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) predicted that the economy would be back in strong growth with GDP increasing by 2.1% in 2011 and by 2.6% in 2012. The economy actually grew by just 0.9% in 2011 and the country is now back in recession with the economy contracting by 0.5% in the past 6 months. The OBR has 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.

7. 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. The 18 month change in the hours rule to qualify for Working Tax Credit will therefore create untold misery for hundreds of thousands of working families and their children for a small and temporary gain to the Treasury.

8. Usdaw (the Union of Shop, Distributive and Allied Workers) is the UK's fourth biggest and fastest growing trade union with over 415,000 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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