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GMB Birmingham & West Midlands Region

West Midlands Tax Credits

Tuesday, July 14, 2015

80% OF IN WORK FAMILIES IN RECEIPT OF TAX CREDITS IN WEST MIDLAND FACE MINIMUM CUT OF £23.72 TO £127.62 AVERAGE WEEKLY TAX CREDITS

Across the UK 2.62 million families face a minimum loss of £23.72 per week and over time the average loss will be about £34 per week for 3.3 million working families says GMB

The Tory Government in the July budget announced a minimum cut of £23.72 per week for four out of five in-work families in receipt of tax credits, as part of the £12 billion welfare cuts. This means the loss of income to households and loss of spending power in local economies in the West Midland will be a minimum of £315 million per year.

The latest figures show that in April 2015 there were 319,000 families in the West Midland getting in work benefits. Latest figures show that they got an average of £127.62 per week. There were 3,277,300 families in the UK getting these in work benefits. Latest figures show that they got an average of £123.90 per week or £6,443 per annum.

Child and working tax credits are now subject to four cuts as follows: First the income threshold for the taper to kick in on tax credits has been cuts from £6,420 to £3,850 per year (£123.46 to £74.04 per week). Second the government will increase the taper rate from 41% to 48%. Third support for children through tax credits is to be limited to two children, affecting children born after April 2017. Fourth tax credits will be frozen for four years.

The first two cuts will lead to a minimum cut of £23.72 per week for 80% of those who get it (2.62 million in the UK) and less for the rest.

Official estimates from the Office for Budget Responsibility (OBR) state that the package to reform tax credits and universal credit will save £4.6bn in 2016-17 rising to £5.8bn in 2020-21. See notes to editor for a breakdown of each change. See notes to editors for sources and definitions.

GMB has been able to analyse from official data the minimum impact of the first two cuts above - these account for 70% of the total cuts in tax credits in 2016/17 – to assess the minimum impact on spending power for each individual area in the region.

This minimum cut of £23.72 per week in child tax credits (CTC) and working tax credits (WTC) will lead to a loss of income for 80% of 77,100 families in Birmingham and a loss of spending in the local economy of £76 million per year. This will be the biggest loss of spending power out of the 14 areas in the region.

Next biggest loss in spending power will be in Staffordshire where 80% of 40,000 families will face a loss in spending power of £39.4 million followed by Worcestershire where 80% of 26,700 families will face a loss in spending power of £26.3m, followed by Warwickshire where 80% of 24,300 families will face a loss in spending power of £24m. See the table below for the numbers in receipt of tax credits in each of the 14 areas in the West Midlands, with average weekly amounts paid and amount that will lost per year to the economy in the area due to a minimum cut of £23.72 per week for 80% of families who get tax credits.

FIGURES FOR AREAS IN WEST MIDLAND - RANKED BY LOSS OF SPENDING POWER DUE TO TAX CREDITS CUT BY A MINIMUM OF £23.72  PER WEEK

   

Total families - in work families

Average weekly value: All in-work families

Estimated minimum size of cut

         
 

United Kingdom

3,277,300

£123.90

£3,233,882,330

 

West Midlands

319,000

£127.62

£314,773,888

         

rank

       
         

1

Birmingham

77,100

£148.54

£76,078,579

2

Staffordshire

40,000

£116.35

£39,470,080

3

Worcestershire

26,700

£117.50

£26,346,278

4

Warwickshire

24,300

£117.77

£23,978,074

5

Sandwell

22,900

£129.29

£22,596,621

6

Coventry

19,500

£129.79

£19,241,664

7

Stoke-on-Trent UA

17,500

£125.15

£17,268,160

8

Walsall

17,300

£130.33

£17,070,810

9

Dudley

17,000

£120.88

£16,774,784

10

Wolverhampton

16,300

£120.90

£16,084,058

11

Shropshire UA

13,900

£111.73

£13,715,853

12

Telford and Wrekin UA

10,300

£123.98

£10,163,546

13

Herefordshire, County of UA

9,300

£115.13

£9,176,794

14

Solihull

8,500

£124.50

£8,387,392

Joe Morgan, GMB Regional Secretary said “The budget is a beautifully crafted con trick by Osborne.

On the one hand he offers a vision of a living wage which is welcome. He confirms what GMB has being saying for some time – the vast majority of employers can afford pay rises and no amount of howling from CBI will alter that fact.

On the other hand he is taking away money from working families without any guarantee that they will be better off.

Across the UK 2.62 million families face a minimum loss of £23.72 per week and over time the average loss will be about £34 per week for 3.3 million working families.

For the huge numbers of working families that will be hit by cuts in tax credits the answer is simple – they should join a union to fight for better pay from employers who can well afford it as Osborne confirms.

George Osborne is big in attacking working families and young workers but he has yet to take action on the billions of public money flowing out of the country into tax havens because of the abuse of housing benefits income by private landlords."

End

Contact: Stephanie Peacock on 07841 763521 or Gary Doolan, 07590 262504 or Kamaljeet Jandu 07956 237178 or GMB Press Office: 07921 289880 or 07974 251823 or 020 7391 6755/56.

Notes to Editors

In the Summer Budget 2015, George Osborne reduced the income threshold for tax credits from £6,420 to £3,850 per year (£123 to £74 per week).

The government will also increase the rate at which a person’s or household’s tax credit award is reduced as they progress in work, by increasing the taper rate in tax credits from 41% to 48%.

The taper is used to calculate the reduction due to income by multiplying the excess income figure by the taper percentage, which has been increased from 41% to 48%. Before the Summer budget a worker a worker would only start to lose 41 pence in the £ for income over £6,420, after the budget the same worker would lose 48 pence in the £ for income over £3,850. So a single worker earning £20,000 per year will be £2,184 per year worse off (£42 per week) because of the lowering of the threshold and the increase in the taper.

The OBR state that due to the change in threshold and the increase in taper, awards will be withdrawn earlier and at a faster rate with many families losing their entitlement altogether.

The Budget will also limit support provided to families through tax credits to 2 children, so that any subsequent children born after April 2017 will not be eligible for further support. Working age benefits are also going to be frozen for 4 years.

Exchequer Impact of changes to Tax Credits

 

 

Exchequer Impact (£ million)

 

2016-17

2017-18

2020-21

Welfare

     

Uprating: freeze working-age benefits, tax credits and Local Housing Allowances for 4 years from 2016-17

90

940

4,010

       

Tax Credits and Universal Credit

     

Limit child element to 2 children for new births in tax credits and new claims in UC

0

315

1,365

Remove family element in tax credits and UC, and the family premium in Housing Benefit, for new claims

55

220

675

Increase tax credits taper rate to 48%

1,475

1,035

245

Reduce income thresholds in tax credits and work allowances in UC

2,880

3,060

3,440

Reduce income rise disregard in tax credits

170

225

110

Sources: Child and Working Tax Credits Statistics - Recipient in-work families receiving Child or Working Tax Credit - April 2015

Average annualised entitlements for in-work families - 2013-2014

Source: HM Revenue & Customs Child and Working Tax Credits Statistics

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