Tax credit cuts “rebranded” through Universal Credit, says Labour

4 Dec 15

Labour has said that cuts to benefit entitlements being introduced through Universal Credit mean controversial tax credit reductions have been “rebranded” by the government rather than reversed.

In last week’s Spending Review, George Osborne announced that tax credit reforms, which were set to almost halve the income level at which support is withdrawn from £6,420 to £3,850, would not be enacted.

In an analysis of the changes published today, the Office for Budget Responsibility highlighted that cuts to work allowances in Universal Credit, which set the level at which benefits will begin to be withdrawn under the new system, have not been reversed.

This measure was announced in Osborne’s summer Budget, and will reduce the level to £4,765 for those without housing costs, £2,305 for those with housing costs (who will also receive a separate housing element of UC), and withdraw them altogether for non-disabled claimants without children.

The OBR said that the cost to the Exchequer of reversing the tax credit cuts would be £3.4bn in 2016/17, falling to £0.5bn in 2020/21.

Shadow work and pensions secretary Owen Smith said the move to Universal Credit, which merges six benefits into one payment, will mean a £3.1bn cut in work allowances by 2020/21, according to OBR figures.

“Labour warned last week that George Osborne’s U-turn on tax credits might not be all it seemed and today’s report from the OBR shows it was a total con job,” he stated.

“It shows clearly that the Tories are still taking £3bn out of the pockets of working people, they’re just using Universal Credit instead of tax credits to pick those pockets. These cuts will drastically reduce support to working families and they should be opposed outright.”

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