So who pays?

When forced to find new resources, the coalition's instinct is to take them from low-to-middle incom

Just in case you were under any doubt about where the burden of today's widely expected cuts to tax credits will fall, the chart below should make it clear. Over 75 per cent of the pain of today's changes to tax credits is felt by the bottom half of the income distribution. The vast majority of these from families with children.


The decision to scrap the planned increases in Child Tax Credit (hitherto the coalition's one emblem of its commitment to tackle child poverty), together with other cuts to Working Tax Credit, will mean more than £1.2bn of cuts in 2012.

The changes to the child tax credit will mean families lose the extra £110 per child that they had been expecting in 2012; and the freezing of the Working Tax Credit will reduce the incomes of working families by a further £100. How many will be affected altogether? Around 5.5 million families will lose as a result of the changes to child tax credit, with 2 million facing a double hit because of the working tax credit changes.

This latest squeeze on family finances comes on top of a raft of other already announced cuts to tax credits, many of which don't bite until April 2012. Together they add to up to approximately £2.9 billion of cuts in 2012-13, roughly 10 percent of the total tax credit budget.

There were actually a number of relatively small announcements that should be welcomed today - above all the doubling of childcare places for disadvantaged two year olds. But the wrong people where paying for this.

If you really want to unpick what is going on in politics -- above all on the day of spending announcements -- it is always best to ignore the words spoken and instead follow the detail of the choices made. Today revealed one thing above all else -- when put in a corner, and forced to find new resources, the coalition's instinct is clear: take them from the tax credits going to low-to-middle income families.

Gavin Kelly is chief executive of the Resolution Foundation 

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.