The big Budget losers? Working families

IFS analysis finds that a million working families will lose £500 a year as new tax changes come in.

Amidst the clamour over pasties, jerry cans, and email surveillance, the Budget seems like a distant memory. But with the new financial year starting tomorrow, certain changes will come into force – and it is not looking good for middle-income families.

Despite the raft of negative headlines about George Osborne’s so-called “granny tax”, analysis published today by the Institute for Fiscal Studies (IFS) has found that pensioners stand to suffer the least.

In fact, it is families with children who will bear the brunt. Up to a million families with children stand to lose £511 a year under new tax and benefit changes.

More than 850,000 families on middle incomes – with an average income of £38,000 – will lose their entire child tax credit, which is worth around £545 a year. The picture is bleaker lower down the income scale. Up to 212,000 working couples with children, earning less than £17,000 a year, will lose all their working tax credit – worth up to £3,870 a year – unless they increase their working hours.

This is because of two changes to tax credits. The first is a cut in the income limit for child tax credit from about £40,000 to about £26,000 for a family with one child. The second is an increase in the number of hours that families with children must work to qualify for working tax credit from 16 to 24 hours a week.

Despite the increase in the personal allowance – which is incorporated into the IFS figures –these families will still see a net loss. Separate analysis by the Resolution Foundation suggests that the changes to working tax credit mean that a single earner on the minimum wage (£6.08 per hour) who works 20 hours a week will lose £3,910 – more than a quarter of their income.

It is a political tight spot for the coalition, which purports to be a family friendly government. The “squeezed middle” is set to be a potent battleground, both in upcoming local elections and in the next general election.

The Treasury highlighted the rise in personal tax allowance, and stressed that the analysis was commissioned by the Labour shadow chancellor, Ed Balls.

But in conjunction with the cut in the top rate of tax for those earning over £150,000 a year, this squeeze on ordinary families is difficult to defend. Indeed, reducing the 50p rate of tax presented a gift for Labour: tax cuts for millionaires as the rest of the population continues to suffer is a clear, media-friendly message. Polls already show that a majority of people think the cabinet is out of touch with ordinary voters; this will do nothing to help. So far, a loss of support for the coalition’s austerity has not been matched by an upsurge of trust in Labour on the economy. The question is whether these real cuts to the incomes of working families – the very demographic the coalition claims to defend – will lead to a shift in public opinion. It is certainly clear – once again – that the government cannot truthfully claim that its cuts are fairly distributed.
 

Ed Balls commissioned the IFS analysis. Photograph: Getty Images

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

Photo: Getty
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Peter Hitchens on Twitter seemed barely human – then he came round for tea

During his visit I realised I had an awkward duty facing me.

But what about Peter Hitchens?” everyone is asking after my last encounter with him. He came round to the Hovel, you see, the day before the column, in which I said all sorts of nasty things about him, appeared. The reason why he came round is complicated and boring, but suffice it to say that books were exchanged, in a spirit of mutual diplomatic tension.

I offered him a choice of red wine, whisky, or tea. It was five o’clock. (He was punctual, which unsurprised me. He chose tea; he is not a fan of intoxication. Aha! I thought, he’ll love this: as a foe of modernity in many of its aspects, such as duvets and central heating, he will appreciate the fact that I do not use tea bags. Loose Assam leaves, put into a scalded teapot. “Conservative in everything except politics” was a formulation – originally, I think, applied to George Orwell – that Peter’s late brother was fond of, and I thought my old-fashionedness would soothe him.

Not exactly: he noticed I was pouring semi-skimmed milk into the mug. Of course you put the milk in last when you are using tea bags. When pouring from a pot, you put the milk in first. Milk poured in afterwards does not emulsify satisfactorily. If you are one of those people who say “but how do you know if you’ve put in the right amount of milk?” then I exhort you to start trusting your pouring arm.

Semi-skimmed milk, I learned quickly, is a no-no in the world of P Hitchens.

“But Orwell himself,” I replied urbanely, “said that milk that was too creamy made the tea taste unpleasant. Not, of course, that I believe everything Orwell said, but on tea-making he is sound.”

Mr Hitchens demurred, saying that Orwell was referring to the equivalent of what we know today as Gold Top. This allowed me to go off on a little rant, a positive, life-enhancing rant, about how good Gold Top is, how my children love it, etc. We moved into the living room. I noticed my shoes were more old-fashioned than his. Come to think of it, they may have been older than him. They’re almost certainly older than me.

There was a mood of civility in the air. Slightly strained, perhaps, like his tea, but unmistakably present. Part of the reason was that I had mentioned our forthcoming meeting on a social medium, and two of my friends, one a well-known novelist, the other a well-known columnist, both women, both left wing, had asked me, extremely sincerely, to pass on their best wishes. They knew him of old, had worked with him, were fond of him. These are two women whose opinions I take very seriously indeed. The Peter Hitchens I knew, of column and Question Time panel, was clearly not the whole picture. If these women say he’s Basically All Right, or All Right enough to ask me to pass on their best wishes, then that is pretty much good enough for me.

During his visit I realised I had an awkward duty facing me. I was becoming increasingly conscious that, the next day, in newsagents throughout the land, the latest edition of this magazine would appear, and in it, on page 82, would be a column by me, which contained several jokes at the expense of P Hitchens, Esq. And I knew that this column would not escape his vigilance. I massaged the bridge of my nose and launched into a pre-emptive apology. “I think I had better tell you...”

He seemed to take it fairly well, though I’d not given him the full nature of my assault. When we were tossing insults back and forth on Twitter, he seemed barely human; now, in my living room, he all too clearly was. I suppose this is how we all see our enemies on Twitter: as botched versions of the Turing Test, spouting opinions that are quite clearly wrong in spite of all our well-reasoned arguments. The only variable is how quickly the arguments de-evolve into base invective. I have my own theory about this. It involves Lacan, so I’ll spare you.

A couple of days later I received an email from him, courteously asking after me and my latest troubles, the ones I can’t write about due to their immensity. It also contained the precise quote from Orwell regarding milk in tea. (“Ninthly, one should pour the cream off the milk before using it for tea. Milk that is too creamy always gives tea a sickly taste.” You have to love that “ninthly”.) “Tempus mutatur,” I replied... but noted, too, that there was no mention of That Column. I was rather impressed. 

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear