Tax credits: 100,000 children may be pushed below poverty line

  • @ukmoneyguru

The tax credit system, meant to help the "squeezed middle", appears to be a big loser in yesterday's Autumn Statement.

Up to 100,000 children could be pushed below the poverty line due to the Government's decision to reduce promised increases in tax credits, the children's charity Barnado's claimed.

The Chancellor went back on a previous pledge to increase the child element of the child tax credit by £110 above inflation. This means that the child tax credit will only increase from £2,555 to £2,690 – the extra £110 would have benefited hundreds of thousands of families with children.

Overall, the decision to scrap the £110 increase alone represents a cut of £1bn to the incomes of some of Britain's poorest working families.

There was worse news still for those in receipt of other elements of working tax credit as the Chancellor said these – apart from the disability element – would not be increased next year.

It was already known that the basic element of the working tax credit would be frozen for 2012 but the Chancellor has now said the couple and lone parent element of the child tax credit would also not be uprated.

This means a saving to the Treasury of close to £300m but flies in the face of other moves on pensions and benefits. Pensions are to rise in line with the high September inflation figure of 5.2 per cent as will working age benefits.

"We must remember that nearly six in 10 of those children already living below the breadline are in households where somebody goes to work," said Anne-Marie Carrie, Barnado's chief executive. "The Government must ensure that these hard-working families are not forced to bear the brunt of this economic crisis and that children are protected from growing up in grinding poverty."

Chris Johnes, Oxfam's director of UK poverty, said: "Freezing working tax credits will penalise those who are trying to make a living by working their way out of poverty – this should be among the last places the Government looks to make savings."