Working poor left out in the cold as benefit U-turn targets better-off

George Osborne's Budget this week is expected to reverse cuts to child benefit, but tax credit cuts will affect single mothers

Thousands of middle-class mothers are to keep their child benefit under a partial U-turn to be announced by George Osborne in his Budget on Wednesday.

The Chancellor is to respond to widespread calls to reverse the planned cut in the £80-plus monthly handout for higher-rate taxpayers with a softening of the blow for those just above the planned threshold.

But there were demands yesterday for Mr Osborne to do more to help the working poor – particularly single mothers and parents working part time on low incomes – instead of targeting what little money there is on the better-off.

Labour accused the Chancellor of a £3bn a year "tax on motherhood" by releasing figures showing how mothers of school-age children are facing the brunt of cuts to benefits, pensions and tax credits.

And separate research by Save the Children showed that 150,000 of the poorest single mothers in the UK could be worse off if they work more than 16 hours a week, because of benefit and tax credit changes.

Mr Osborne, David Cameron, Nick Clegg and Danny Alexander meet tomorrow to finalise a bitterly fought Budget statement which appeared to have left the Liberal Democrats worse off.

Senior Lib Dem sources hailed a "Robin Hood Budget" which would leave "top-earning tax dodgers and their army of flashy accountants quaking in their boots". The "tycoon tax" is a trade-off for the Chancellor agreeing to reduce the 50p top rate of tax on incomes over £150,000 in the next few years.

But there was anger within the Lib Dems that Mr Clegg's "victory" of a "tycoon tax" – trying to make the wealthiest pay their fair share by cracking down on tax avoidance – was a poor substitute for a "mansion tax" on properties over £2m.

A former Lib Dem Treasury spokesman, Lord Oakeshott, said: "Taxing the super-rich is like hammering nails into a jelly – the only bit that can't wobble offshore is their luxury property.

"That's why our Lib Dem mansion tax really works on the seriously wealthy, including Tory tycoon donors, unlike a 'tycoon tax' which leaves non-doms' and non-residents' wealth offshore and off the hook."

Mr Osborne will still go ahead with a child benefit cut of some form, but he is expected to address the "cliff-edge issue" identified by the Prime Minister earlier this year – where parents who earn just over the higher rate of £42,475 suddenly lose their entire child benefit of £20.30 a week for the first child and £13.40 a week for each other child. Mr Osborne is looking at the possibility of a higher threshold of about £50,000, tapering the amount of benefit for those just over the threshold, phasing in the cut, or a combination of all three.

Yet there was little sign that Mr Osborne will reverse the planned cut in working tax credits, which from April will be limited to those working more than 24 hours a week.

Save the Children said 150,000 of the poorest single mothers faced losing money if they worked more than 16 hours a week, the current threshold. Karren Brady, The Apprentice judge, businesswoman and mother of two, said the planned universal credit had created a "major blind spot" which would mean that single mothers who worked longer hours and second earners would lose money.

She added: "It's crazy that mums who want to work could get hit by the system that is designed to make work pay. Many of the mums set to be affected by these changes already find it's barely worth working, once they've paid for child care, rent and the rest." Labour highlighted figures from the House of Commons Library, that show how, by 2014, some £7bn out of £10bn raised from 37 changes to benefits will be taken from mothers of school-age children.

Meanwhile, unions reacted furiously to news that Mr Osborne will scrap national pay rates for millions of public sector workers across the country to bring them into line with the private sector. Mark Serwotka, general secretary of the Public and Commercial Services union, which represents civil servants, said the move would be "cruel, economically incompetent and counterproductive" at a time when public sector salaries and pensions were being cut. Len McCluskey, Unite's general secretary, said: "All this will do is drive workers to the better-paid regions, leaving large parts of the country without the professionals essential to sustain local services." Chris Keates of the NASUWT pointed out that large organisations in the private sector have national pay and conditions frameworks.

Mr Osborne is expected to announce a relaxation of Sunday trading laws for the eight weeks of the Olympic and Paralympic Games this summer, with all shops allowed to open as long as they want – a measure that could boost the retail sector by £90m.

Predictions: What the Chancellor shoulddo – and what he will do

50p Tax rate:

What the leaks say: George Osborne will scrap the 50p top rate of tax for incomes in excess of £150,000 in a major concession to the Tory right – reducing it to 40p or 45p.

What the people say: 58 per cent oppose abolishing the 50p rate, according to the IoS/ComRes poll

What should happen: The rate should be kept at 50p because we are "all in this together".

What will happen: Using HMRC figures showing the 50p rate is not reaping as much revenue as intended, Osborne will announce a reduction to 40p – but, crucially, only by the end of this Parliament.

Wealth Taxes:

What the leaks say: Nick Clegg has "won" a "tycoon tax", ensuring that the richest will pay at least 20 per cent tax, but given up on a long-held Lib Dem dream of a mansion tax.

What the people say: 64 per cent – including 59 per cent of Tory voters – back a mansion tax on properties worth more than £2m.

What should happen: A proper wealth tax on property, through extra council tax bands on the most expensive properties.

What will happen: The Lib Dem leadership will claim the "tycoon tax" is a victory – but, in reality, it is unenforceable.

Child Benefit:

What the leaks say: Osborne will perform a partial U-turn on scrapping child benefit for higher-rate taxpayers by keeping it for parents earning £50,000 or less.

What the people say: 58 per cent agree with the cut.

What should happen: Child benefit should be kept for everyone and be paid directly to the mother whether she is in work or not, regardless of how much a couple earns. Like the NHS, universality is central to the welfare state.

What will happen: Some tinkering to avoid the "cliff-edge" issue highlighted by the Prime Minister. This will be achieved either by lifting the threshold; tapering, by reducing benefits for those close to the threshold; or phasing in the cut.

Income tax thresholds:

What the leaks say: We know the coalition is committed to lifting the personal allowance to £10,000 in this Parliament, but its introduction is widely predicted to come sooner.

What the people say: 81 per cent of people want the new threshold to be £10,000.

What should happen: The personal allowance of £8,105 for 2012/13 should be lifted to £9,000, then £9,500 in 2013/14 and £10,000 in 2014/15.

What will happen: Raising the income tax threshold is expensive – for every £100 that is raised above inflation, it costs the Treasury £500m – but the idea is highly popular and simple, so expect the new threshold to be £8,500.

Jane Merrick

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect