Prior to Budget Day, Liberal Democrat ministers made no secret of the fact that a deal was being hammered out.
By March 21 it was an open secret that the top rate of tax for those earning north of £150,000 would be cut. The quid pro quo was to be an accelerated rise in allowances for basic rate taxpayers.
This enabled George Osborne to boast: "As a result of our Budgets, people working full-time on the minimum wage will have seen their income tax bill cut in half. And this Coalition Government will have taken two million people on the lowest incomes out of tax altogether." Bravo, was our intended response.
However, as the TUC shows today, this is only half of the story. As a result of other changes, low-income families are losing far more in tax credits than they stand to gain from the tax changes. In the worst-case scenario, a family with two children, depending on one part-time wage, will gain £191 a year by next April but lose £4500, 24 times as much.
The rise may be clawed back from upper rate taxpayers by lowering that threshold but middle-earners and childless households are the big winners from the changes, not the poor. For poor working families the unfairness goes further because the rise in allowances will mean hundreds of thousands of them losing housing benefit and council tax benefit almost pound for pound.
This is merely the latest blow. The same families are most heavily reliant on council services, which are the subject of deep cuts. And they suffer most from the three-year freeze on child benefit, from steep rises in food and fuel prices, from the regressive VAT rise and from the change to the lower Consumer Price Index uprating mechanism for benefits. In fact, the Institute for Fiscal Studies calculates that if the personal allowance had continued to rise by the invariably higher Retail Price Index inflation measure, it would have reached nearly £9000 by 2015, only £1000 short of the LibDem target.
Little wonder that on current projections 400,000 more British children will be growing up in poverty by 2015. With £10 billion more in welfare cuts in the pipeline, we can expect this unfairness to continue to accumulate. If the Coalition really wants to help low-income working families, it would soften the tapers on withdrawal of benefits or raise the minimum wage ahead of inflation. That would also boost the economy, as hard-up parents spend every penny they have. How much longer can the LibDems justify propping up a Government that robs the poor to pay the rich and mollify the middle?
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