More than half a million Scottish children facing poverty under Tory cuts

The statistics uncovered by the Sunday Herald highlight concerns about the impact of potential cuts to tax credit on thousands of families already struggling to get by on low incomes.

The UK Government has yet to announce the full proposals, which are expected to be unveiled in next months' emergency budget.

But in a speech last week Prime Minister David Cameron talked of his ambition to move from a "low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare society."

One option the government is believed to be considering is returning child tax credits to the level of 12 years ago, to make a saving of £5 billion as part of plans to slash £12 billion from the welfare budget. According to think-tank the Resolution Foundation, this means families with two children could lose up to £1,690 a year.

The figures obtained by the Sunday Herald, which cover the year 2013-14 and were published by Her Majesty's Revenue and Customs (HMRC) last month, show that 352,000 families in Scotland are in receipt of tax credits. The majority - 194,000 - are in employment and have children, including 100,000 lone parents.

Satwat Rehman, director of One Parent Families Scotland, said cuts to the "crucial lifeline" of tax credits would be grim news for anyone seeking progress on child poverty.

She said: "More single parents than ever before are in employment, doing what the government has asked of them.

"What these figures show is that many are on such low wages that they need tax credits to get by."

She added: "The Westminster government has already imposed a draconian regime of benefit cuts and sanctioning and single parents and their children have been disproportionately affected.

"This government is ideologically wedded to continuous cuts as the route to a smaller public sector which in the end means our poorest citizens are being made poorer."

The current tax credit system - comprising of working tax credit and child tax credit - was introduced 2003, with the idea of helping people in low-paid work by allowing them to keep some or all of their benefit when they found a job and addressing disincentives to work.

The cost of tax credits is now around £30 billion annually - accounting for 14% of the total £220 billion welfare budget. However in the last three years, child tax credit has increased by 1% a year and working tax credit has been frozen.

The HMRC figures show the total number of children in families receiving tax credits in Scotland is 526,000: 187,000 living in households which are not working and 339,000 in households whose parents are in work.

John Dickie, director of the Child Poverty Action Group in Scotland, said tax credits had played a "massive role" in protecting families from poverty.

He said: "They are an absolutely critical part of the support that is available to families, both in and out of work.

"For families where parents are doing everything they possibly can - working, quite often juggling low-paid jobs with caring responsibilities - tax credits play a crucial role in boosting their incomes.

"If we remove support from them, it reduces the chances of giving children a decent start in life."

Dickie said there had to be more action to tackle low pay and pointed out if there were higher wages across society, many parents would automatically no longer be entitled to entitled to tax credits.

He added: "You need to bring about the savings that way, not just by slashing it from the budgets of our own lowest income families."

David Finch, senior economic analyst at the Resolution Foundation, said the reality was that tax credit cuts would hit working families the most.

"When this issue gets talked about, a lot of the time it feels like it is about people not in work and it is not a big hit to the working families with children who get talked about a lot as part of the 'hard-working families' narrative by the government," he said.

"But it is actually hitting those working families that are supposedly meant to be helped."

An analysis carried out by Finch also found almost two-thirds of the cut would be borne by the poorest 30% of households.

Finch said the idea that any increases in wages could offset the tax credit cuts was unlikely as pay would need to rise by 25% within two years to balance the reduction in tax credits for just one child.

He also questioned the "lower tax" notion put forward by Cameron as having the potential to provide assistance to lower income households, pointing out that as many were already below the personal allowance threshold, further cuts would not help.

"If it is a single parent working 16 hours, they are not going to be earning enough to pay tax and they will be losing up to £845 for each child," he said.

"You might be saying you will cut income tax to offset the cut, but it is not the same people who will benefit.

"And the idea that wages can grow at such a rate to offset it is completely unlikely."

In his speech on Monday, Cameron gave a clear signal that tax credits would be targeted in the government's plans to save £12billion from the welfare bill.

On the topic of low pay he said: "There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back - and more - in welfare.

"Again, it's dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity - helping to create well paid jobs in the first place."

The speech was in stark contrast to comments he made in April, just before the election, on the BBC's Question Time leaders' election special. When an audience members asked Cameron if he would put to bed rumours he planned to cut child tax credit and restrict child benefit to two children, he responded: "No, I don't want to do that."

Asked about cutting tax credits in a radio interview in the run-up to the election Conservative MP Michael Gove, who was the Chief Whip in the last Parliament, also said: "No: we are going to freeze them for two years: we are not going to cut them."

A spokeswoman for the Treasury said she could not comment on further details of any potential cuts as it would be "verging on budget speculation".

Meanwhile, campaigners remain concerned that the most vulnerable and poorest in society will once again be bearing the brunt of cuts.

Iain Smith, policy and parliamentary officer at disability organisation Inclusion Scotland. said the introduction of the new Universal Credit benefit mean that current top-ups to child tax credit which parents of disabled children can claim will be cut by nearly 50% - from £58 to £28 per week.

He said: "Even without any further announcements, disabled people are already facing cuts.

"Disabled people have borne the brunt of the welfare reform changes because of the cumulative impact- they are not only hit by the general ones that affect everybody, they are also hit by specific ones that hit disabled people."

Peter Kelly, director of the Poverty Alliance, said: "We are really concerned about where this new package of cuts is going to fall.

"It is almost impossible to see how £12 billion can be taken out of the welfare budget without having quite a big impact on families - in particular lone parents.

"There is a question about the reliance on tax credits and the extent to which we have to rely on tax credits, but for the moment those tax credits are vital in giving people more of a liveable income. "

He added: "Tax credits need to change, they need to be reformed and we need to figure out how to make them work better - but cutting them is not the way to do that, there is no question about that."

CASE STUDY:

Kerry-Anne McPherson, 23, from Glasgow, is a lone parent with two daughters aged seven and four.

After spending time bringing up her children and caring for her grandfather, she started work last year as a project support worker.

She receives around £89 a week in working and child tax credits, which she says is essential to help with everyday costs such as bus fares and unexpected expenses from school and nursery.