This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/money/2015/nov/25/tory-mps-cheer-george-osborne-climbdown-tax-credit-cuts

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Tory MPs cheer George Osborne's climbdown on tax credit cuts Tory MPs cheer George Osborne's climbdown on tax credit cuts
(about 3 hours later)
George Osborne has performed a spectacular political climbdown over his plans for £4bn of cuts to tax credits.George Osborne has performed a spectacular political climbdown over his plans for £4bn of cuts to tax credits.
The chancellor had been expected to soften the blow of the cuts following weeks of pressure from across the political spectrum. But in an unexpected move, Osborneannounced in his spending review that he was abandoning the plans almost wholesale. The chancellor had been expected to soften the blow of the cuts following weeks of pressure from across the political spectrum. But in an unexpected move, Osborne announced in his spending review that he was abandoning the plans almost wholesale.
The U-turn was widely welcomed, not least among his own backbenchers, who greeted the announcement with loud cheers. Millions of families had been expected to lose an average of more than £1,000 a year under the original proposals.The U-turn was widely welcomed, not least among his own backbenchers, who greeted the announcement with loud cheers. Millions of families had been expected to lose an average of more than £1,000 a year under the original proposals.
Osborne told MPs: “I’ve had representations that these changes to tax credits should be phased in. I’ve listened to the concerns. I hear and understand them. And because I’ve been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether.”Osborne told MPs: “I’ve had representations that these changes to tax credits should be phased in. I’ve listened to the concerns. I hear and understand them. And because I’ve been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether.”
The chancellor indicated he would seek to make social security cuts by other means to enable him to meet his election manifesto pledge of £12bn of welfare reductions by 2020.The chancellor indicated he would seek to make social security cuts by other means to enable him to meet his election manifesto pledge of £12bn of welfare reductions by 2020.
Critics said the relief for low-income families would only be temporary. Changes to work allowances announced in July mean some in receipt of tax credits are still due to see their incomes shrink by hundreds of pounds as they migrate on to universal credit between now and 2021.Critics said the relief for low-income families would only be temporary. Changes to work allowances announced in July mean some in receipt of tax credits are still due to see their incomes shrink by hundreds of pounds as they migrate on to universal credit between now and 2021.
The shadow work and pensions secretary, Owen Smith, said: “I welcome the fact that the chancellor has bowed to Labour pressure and reversed the immediate unfair cut to tax credits. However, this is not the full and fair reversal we demanded, as he is still taking £1bn from working families next year and over £3bn by the end of the parliament, as tax credits are replaced by universal credit.”The shadow work and pensions secretary, Owen Smith, said: “I welcome the fact that the chancellor has bowed to Labour pressure and reversed the immediate unfair cut to tax credits. However, this is not the full and fair reversal we demanded, as he is still taking £1bn from working families next year and over £3bn by the end of the parliament, as tax credits are replaced by universal credit.”
Universal credit, the government’s flagship welfare initiative, will eventually replace means-tested benefits and tax credits for an estimated eight million claimants, both in and out of work. Rollout has been delayed and as of last month just 141,000 were on the caseload.Universal credit, the government’s flagship welfare initiative, will eventually replace means-tested benefits and tax credits for an estimated eight million claimants, both in and out of work. Rollout has been delayed and as of last month just 141,000 were on the caseload.
Osborne admitted that in the short term the government would breach its own overall welfare cap – the target the chancellor introduced in 2014, supposedly to control social security spending. The 2016-17 cap is £115.2bn.Osborne admitted that in the short term the government would breach its own overall welfare cap – the target the chancellor introduced in 2014, supposedly to control social security spending. The 2016-17 cap is £115.2bn.
The proposed cuts to tax credits announced by the chancellor in July had attracted growing criticism, and proved embarrassing for the government when the House of Lords voted in October to delay the changes.The proposed cuts to tax credits announced by the chancellor in July had attracted growing criticism, and proved embarrassing for the government when the House of Lords voted in October to delay the changes.
Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “Cancelling the tax credit cuts will be welcomed by low-income working families in the short term. But many working families will still find themselves worse off due to upcoming reductions to universal credit.Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “Cancelling the tax credit cuts will be welcomed by low-income working families in the short term. But many working families will still find themselves worse off due to upcoming reductions to universal credit.
“By 2020, families with children will be better off only if both parents work full time on the national living wage – something only a small minority of families can manage.”“By 2020, families with children will be better off only if both parents work full time on the national living wage – something only a small minority of families can manage.”
Fiona Weir, the chief executive of Gingerbread, a charity for single parents, said: “Both Gingerbread and campaigners up and down the country who have fought hard to overturn the planned cuts to tax credits should be pleased at the outcome. However, this announcement only covers the first phase of tax credit cuts, due to kick in next year. Single-parent families on universal credit will still suffer cuts to the support they receive if the planned reduction in the work allowance goes ahead.”Fiona Weir, the chief executive of Gingerbread, a charity for single parents, said: “Both Gingerbread and campaigners up and down the country who have fought hard to overturn the planned cuts to tax credits should be pleased at the outcome. However, this announcement only covers the first phase of tax credit cuts, due to kick in next year. Single-parent families on universal credit will still suffer cuts to the support they receive if the planned reduction in the work allowance goes ahead.”
Osborne announced several measures aimed at trimming the welfare bill. Housing benefit for social tenants will be capped by aligning it with local housing allowance – the rate paid by private renters – for all new tenants. Claimants will have housing benefit and pension credit payments stopped if they go abroad for longer than four weeks. At present recipients can go overseas for as long as 13 weeks without losing benefits.Osborne announced several measures aimed at trimming the welfare bill. Housing benefit for social tenants will be capped by aligning it with local housing allowance – the rate paid by private renters – for all new tenants. Claimants will have housing benefit and pension credit payments stopped if they go abroad for longer than four weeks. At present recipients can go overseas for as long as 13 weeks without losing benefits.
Housing costs for homeless people in temporary accommodation will in future be paid by councils rather than through the benefit system. Local authorities will receive £10m a year in compensation.Housing costs for homeless people in temporary accommodation will in future be paid by councils rather than through the benefit system. Local authorities will receive £10m a year in compensation.
There will be tighter conditions for unemployed people claiming jobseeker’s allowance, and some disabled and ill people who have been formally passed as unfit to work will have to attend jobcentre meetings more regularly.There will be tighter conditions for unemployed people claiming jobseeker’s allowance, and some disabled and ill people who have been formally passed as unfit to work will have to attend jobcentre meetings more regularly.
Osborne said the government would publish a white paper in the new year setting out plans to improve support for people with chronic health conditions and disabilities.Osborne said the government would publish a white paper in the new year setting out plans to improve support for people with chronic health conditions and disabilities.
The chancellor said councils would be allocated additional discretionary housing payment funding. The government announced in July that £800m would be spent over the next five years to prevent vulnerable people affected by welfare changes such as the bedroom tax and benefit cap from running up arrears and being evicted.The chancellor said councils would be allocated additional discretionary housing payment funding. The government announced in July that £800m would be spent over the next five years to prevent vulnerable people affected by welfare changes such as the bedroom tax and benefit cap from running up arrears and being evicted.
No reprieve for universal credit cuts
George Osborne may have reversed some of the tax credit cuts that he proposed in his July budget, but he offered no reprieve to similar reductions to universal credit.
Universal credit is currently being piloted in some areas of the country, meaning an estimated 141,000 families will be affected in April next year when the changes come in. And universal credit is intended to eventually replace tax credits, meaning cuts in the benefit will eventually affect those people who may have felt relieved by Wednesday’s announcement.
Those hit hardest by the new universal credit rules will be lone parents, disabled people and couples with children who rent their home rather than have a mortgage. Currently, the rules allow lone parents £8,800 a year in earnings before their universal credit starts to get reduced. From April that figure will drop to £4,800.
The net effect for lone parents on universal credit will be a drop in income of £2,600 a year. Disabled people will see a drop of around £2,000 a year in income, and couples with children will lose about £1,000.
A couple both working full-time on £20,000 per year with two young children had stood to lose £1,400 a year from April as a result of tax credit cuts. Wednesday’s announcement means they are likely to be £160 a year better off, because the tax credit cuts have been reversed and the income tax personal allowance has gone up a little.
However, if they had the misfortune to be on universal credit, come April they would find themselves £1,030 a year worse off. Ashwin Kumar