Tax credit cuts could cost economy £3.5bn

The UK economy could be hit to the tune of around £3.5bn a year if the Chancellor confirms later today (Wednesday), in the spending review, that he is to continue with cuts to tax credits announced in the summer, says UNISON.

Almost three million working families with children across the UK who receive tax credits could between them lose around £3.5bn, according to UNISON research. This average loss per tax credit household of £1,300 could see businesses and high streets suffer as families have much less money to spend.

Although last month’s vote in the House of Lords forced George Osborne to look again at his tax credit plans, the issue has certainly not gone away, says UNISON. As a result more than 2.7m low-income working families across the UK are nervously awaiting today’s autumn statement.

UNISON General Secretary Dave Prentis said: “The Lords might have forced a reluctant Chancellor to think again, but we’re not out of the woods yet. Tax credit cuts have not gone away, far from it. Even if the Chancellor announces a pause to their introduction today, it will only be delaying untold financial misery for working families.

“Tax credits are not a luxury, but are quite simply a lifeline for hardworking families. Taking away a large proportion of the tax credits they rely upon will turn their already precarious finances upside down.

“Nearly three million low income families across the UK will be hoping that the Chancellor has good news for them today. They will want to hear that he’s decided against grabbing billions back in tax credits from working parents who are trying to provide a decent start in life for their children.

 Notes to editors:

Region/nation  Regional reduction in household spending by working families with children due to cuts in tax credits £m
London 464.23
North West 439.53
South East 394.16
West Midlands 349.57
Yorkshire and Humberside 332.02
Eastern 299.78
South West 279.63
East Midlands 268.58
Scotland 257.01
Wales 175.11
Northern 151.58
Northern Ireland 118.43
Total 3,529.63

Source: House of Commons Briefing Paper CBP7300; 15 October 2015; Tax Credit Changes from April 2016


Number of working families with children claiming tax credits Number of children in working families receiving tax credits
Wales 134,700 250,600
Eastern 230,600 440,100
East Midlands 206,600 391,200
London 357,100 704,800
Northern 116,600 211,200
Northern Ireland 91,100 175,400
North West 338,100 636,700
Scotland 197,700 347,400
South East 303,200 575,500
South West 215,100 406,700
West Midlands 268900 524,300
Yorkshire and the Humber 255,400 492,900
Total  2,715,100 5,156,800

Source: HMRC child and working tax credit statistics provisional awards 2015

Unless the Chancellor announces otherwise in today’s spending review, next April the point at which tax credits start to be reduced (the threshold) will be cut from £6,420 to £3,850, and the rate at which they will be reduced (the taper) will be increased from 41p for every £1 earned above the threshold to 48p.

With many UNISON members – for example, teaching assistants, hospital cleaners, home care workers, healthcare assistants, nurses, PCSOs and street cleaners – set to be affected by the changes, the union has developed an online calculator so people can work out how the tax credit changes are likely to affect them and their families.

UNISON has also produced a map showing the numbers of families that will be affected across the UK. By clicking on each constituency people can see whether their local MP voted for or against the cuts to tax credits.

UNISON General Secretary Dave Prentis is available for interview on tax credits or on other aspects of the spending review.