3 October 2014
On Monday (Sep 29) the chancellor George Osbourne announced that there would be a two-year freeze on working age benefits, under a Conservative government. This would come into affect in April 2016, following the 1% benefits cap announced in 2012.
The benefits to be frozen include jobseeker’s allowance, tax credits, universal credit, child benefit and income support.
This would come as part of the further £25bn cuts to public spending the chancellor claims are needed.
In spite of this, on the Wednesday of conference (Oct 1) Cameron vowed to raise the tax-free allowance from £10,500 to £12,500 by 2020. This was dressed up as a move which would save money for low-paid households.
However, many of those households do not earn enough to pay income tax – an increase in tax free allowance benefits the rich rather than the poor, while those on low incomes or out of work will suffer from the proposed benefit cuts.
The IFS said less well-off workers could be helped more effectively by cutting National Insurance contributions or increasing benefits.
Analysis produced by the TUC has shown that a family with two children, working 30 hours at the national minimum wage, will in fact be £320 worse off.
TUC General Secretary Frances O’Grady said: “The Conservative plans will make the lowest paid families foot the bill for tax cuts for the rich.
“While a family with the minimum wage hours David Cameron spoke of may not have to pay income tax, they will lose much more from his new cuts to tax credits and from means-tested cuts to the help they get to pay the rent. The amount of council tax they have to pay will go up too.
“The Conservative’s new proposals are a charter for handouts to the wealthy and punishment for the working poor.”
Cameron also said the threshold for the 40p income tax rate would be raised from £41,900 to £50,000 over the same period of time. At the moment the 40% tax rate is only paid by the top 15% of earners.
The Institute for Fiscal Studies said the combined cost of the tax changes would be £7.2bn – double the amount saved by benefit freezes. As to where the funds to pay for the tax cuts would come from, Conservative party Chairman Grant Shapps refused to rule out a rise in VAT on the Daily Politics programme.