Tory tax credit policy in disarray

Theresa May appeared to contradict George Osborne this morning on tax credits. But the Conservative's figures don't add up - their policy would save £352.5 less than they estimate.

Theresa May and George Osborne appear to contradict each other on the Tory’s tax credit policy but there’s a £350 million blackhole in the their calculations.

On the Today programme this morning, Theresa May denied that a Conservative government would cut tax credits:

“They keep making these false claims about what we would do. For example, Yvette [Cooper] … implied that we’re going to take away tax credits. We’re not going to take away tax credits. We actually want them to work better for people.” (08’00”)

But in his conference speech, George Osborne said:

“And I can also tell you today, we can no longer justify paying means tested tax credits to families with incomes over £50,000.”

At the time, the Times and Telegraph reported that this would save £400 million a year. But calculations carried out by the ‘ippr tax/benefit calculator’ and seen by Left Foot Forward show that this policy would only save £65 million assuming full take-up of the family component. If take up were 73 per cent, the relevant HMRC figure in 2005-06, the total saving would fall to £47.5 million. (pdf, Table 3: CTC, family element or less)

At present the family component of the Child Tax Credit starts being withdrawn at a rate of 6.67 per cent from an income level of £50,000. The value of the family component is £545 per year so it gets completely withdrawn at about £58,000. Ensuring that no-one earning above £50,000 received the CTC would mean that the family component was withdrawn at about £42,000.

Howard Reed, who designed the ippr model, told Left Foot Forward:

“The Conservatives would need to make the main threshold steeper or make the system less generous for low-to-middle income families in order to save £400 million.”

UPDATE 12.56

A separate scenario was modelled with the family element withdrawn between £27,000 and £35,000. Assuming that entitlement to the rest of the Child Tax Credit and Working Tax Credit was exhausted at that point, it would save around £280 million.

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21 Responses to “Tory tax credit policy in disarray”

  1. Will Straw

    Theresa May contradicted Osborne on Today but there's a £352.5m blackhole in their tax credit figures http://bit.ly/4nfY7j

  2. matthew bond

    RT @leftfootfwd Tory tax credit policy in disarray – £352.5m blackhole http://bit.ly/4nfY7j

  3. Shamik Das

    RT @leftfootfwd: Tory tax credit policy in disarray – £352.5m blackhole: http://bit.ly/4nfY7j

  4. labourmatters

    RT @wdjstraw Theresa May contradicted Osborne on Today but there's a £352.5m blackhole in their tax credit figures http://bit.ly/4nfY7j

  5. Albert Shanker

    Good work. Beyond the headlines, the Conservatives fall apart with the slightest bit of scrutiny.

  6. Labour List

    RT @leftfootfwd Tory tax credit policy in disarray – £352.5m blackhole http://bit.ly/4nfY7j

  7. Martin Coxall

    That you’ve quoted this imaginary number to four significant figures is a dead giveaway that they were invented by a statistical inept.

    It’s hilarious that Labour can’t even forge statistics convincingly any more. FAILED.

  8. Jonathan Taylor

    RT @LabourList: RT @leftfootfwd Tory tax credit policy in disarray – £352.5m blackhole http://bit.ly/4nfY7j

  9. willstraw

    Err… Did you read the article, Martin?

    Osborne’s figures – £400m
    ippr estimate – £47.5m

    Judicial rounding = £350m blackhole.

  10. Jessica Asato

    RT @leftfootfwd Tory tax credit policy in disarray – £352.5m blackhole http://bit.ly/4nfY7j

  11. Web links for 10th November 2009 | ToUChstone blog: A public policy blog from the TUC

    […] Tory tax credit policy in disarray | Left Foot Forward Left Foot Forward considers Conservative policies on tax credits Related posts (automatically generated):Boris’ fare rises will hit low-income travellers hardest […]

  12. Mick Fealty

    RT @wdjstraw Theresa May contradicted Osborne on Today but there's a £352.5m blackhole in their tax credit figures http://bit.ly/4nfY7j

  13. Anon E Mouse

    Albert – and Labour really falls apart irrespective of the headlines and without any scrutiny, slight or otherwise.

    Instead of sitting there dreaming wishing and hoping that things will improve why not roll your sleeves up, get stuck in and help the party out.

    The doom, gloom and despondency of the Left’s response to this current PLP crisis is all of your own making.

    Stop the silly side swipes at the opposition and play the ball not the man.

    While Brown is PM to be even contemplating playing any other MP’s character is suicidal in electoral terms.

    Remember the “Tory Toffs” campaign against the guys who’s dad made his money as a shoemaker? Timpsons – an honest tax paying, people employing company was
    absolutely run down in that stupid campaign.

    Who comes up with these wheezes?

    Since Anthony Charles Linton Blair was PM, class should have left the Labour Party and whilst the party chairman is Harriet Harman, a countesses daughter, I hold my head in my hands at the parties open stupidity.

    To bring up class is so crass it begs belief.

    My point here is that while Labour self implodes – a slow motion car crash – the left should be putting forward the idealogical case for a Left/Left of Centre government and not running down the opposition. If I want to know what the Tory Party policy is I’ll ask them.

    Do something and do it quickly guys…time is not on your side.

  14. Will Straw

    Cameron's "big society" speech misled on 'severe' poverty and failed to support the £4bn needed for child poverty http://bit.ly/4nfY7j

  15. Tom

    Another missing the point article. Tax credits are deeply flawed as anyone who has been over or underpaid or who has had the misfortune to have to ring them up can vouch. A Tax Credit system that has over and underpaided by £4 billion a year. Even as a staunch non-Conservative I can spot the difference between scrapping tax credits and stopping them for families with incomes of over £50,000.

    You may be right, but £350 million is peanuts in Government budgets terms and compared to the blackhole in Labours economic policy, insignificant.

  16. Look Left – The Week in Fast Forward | Left Foot Forward

    […] Osborne’s plans for the Financial Services Authority were challenged, two of his key players contradicted each other and the Tories’ propagandist-in-chief, Speccie hack Fraser Nelson, got a C- for his […]

  17. Estate Taxes

    Thanks for this, very informative. There may be contradictions in the tax policy but I hope this will be resolved soon.

  18. Couples earning £16k each would lose out under Tory tax credit plan | Left Foot Forward

    […] weeks ago, Left Foot Forward revealed that there was a £350 million blackhole in the Conservative’s tax credit plan. A […]

  19. Will Straw

    @cathynewman We fact-checked the CTC claim in November using the ippr's tax model – £65m saved with 100% take-up http://bit.ly/4nfY7j

  20. New Tory tax credit chaos | Left Foot Forward

    […] fact, as Left Foot Forward showed last year and Channel 4 Fact Check reiterated last week, saving £400 million would require […]

  21. Family Income Benefit Insurance

    Never heard of this term used before, but it sounds terrible. Thanks for drawing it to our attention

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