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At present the family component of the Child Tax Credit starts being withdrawn at a rate of 6.67 per cent from an income level of £50,000. The value of the family component is £545 per year so it gets completely withdrawn at about £58,000. Ensuring that no-one earning above £50,000 received the CTC would mean that the family component was withdrawn at about £42,000.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A separate scenario was modelled with the family element withdrawn between £27,000 and £35,000.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”
Web links for 10th November 2009 | ToUChstone blog: A public policy blog from the TUC
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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
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.
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
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.