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Poorest families face debt as they lose £3,870 in benefits

Posted by hannah on 08/05/2012

Bitten Pound SignMore than 200,000 of the poorest families are facing financial problems after their working tax credits worth £74 a week were cut.

Tax credit rule changes introduced on April 6 increased the number of hours worked by a household to qualify for the benefit from 16 to 24.

When the threshold was agreed in 2010, the government forecast a better economic performance and assumed employers would offer the extra hours as business improved.

Unfortunately, the reverse has happened - employers are cutting hours as the economy dips back in to recession, leaving working families on less money than if they were claiming benefits.

In a written answer to a question in Parliament, HM Revenue & Customs, the agency that pays working tax credits, disclosed 203,000 were still working less than 24 hours a week.

Unions and family charities lobbied the government to withdraw the change without success.

The Treasury claims the ‘vast majority’ of affected households are better off because of other tax and benefit changes.

"We've had to take tough decisions, such as on tax credits, but have done so in the fairest way possible, meaning more than 15 times as many people gain rather than lose from the recent changes,” said a spokesman.

For families who no longer qualify for working tax credits, the loss adds up to £3,870 a year or £74.42 a week.

Lobby groups and charities are concerned that losing this benefit will plunge many families already in financial difficulties in to debt.

Child Poverty Action Group chief executive Alison Garnham said: "This is an absolute calamity that plunges nearly half a million children deep below the poverty line. Many of these parents will now have less money in work than if they just claimed benefits. It runs directly against the consensus on the importance of making work pay and the government's duties on child poverty.”


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