Couples earning £16k each would lose out under Tory tax credit plan

Three weeks ago, Left Foot Forward revealed that there was a £350 million blackhole in the Conservative’s tax credit plan. A parliamentary answer laid today outlines that to recoup the full £400 million earmarked by George Osborne would mean couples earning as little as £16,000 each would lose out.

A Parliamentary Question by Andrew Gwynne MP asked the Treasury to “estimate the level of second income threshold for tax withdrawal required to reduce annual expenditure on tax credits by £400 million.” Finance Secretary Stephen Timms, replying on behalf of the Chancellor, said:

“To reduce total annual Tax Credit expenditure by £400 million, it is estimated that the second income threshold would need to be reduced to around £31,000.”

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. Liam Byrne MP, Labour’s Chief Secretary to the Treasury, responded by saying:

“For the Tories to recoup £400 million from tax credits as they’ve pledged, Osborne had claimed he would only remove tax credits from those earning over £50,000. But figures released to Parliament today show that to raise the £400 million Osborne’s credibility depends on, a couple earning as little as £16,000 each would be hit by his tax plans.”