Sheila Gilmore: Tax credits discourage work

From yesterday, more than 1000 Edinburgh families stand to lose up to £3000 a year in tax credits if they can’t get an extra eight hours work.

Until now couples have had to work at least 16 hours per week to qualify for working tax credits. This has risen to at least 24 hours per week, with one partner working a minimum of 16 hours. These are people who are doing what the government says they should do – work to provide for their family.

This change is not only unfair, but it contradicts the promise the government has made that it will ensure that “it pays to be in work”.

Labour introduced working tax credits to make sure working families would be better off than those on benefits. Faced with this change some may give up work because, if working 16 hours on minimum wage, they could be at least £730 a year better off not at work and the government would be paying out an extra £2000 in benefits. This is not good for them, their children or the country as a whole.

Before the Budget, the Opposition repeatedly asked the government to stop this happening. At the same time the government was under pressure to modify its proposal to take child benefit from people paying higher rate tax. So who did they choose to help? They chose to change their plans on child benefit so it won’t start hitting people until they earn at least £50,000.

But for the families on minimum wage losing tax credit – no change of mind. Nor did these families gain from the rise in the income level at which you start to pay tax because they already earn too little to pay income tax. Not “all in it together” at all.

n Sheila Gilmore is Labour MP for Edinburgh East