News story

7th February 2002

Hard-Working Families Face Tax Blow

Steve Webb MP, Liberal Democrat Shadow Work and Pensions Secretary, will today make a last-ditch attempt in the House of Commons to gain Government assurances that hard-pressed couples, such as teachers and nurses, won't lose money. Proposed changes to the Child Tax Credit could cost such couples as much as £500. The Tax Credit was introduced by Gordon Brown prior to the 2001 General Election as part of his well publicised 'support' for families with children.

Mr Webb will say:

"The Government has repeatedly refused to put on record an assurance that 1.4 million families will not lose all, or part of, their entitlement to this important tax credit.

"We are not talking about rich families here. A nurse married to a teacher, both earning average salaries, risk facing a hefty drop in their income.

"The Chancellor was generous in offering out the children's tax credit to these families when there was an election looming, but now he is threatening to take it away again.

"If this Government is really keen to support hard-working families, it must end the uncertainty and tell us how it plans to prevent these losses."

ENDS


Notes to editors:

1. Steve Webb MP has tabled a new clause to the Tax Credits Bill which goes through its Report Stage and 3rd Reading today. The new clause says:

New Clause 1: Recipients of children's tax credit prior to April 2003
To move the following clause: -
"Persons in receipt of children's tax credit immediately prior to April 2003 shall continue to receive tax credit of the same amount after that date in any case where their award of child tax credit under this Act would be of a lesser amount, for as long as they are responsible for one or more children or qualifying young persons."

2. The new child tax credit threatens to take up to £520 from couples whose joint income is above a minimum threshold. It could result in 900,000 couples losing their full entitlement of £520 per year, and a further 500,000 losing smaller amounts. For example, a teacher on average pay married to a nurse on average pay currently receives the full £520 credit, but could lose it all when the amount is based on their joint income.

3. The Children's Tax Credit (which cuts the annual income tax bill of families by up to £520 a year) was first announced in the Budget of March 1999 and came into effect in April 2001. In his budget speech Brown made a big thing of helping families with children.
Gordon Brown said: "In the Budget last year, I set down the two principles that govern my approach: we must substantially increase support for families with children and we must do so in the fairest way."

The Government are now refusing to rule out a substantial reduction in the number of people who will receive CTC. Steve Webb has asked for clarification on numerous occasions. The following exchange with Treasury Minister Dawn Primarolo illustrative of the Government's response.

(Tax Credits Bill Committee Stage - 17 January 2002)

Mr Webb: "…In order to obtain some realistic figures, I tabled a couple of questions a week or two ago. I asked what an average teacher and an average nurse earned and I was slightly startled by the answers. An average full-time qualified nurse working in the National Health Service and receiving all additional payments and allowances earns £450 per week. An average qualified teacher in the maintained school sector earns £550 per week. Add those two together, so a teacher married to a nurse-on typical average figures; I am not trying to rig the figures-will earn £1,000. An average teacher married to an average nurse has a gross weekly income of £1,000, or £52,000 per year. As I understand the way that the tapers on CTC work, under the present thresholds that would entirely exhaust their entitlement to CTC. If it does not I will want to know why not, because my family's joint income is precisely that and we do not get any CTC. I am not trying to declare an interest here. Nor do I suggest that I should receive it. Can the Minister offer any reassurance to families in that situation?

"I have should have checked this, but I recall that about 900,000 might lose everything and 500,000 might lose something. Those are people who have lost the value of the married couple's tax allowance, have had a year with nothing, then got £520 of CTC for two years and may be about to get nothing again if the Bill goes through unamended. Not all of them are in dire poverty, but we should remember that we are talking about an amount per family, not per child. It might be the couple I described: the nurse married to the teacher who have several children and an income of £52,000 in total. By the time they have catered for the children their income might be much lower, on an equivalent basis, than that of a childless couple who earn a lot less. Yes, there will be rich people to whom we would not want to give the tax credit, but I am not sure that a nurse who is married to a teacher and has received it for two years should expect it to be taken away overnight in 2003. What plans does the Minister have to protect such couples?"

Dawn Primarolo: "...The hon. Member for Northavon asked about a specific group who are currently in receipt of CTC. He has done this a number of times on the Floor of the House. He has probably asked me in writing. I give him the same answer, which is that the rates and thresholds in the full range of the new tax credits are a matter for my right hon. Friend the Chancellor of the Exchequer in his Budget statement. I look forward to being able to answer his question at the appropriate time, in the appropriate place, when the Chancellor has made his announcement.

I congratulate the hon. Gentleman on his ingenuity. To him I say, nice try. I ask him to withdraw this amendment, as he recognises that it is not a terribly good one. If he does not, I will ask my hon. Friends to oppose it. In the debates on all the clauses between now and the passing of this Bill, I look forward to being amused by the many varied and ingenious ways that the hon. Gentleman will find to ask me the same question. I hope that I can rise to the challenge in finding many ingenious ways to give him the same answer.

4. The following written answers set out the combined average earnings for a nurse and a teacher - £1,000 a week or £52,000 a year. The House of Commons Library (below, note 2) estimates that under joint income assessment, a family would lose its tax credit entitlement on earnings of just under £42,000 a year.

6 December 2001
Mr. Webb: To ask the Secretary of State for Health if he will estimate the average weekly earnings of a qualified nurse in 2001-02. [21101]
Mr. Hutton: The average weekly earnings of a full-time qualified nurse working in the national health service, including all additional payments and allowances, in 2001-02 are estimated to be £450.
Source: Department of Health's August 2000 NHS earnings survey.

17 December 2001
Mr. Webb: To ask the Secretary of State for Education and Skills if he will estimate the average weekly earnings of (a) a fully qualified teacher, (b) a primary school head teacher and (c) a secondary school head teacher in 2001-02. [21102]
Mr. Timms [holding answer 6 December 2001]: The estimated average weekly gross pay of full-time teachers in England and Wales from April 2001 is as follows.

Teachers in England and Wales £
Qualified teacher in the maintained schools sector(15) 550
Head teacher in maintained nursery and primary 750
Head teacher in maintained secondary 1,020
(15) Including staff on the leadership scale.