Scottish Government
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UK Budget ‘encourages inequality’

Cuts to tax credits could cost to up 250,000 households in Scotland £1,000 a year.

Up to 250,000 households in Scotland will be affected when the reduction to income thresholds in tax credits and work allowances in Universal Credit is introduced in April 2016, according to a Scottish Government paper published yesterday (Sunday).

The UK Government’s tax credit proposals announced in this week’s Budget will cost working families an average of £1,000 per year according to the Institute for Fiscal Studies, which the Scottish Government analysis confirms.

The planned increase to the minimum wage is not enough to compensate for the impact of the Budget on lower income households, who will have their net income cut as a result. While Scotland’s lowest earners are seeing further cuts, the announced increase in the higher rate threshold for income tax will only benefit individuals earning over £42,385 which is equivalent to only around 15% of Scottish income taxpayers.

First Minister Nicola Sturgeon said:

“These figures prove that the Chancellor is cutting disproportionately from the poorest and most vulnerable sections of society, short-changing those on low incomes and removing work incentives, whilst giving tax breaks to the better-off. The changes in the minimum wage, whilst welcome, are nowhere near enough to offset these changes. The UK Government’s budget simply encourages inequality.

“Tax credits form an important part of the tax and welfare system, particularly to support working families on low incomes, and the stark and tragic reality is that almost 250,000 families in Scotland will be on average £1,000 a year worse off because of these tax credit changes.

“More than half a million children in Scotland currently benefit from tax credits, while many more families will be affected by the freeze on other benefits, including 577,000 who currently receive child benefit.

“We want to support people get into work - and stay in work - and the tax credit system provides important practical help to families on low pay. These are people who are in jobs, often working very hard for relatively little pay, and it is unfair that their children are on the receiving end of the UK Government’s austerity agenda.

“Today’s Scottish Government analysis comes on top of estimates from the Institute of Fiscal Studies this week which makes clear that it will be impossible for less well-off families to be better off as a result of the new minimum wage – wrongly branded a living wage by the UK Government – such is the extent to which poorer households will have their income slashed by the loss of tax credits.

“The UK Government’s Budget continues the misguided austerity programme, which is not just unfair but damaging to the economy – undermining attempts to stimulate sustained and widely shared growth.

“Austerity hasn’t worked and it is astonishing that the UK Government continues to attack low paid workers, ignoring the fact that their polices do little more than hit the most vulnerable the hardest.”

Notes To Editors

To access the new paper visit:

The latest available HMRC statistics are for 2013-14 (Published June 2015). They show:

  • Over half a million children in Scotland (60% of the total) benefit from the tax credit system
  • Tax credits were worth £2 billion to Scottish households in 2013-14, with two thirds of this expenditure going to low income working families with children

The announced increase in the higher rate threshold for income tax only benefits individuals earning over £42,385 which is equivalent to only around 15% of Scottish income tax payers.


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