‘I can’t believe I’m being forced on to benefits’

Reader Andrea said the changes to the tax and benefits system that kick in on Friday mean it no longer makes sense for her and her partner to stay in part-time work.

The start of the financial year, dubbed Bad Friday by opponents of the reforms, will see families with children lose an average of £511 a year, according to the Institute for Fiscal Studies (IFS) think-tank.

Mother-of-three Andrea and her partner, who works in the service sector, are one of an estimated 212,000 couples who earn less than £17,000 a year and will now lose their entitlement to working tax credit because they work less than 24 hours a week between them.

Households like this could find themselves worse off to the tune of some £4,000 a year, according to the IFS. A further 850,000 families will lose their child tax credit, worth around £545 per year.

What the working tax credits changes mean

Andrea said: “My partner and I currently work 16 hours between us. This is not an ideal situation but his working hours have been cut significantly in the last couple of years since the recession kicked in and he has not been able to get any more hours.

“This is not for lack of trying but there are simply very few opportunities for emplyoment at the moment and everyone is struggling. I am doing a PhD while bringing up three children. I work all the hours I can and simply do not have enough hours in the day to do anymore than I do already.

She added: “I now have to consider that very real possibility that I am not going to be able to meet basic living costs such as rent, council tax, food, fuel bills.

“I have consulted with the ‘entitled to’ benefits checker and it seems that my family will actually be better off if we were to give up work. I cannot believe I am being forced into this position by a government who are claiming their policies are aimed at encouraging people to work.”

I cannot believe I am being forced into this position by a government who are claiming their policies are aimed at encouraging people to work. Andrea

Treasury Chief Secretary Danny Alexander defended the tax credit cut by saying: “I think it is right to say, in a situation where you ask a single parent, for example, to work 16 hours a week before they can receive working tax credits, that you ask more of two people.

“If you are going to ask a single parent to work two days a week before they can receive working tax credit, I think asking a couple to work three days a week between them is a reasonable position.”

The Conservative-led coalition government has repeatedly said its aim is to “make work pay” through reforms to the benefits system, but employment minister Chris Grayling admitted in a string of parliamentary questions that the tax changes would mean some couples who do low-paid part-time work will now be better off on benefits.

Mr Grayling told MPS a couple who work 16 hours a week on the minimum wage would stand to gain about £14 a week by quitting their jobs and claiming unemployment benefits instead, thanks to the tax credit changes.

It would only make sense for such a family to start working again if they could increase their working hours to 19 a week.

But ministers say that such perverse incentives will begin to disappear after the introduction of Universal Credit from October 2013.

Under the new simplified benefit payment, no individual will be better off on the dole than in work, according to the Secretary of State for Work and Pensions, Iain Duncan Smith.

IFS unpicks Cameron claim

While about 1 million working families will see a significant cut in their income this week, Prime Minister David Cameron has insisted that some 24 million taxpayers will benefit by £6.50 a week thanks to an increase in income tax allowances.

But the Institute of Fiscal Studies says the real saving for most people will be a modest 81p a week, as Channel 4 News’s FactCheck team have discovered.

Child Poverty Action Group chief executive Alison Garnham said: “This year’s holiday will feel more like Bad Friday for millions of families as they come to terms with over £2bn of cuts.

“Some of the poorest working families will lose thousands of pounds from their annual income, leaving them in a desperate struggle to pay for basics like groceries, clothes and household bills.

“It is astonishing that the people making the smallest contribution to deficit reduction are in the richest half of the population. Ordinary families and children are now carrying the greatest burden of deficit reduction.”

Government figures published in last month’s budget show that, with the exception of the tenth of households with the highest income, poorer households have tended to lose a greater proportion of their income as a result of measures introduced by the coalition since 2010.