Summer Budget 2015: Tax credits to be limited to two children

8 July 2015
State support provided to families through tax credits will now be limited to two children, which means that any further children born after April 2017 won’t be eligible for support. The only exception is if further children are the result of twins, triplets or other multiple births. Those who already have large families and receive tax credits won’t be affected by the new rules. In addition, those starting a family after April 2017 will no longer be eligible for the Family Element in tax credits. The equivalent in Universal Credit (the successor to tax credits), known as the first child premium, will also not be available for new claimants after April 2017. The Chancellor pointed out that on top of Child Benefit for every child (which will continue to be paid at the same level for all children), an out-of-work family with five children can currently claim more than £14,000 a year in tax credits alone.Osborne said: "It’s important to support families, but it’s also important to be fair to the many working families who don’t see their budgets rise by anything like that when they have more children." Those in receipt of tax credits should therefore face the same financial choices about having children as those supporting themselves solely through work, he explained. He added that the aim is to protect existing families on the lowest incomes while favouring support to working families through the tax system and earnings growth, rather than the benefit system. To that end, the chancellor also annnounced a new National Living Wage to help boost the finances of low-income families. But welfare campaigners were angered by the announcement. Alison Garnham, chief executive of the Child Poverty Action Group, said: “The welcome move on a higher minimum wage cannot disguise the truth that this is a budget that damages the economic security of working families, and takes us further down the road to being a two-nation economy, with higher child poverty for millions and lower taxes for the better off. "We have long called for a genuine living wage, but no single wage level can take account of family size, so families which appear to gain under this proposal may end up worse off overall if cuts to child benefit, child tax credits and working tax credits go ahead. It’s vital that any savings the government makes through higher wages are re-invested to help families with children.” Mike O’Connor, chief executive of StepChange Debt Charity, added: “Action on low pay is much needed as years of stagnant wages and rising living costs have left millions of households living on a financial knife edge. However, cuts to the safety net risk leaving those people who fall into debt more vulnerable to deep and entrenched financial difficulties. “Most people who fall into debt do so as a result of sudden changes in circumstance such as job loss, reduced hours and illness. When people suffer these life events they need the right kind of support to help them get back on their feet. For many people, credit has become their ‘distress safety net’.”

Add new comment