Making Tax Credits fair is at the heart of UKIP’s position, says Mark Reckless, the UKIP economics spokesman. He said, “It is right to cut subsidies for employers who pay low wages. UKIP therefore supports plans to introduce a National Living Wage, rising to at least £9 by 2020, while cutting tax credits.
“We also welcome the government’s adoption of our policy to lift people earning minimum wage out of tax by raising the annual personal allowance towards £13,000.
“The problem is that George Osborne has got implementation of the policy wrong”.
The National Living Wage will rise to £7.20 in April 2016, and then gradually in annual steps to at least £9 by 2020. At the same time it is envisaged that the personal allowance will keep rising. However, the Chancellor says he wants to cut people’s tax credits largely in one go in April 2016. That is contradictory, given that he claims increases in the personal allowance and National Living Wage are meant to offset cuts in tax credits. UKIP therefore proposes to phase in the main cut to tax credits.
Reckless continued, “Instead of cutting the tax credit income threshold from £6,420 to £3,850 in one fell swoop in April 2016, UKIP would phase in the reduction evenly in five steps from 2016 until 2020.
“This would better match rises in the National Living Wage and the personal allowance and therefore be fairer. It will also give the up to three million families most affected time to adjust, e.g. by seeking to work more hours, rather than just taking £1,233 a year away from each family in April 2016.
“Phasing cuts in tax credits in this way would reduce savings in the near-term but ensure the full saving is still made by 2020.
“UKIP would ensure higher overall savings than the government from welfare reforms. We would do this by removing child benefit for more than two children from new claimants only, which would over time ensure savings of over £1 billion annually.”