Changes to Tax Credits and Council Staff

At the Policy & Resources Committee on Monday 8 November 2010 I made the following speech in support of my motion on Changes to Tax Credits and Council Staff:

"Convener, I have placed this item on the agenda tonight because it is anticipated that a significant proportion of our staff will be effected by changes in Tax Credits introduced by the Chancellor of the Exchequer, George Osborne, in his budget in June 2010 and the subsequent Comprehensive Spending Review last month.

While the post Spending Review public debate has focused predominately on changes to Housing Benefit, especially in high rental areas of the UK, especially London, the effects of changes to Tax Credits has hitherto received less attention. This is surprising because the accumulated cuts in Tax Credits are much larger in cash value than the reductions in Housing Benefit. Perhaps this is because many of the Tax Credit changes are complex measures which the think tank, The Resolution Trust has referred to recently as “stealthy changes”.

Now I think we all know that Tax Credits, introduced in 1999 are a form of means tested cash benefit that is paid through the payroll by employers to their employees in households living on low to modest incomes – defined as between £12,000 and £30,000 per year. The award in calculated by Her Majesty's Revenues and Customs on an annual basis. For single parents and couples with children there are childcare allowances,currently up to 80% of allowable costs.

Changes in Tax Credits include:

• uprating tax credits in line with the consumer price index rather than the retail price index, which has been historically higher;
• reducing the opportunity to backdate claims from three months to one month;
• reducing tax credits faster as incomes rise and
• increasing the minimum working hours for couples with children from 16 to 24 and the minimum number of hours worked by one partner in the couple from 16 to 18.
  

So this group of our staff like other citizens in a similar position face a quadruple whammy:

• living with job insecurity;
• stagnation in the their earnings;
• significant price inflation, especially on food and heating and
• reduction and withdrawal of key benefits such as tax credits introduced over a period of time.
  

Most starkly, some of our part time and job sharing staff may find they no longer work the necessary hours to continue receiving tax credits in their pay packets. As soon as they lose entitlement to tax credits their entitlement to a proportion of their child care costs will also go. It is for this reason that I have brought forward this item to request that the Council explore what we can practically, do as a major employer, for members of our workforce who may be effected by these changes."

The motion (see below) was adopted by the Committee unanimously.

Motion for Policy & Resources Committee Meeting

Changes to Tax Credit and Council Staff

This Committee instructs the chief Executive to undertake a review to ascertain the number of Council employees potentially affected by changes in Tax Credits, as announced by the Chancellor of the Exchequer in his June 2010 Budget and the October 2010 Comprehensive Spending Review. This review should focus particularly, but not exclusively, on the increase in the minimum hours threshold for qualifying for Working Families Tax Credits. Furthermore, the Council, explores ways it might mitigate the negative effect of these changes on its employees to be disqualified from Tax Credits when the qualifying conditions change. Finally, that the Chief Executive reports back to the Policy & Resources Committee.

Call for Action to Protect Council Employees Caught by Changes to Tax Credits

In George Osborne's Comprehensive Spending Review last week, there were a number of complex changes to Tax Credits. Tax Credits are paid by the government through the payroll, to workers on low incomes.

Under the new qualifying conditions, from April 2012, couple households with children will need to be engaged in 24 hours or more hours of work per week (compared to the current 16) and one of the couple will need to work at least 18 of the 24 hours. As claimants of Tax Credits with children (single parent or couple) can also receive 80% of their child care costs (to be reduced to 70% in April 2011) the length of working hours of employees in fractional or part time posts may mean that many Council employees are disqualified from access to these benefits. That is why Councillor Richard McCready and I are calling on the Council's Policy and Resources Committee to adopt our resolution to review the position of part time post holders working for the council who may be affected in these changes. Their resolution also call for working hours to be considered as the Council restructures in the light of the Con-Dem cuts.

Councillor Laurie Bidwell said:
A significant number of Council staff job share or undertake part time work. It will make a significant difference to couples with children if their working hours prevent them from continuing to claim Tax Credits and the related child care costs. While this change is more than a year ahead, it is not too soon for the Council to investigate the impact of these changes on its own staff and what maybe done to help staff retain their entitlement to Tax Credits. I think this is the least that the Council can do as a major employer. Maximising the income of staff from wages and benefits is not only good for our staff and their families abut also good for the economy of the city.

Councillor Richard McCready said,
The Council has a duty to ensure that employees are rewarded for their efforts and that parents are able to work to support their families. I am very concerned about these changes to tax credits. I also think that the council should be considering moving towards providing a Living Wage, set at around £7 an hour.