Resolution Foundation – a UK think tank concerned with families on low to middle incomes – has argued that, if families with lower levels of income are to maintain an adequate living standard, planned tax credit cuts have to be fully scrapped.
It is believed that Chancellor George Osborne will soon announce measures to lessen the impact of his original plans for tax credit cuts, following public pressure and a House of Lords vote that went against the House of Commons.
However, the think tank has argued that the £4.3 billion cut should be scrapped altogether in order to ensure many working families can maintain an acceptable lifestyle.
Resolution Foundation has also argued that there are numerous alternatives available to the Government, to save the same amount of money, highlighting possibilities such as a potential change to the inheritance tax threshold as well as a reversal of corporation tax cuts.
The group has also claimed that by imposing a limit on pension fund increases it would save £6 billion for the UK economy, while emphasising that if tax reliefs were changed back to 2010 levels then an additional £10 billion would be raised by 2020.
David Finch, senior economic analyst at Resolution Foundation, said: “The Chancellor now has an opportunity to think again and limit the losses.
“His options come down to pushing ahead with the reforms while trying and failing to compensate those losing out at significant expense, protecting current claimants at the price of much lower savings and creating perverse incentives, or finding the money to reverse at least the most damaging of the cuts.
“Many proposals have been suggested to soften the impact of the changes – from further tax cuts, to a phasing-in of the reforms – but none of them make much of an imprint into the scale of losses being imposed on low income working families.”
