Working Families Tax Credit

Work and Pensions written question – answered on 26th March 2002.

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Photo of Mr Andy King Mr Andy King Labour, Rugby and Kenilworth

To ask the Secretary of State for Work and Pensions what steps have been taken by his Department to ensure that the tapers determining the amount of housing and council tax benefit to which the recipients of working families tax credit are entitled do not result in a lower income in work after rent and council tax than out of work after receiving 100 per cent. housing benefit and council tax benefit.

Photo of Malcolm Wicks Malcolm Wicks Parliamentary Under-Secretary, Department for Work and Pensions

holding reply 25 January 2002

We are transforming the welfare system from a passive organisation paying out benefits to an active system that fights poverty, creates opportunity and helps people become self-sufficient.

In support of these aims we are ensuring that work pays. The Working Families Tax Credit and the National Minimum Wage have for the first time guaranteed a minimum income for working families with children. These measures together guarantee that every family with children where at least one person is working 35 hours a week will receive a minimum income of #225 a week, or almost #12,000 a year.

Entitlement to Housing Benefit and Council Tax Benefit is assessed by comparing a person's net income, less income disregards, with the amount they would receive on Income Support or income-based Jobseeker's Allowance. For each pound that their income exceeds this level, the amount of benefit payable is reduced by fixed tapers. For people moving from welfare into work these tapers ensure they are better off.

For people in work, who receive a pay rise, the combined effect of the tapers in Working Families Tax Credit, Housing Benefit and Council Tax Benefit means they remain better off. If Working Families Tax Credit was not taken into account in Housing Benefit and Council Tax Benefit families who worked longer hours or took better paid jobs would be worse off as they would face high marginal deduction rates.

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