Welfare Tax Credits

HM Treasury written question – answered on 2nd November 2015.

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Photo of Seema Malhotra Seema Malhotra Shadow Chief Secretary to the Treasury

To ask Mr Chancellor of the Exchequer, if he will publish a distributional analysis of the effect of the changes to thresholds and taper rates for tax credits for each income decile.

Photo of Damian Hinds Damian Hinds The Exchequer Secretary

The distributional analysis published at Summer Budget 2015[1] is the most comprehensive available, showing the cumulative effect of policies on welfare, tax, and public service spending measures since 2010.

This analysis shows the proportion of spending received by households in each quintile has not changed since 2010-11: around half of all spending on welfare and public services is still going to the poorest 40% of households.

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443229/PU1822_Distributional_Analysis.pdf

Additional HMT analysis that fed into the published Impact Assessment[1] shows how the share of savings from the tax credit changes are distributed for each income decile on the income distribution for tax credit claimants. This has clearly demonstrated that tax credit claimants on the highest incomes – on average £42,000 a year - will contribute nearly 4 times as much as the claimants on the lowest incomes to the savings from this policy.

[1] http://www.parliament.uk/documents/lords-committees/Secondary-Legislation-Scrutiny-Committee/DraftTaxCreditsRegs2015-ImpactAssessment.pdf

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