Poorest families will miss out on tax cuts promised by all three main parties

11 June 2014

A report, published by the Joseph Rowntree Foundation (JRF), has warned that the lowest-paid working families will miss out on the tax cuts that will be promised by the main political parties at next year’s general election.

It argued that households which are better-off would benefit the most from plans being considered by the Conservatives, Liberal Democrats and Labour to reduce income tax bills.

The think-tank said that boosting support through the new Universal Credit scheme, being rolled out by the Government and supported in principle by Labour, could be the most successful way of getting money to the people who need it most. In contrast it stated that the rise in the national insurance threshold – an initiative which is being backed by some senior Tories – could prove equally ineffective.

Both the Tories and the Lib Dems have backed further rises in basic rate tax allowances. But the foundation calculated the tax threshold would have to be raised to £12,500 to bring the lowest-paid families to a level which would guarantee them an “adequate” income. This would cost the Treasury at least £11.5bn a year, JRF claimed, with most of the beneficiaries being basic rate taxpayers rather than the worst-off.

Meanwhile, Labour has proposed introducing a 10 per cent starting rate of tax, which would need to be fixed at £5,200 to bring families up to an “adequate” income, leaving the Treasury with a bill of about £11bn, the foundation said.