April 9, 2013

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The government says that we all gain from a higher personal tax allowance of nearly £10,000.

Yet when you look at the detail any gains are more than wiped out by higher VAT and cuts to tax credits. And families with children where one parent works will be hardest hit by new tax changes that came into force on Saturday.

In fact, the Prime Minister, David Cameron, has prioritised tax cuts for millionaires over those people in work on lower and middle incomes. According to the Institute for Fiscal Studies (IFS) a one-earner family with children will lose an average of just under £4,000.

The IFS data shows that a couple with children, where one parent works, will be worse off by £3,995.65 a year on average after the tax and benefit changes introduced since 2010. Average households will be worse off by £891 a year.

A series of changes have just been introduced with the start of the new financial year. These include a freeze in child benefit for a third year and an increase in tax credits by just 1%. The personal allowance will increase to £9,440 although the higher threshold will fall to £41,450 to help pay for this.

The figures show the government has the wrong priorities because the tax changes include a cut in the top rate of income tax from 50p to 45p. This will give 13,000 people who earn more than £1m an average tax cut of £100,000. Overall, the change will benefit 267,000 people earning £150,000-plus a year.

These figures show the full picture David Cameron and George Osborne do not want you to see. They reveal that any gains ministers boast about from the rise in the personal allowance are swamped by higher VAT, cuts to tax credits and child benefit.

People in work, people looking for work, stay at home mums and pensioners hit by the granny tax are all being squeezed like never before. Millions are paying more while millionaires pay less.

The IFS data shows that lone parents will also be hit by the changes. A lone parent in work will be worse off by £1,225.95 a year while a lone parent out of work will lose £1,206.50. Couples with children where both parents work will be worse off by £1,869.09 while a similar couple with no children will lose £672.10.

Most tax credits and working age benefits, including Jobseeker's Allowance, are being increased by 1% – below the rate of inflation while pensioners get an increase in the state pension, which goes up by 2.5% to £110 a week.

The government has failed to grow the economy, has failed to create jobs and has increased borrowing when they promised to cut it. The Tories and their Lib Dem friends in government have given a tax cut to millionaires paid for by the rest of us. It is clear that the government is on the wrong track and they are protecting the wealthy few at the expense of the many on middle and low incomes.