Given the extensive debriefing before the reading of the Budget, no one expected the reveal to be a bed of roses for families on low to middle incomes. But the chancellor’s decision to axe child tax credits for families with a third child has shocked unsuspecting parents.
The way these cuts are being made undermines previous objectives of the government – to encourage work, support families and give parents more childcare options. The budget introduced a raft of measures to cut £12 billion from the welfare budget. The bulk of this has come from cuts to cash transfers that are designed to ensure no child grows up in poverty. As with all tax cuts, the child credit is means tested so it will affect predominantly low income families, including
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It will not affect the 870,000 families who already have three or more children. However, parents looking to conceive after 2017 could be caught out. Higher tax credit and housing benefit payments for the first child will also be axed the same year, saving a further £675m by 2020-21.
These may seem like catastrophic elements to an already complex welfare system (and they are) but they can have a big impact on your families decisions and future goals. For example, the cuts are sure to concern many parents looking to extend their families in future years. Child benefit and tax credits can be a big boost to the family budget. They help with the costs of bringing up a child, especially in times of economic uncertainty. Without financial installments the possibility of bringing up a third child on a low income is next to impossible.
Treasury officials have supported the decision, insisting George Osbourne is not dictating how many children parents can have. The budget document outlines that “those in receipt of tax credits should face the same financial choices as those supporting themselves solely through work.” It was said a family out of work with five children to support could currently claim more than £14,000 a year in tax credits