CUTS TO tax credits will hit ethnic minorities the hardest, a Financial Times analysis has found.
In yesterday’s (July 8) summer budget, chancellor George Osborne announced that he would restrict child tax credits to two children per household for new claimants from 2017 to save £12bn from the increasing welfare budget, which will reach £219bn this year.
However, recent government data show that while tax credits – a form of welfare payment to low earners – constitute two per cent of weekly household income for white households, this rises to six per cent for black households and 10 per cent for households of Pakistani or Bangladeshi origin.
This is largely because ethnic minority households typically have bigger families and lower than average incomes. Under the current system, low-income families receive extra payments for each child living at home.
Omar Khan, director of Runnymede, a race equality think-tank, and a member of the department for work and pensions’ ethnic minority advisory group, told the newspaper that cuts to tax credits would “inevitably increase racial inequalities and probably increase rates of child poverty”.
Mr Khan also said it could affect the Conservatives’ progress among ethnic minority voters. The party managed to significantly improve its vote share across the ethnic minority population in the last election, from around 16 per cent in 2010 to over 25 per cent in 2015, according to Runnymede analysis.
While Paul Gregg, economics professor at the University of Bath and one of the original architects of the tax credit system in Gordon Brown’s government, said minority families risked being “collateral damage” in changes to the system from a government “fighting the last war not the new one”.
Labour and the unions complained of an ‘assault on the poor’, particularly over child benefit changes which some have likened to China’s one-child policy.
But the Tories say the changes are needed to put Britain’s welfare budget and finances on a sustainable footing.
Mr Osborne said: “In 1980, working-age welfare accounted for eight per cent of all public spending. Today it is 13 per cent.
“The original tax credit system cost £1.1billion in its first year. This year, that cost has reached £30billion. We spend more on family benefits in Britain than Germany, France or Sweden.”
The Chancellor added: “Those who oppose any savings to tax credits will have to explain how on Earth they propose to eliminate the deficit, let alone run a surplus and pay down debt.”
Culled from The Voice