Higher tax allowance does little for low earners – as little as 15% benefit will go to lowest-income half of the population

October 1, 2014

Responding today to the Prime Minister’s speech at the Conservative Conference, Alison Garnham, Chief Executive of Child Poverty Action Group, said:

“What was missing in the PM’s speech was any recognition that independent projections show that child poverty rates are set to soar.

“We know that raising the personal tax allowance is an ineffective way of supporting low paid families. Independent analysis shows that just 15% of the £12 billion required to raise the PTA to £12,500 would go to working families in the lowest-income half of the population.(1) Many simply don’t earn enough to benefit from this policy, and those that do just see their benefits and tax credits withdrawn as their incomes rise.

“When two thirds of poor children come from working families, they and their families deserve better than this. As the IFS has pointed out, rather than raise the tax allowance or introducing a new 10p tax band, the next government could provide more effective help for the low paid at a significantly lower cost by investing in tax credits and universal credit.”

ENDS

Notes to Editors

(1). For IFS analysis on increasing the personal tax allowance to £12500, please see page 155 of http://www.ifs.org.uk/budgets/gb2014/gb2014_ch7.pdf

Overall, the numbers underlying Figure 7.4 imply that 69% (£8.4 billion) of the £12.2 billion per year giveaway would go to working families in the top half of the income distribution, and a further 16% (£1.9 billion) would go to non-working families (mostly pensioners). Just 15% (£1.9 billion) would go to working families in the lowest-income half of the population.

  • CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.

  • CPAG is the host organisation for the Campaign to End Child Poverty coalition, which has members from across civil society including children’s charities, faith groups, unions and other civic sector organisation, united in their campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met.

For further information please contact:

Jane Ahrends CPAG

Press and Campaigns Officer
Tel. 020 7812 5216 or 07816 909302
jahrends@cpag.org.uk
www.cpag.org.uk