A raised minimum wage is welcome but falls well short of what families need to make ends meet
A hike in the minimum wage won’t offset cuts to tax credits, charities have warned.
It is estimated some struggling families will lose £1,200 a year due to tax credit cuts announced in the summer Budget and this will not be offset by raising the national minimum wage to £7.20 next April.
Barnardo’s Scotland’s estimates that a lone-parent family working full-time on minimum wage with two children will be £23 a week worse off after the cuts are implemented.
This is despite George Osborne annoucing a new National Living Wage to replace the minimum wage, which will rise wages by 6% a year on average to around £9 an hour by 2020.
Tax credits, which include child tax credits and working tax credits, were introduced in 1998 as a response to rising child poverty, caused by low wages and high living costs. Since then, campaigners say the number of children living in poverty in the UK has fallen by 5% – from 33% to 28%.
Barnardo’s Eddie Follan said: “Tax credit cuts could blow a £1,200 hole in some families’ annual budgets, leaving them struggling to cover the cost of food, gas and electricity and childcare.
The chancellor may have adopted the rhetoric of the Living Wage, but his policy still lags behind - Peter Kelly
Promises that this shortfall will be made up for by raising low wages are misleading, because the cuts to tax credits are so severe.
“Our figures show that unless tax credits are protected, more children will be pushed into poverty.”
The Poverty Alliance said while the chancellor adopted the rhetoric of the living wage, the new statutory minimum was in reality falls short.
The National Living Wage, as set by the Living Wage Foundation, is currently £7.85 an hour – a figure campaigner say is the minimum people need to earn to make ends meet.
While the increase in the minimum wage was welcome, the groups agreed it wouldn’t make up for the cuts to tax credits for most people.
Peter Kelly, director of the Poverty Alliance, which manages the living wage programme in Scotland, said the cuts will hurt the most vulnerable people in our society.
“It is unacceptable that the most vulnerable groups will once again be the people hurt the most by cuts to the welfare system,” he said.
“The Poverty Alliance has campaigned for many years for a Living Wage. We are pleased that George Osborne has finally recognised that the free market fails many people who are trapped in low-paid employment.
“However, his national living wage is not the answer.
“The living wage is £7.85 an hour, and is based on what people need.
“The chancellor may have adopted the rhetoric of the living wage, but his policy still lags behind.”
