Personal Finance

Government defends tax changes

The Government has insisted that most families will benefit from Chancellor George Osborne's tax and benefit changes in response to Labour claims that families were facing a financial squeeze.

The Treasury has indicated that households not in the top 20% of earners in the country would benefit from the changes that are now in effect, contradicting claims by education charity Credit Action which calculated that households were set to lose an average of £200 a year.

While the Treasury acknowledged that average impact across the population was a "marginal loss", it said the figures were "heavily skewed" by the losses at the top of the income range.

It said that the top 10% of households would suffer the most as they do not gain from the increase in personal allowances, while having to pay the most increased national insurance contributions.

Labour, meanwhile, calculated that the changes to tax and benefit rates when combined with January's VAT rise could leave some families worse off by more than £1,700 a year.

Shadow chancellor Ed Balls said that what he called "Black Wednesday" would hit women with children hardest of all.

However, according to the Treasury figures, a double income family on £25,000 with one child will be £12 a week better off, a double income family with two children on £60,000 will gain £5 a week, and a lone parent with one child on £12,500 will gain £10 a week.

Sam Jackson

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