There was a lot to check out in the Spending Review – and we’ll keep on it for the rest of the week. But here’s a taster of the claims that caught FactCheck’s eye today.
“Child benefit will continue to paid in the normal way to the great majority of the population, from birth until a child leaves full time education at the age of 18 or even 19. We can afford to do this because, according to the latest independent estimates from the Office for Budget Responsibility, removing child benefit from higher rate taxpayers saves Britain £2.5 billion a year.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
Hang on. Back at the Tory conference, George Osborne said cutting child benefit from higher rate taxpayers would save £1bn per year and got into all sorts of difficulties by doing so. We know, we FactChecked it at the time. So where has the extra £1.5bn in savings come from?
We spoke to the Institute for Fiscal studies who pointed out that the difference could be blamed the vagaries of accounting processes. Self-assessing taxpayers would file their returns a year after the year the tax was incurred and so it wouldn’t be clear in 2013 (the year the cut comes into force) exactly how many people would be higher rate taxpayers – that would happen the following year.
So although what the government told us at conference time was true, the new figure of £2.5bn is a fuller picture of the scale of the cut as it takes into account the number of people projected to be affected by 2014-15 – i.e. self assessors who file their tax returns a year later.
So will more people be affected? Well the Treasury told us that 1.5 million families are predicted to be affected by this change – you may remember originally they told us it would be 1.2 million. When FactCheck asked them to explain the extra headcount, the Treasury confessed its original figure was based on modelling it did on two changes: cutting child benefit from higher rate taxpayers AND taking it away from children aged between 16 and 19.
Since the government’s decided not to do the latter, the amount of families affected by this cut has gone up by 300,000.
“Fairness means that across the entire deficit reduction plan, those with the broadest shoulders should bear the greatest burden.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
The Treasury kindly provided an impact assessment of who will be hit the hardest – and it’s not a pretty picture for fairness.
Under their measures, it is households in the bottom 10 per cent of the income scale that are worst off under today’s announcements – and they’re the second worse off income group when you include the measures announced in Osborne’s first budget.
The Institute for Fiscal Studies says the Spending Review is “clearly is not progressive on the Treasury’s analysis. It’s only once you add it in to the things we heard about in June and the things Mr [Alistair] Darling had already put in the pipeline for next year that it becomes progressive.”
The Treasury says the disparity is for two reasons. First, that lowest income bracket will include a fair amount of students who have a very small income, but will spend and so be affected by the rise in VAT, for example. The second reason is that those on lower incomes will be more reliant on welfare payments, as opposed to the higher income brackets whose benefits in kind are more through education and healthcare.
“We want to ensure that low income families with children are protected from the adverse effect from these essential savings.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
The child element of the Child Tax Credit will be raised by “a further £30 in 2011-12 and £50 in 2012-13 above indexation”, Mr Osborne said. Which is all well and good, but it might seem like a drop in the ocean compared to the amount families will lose from other changes to tax credits.
The Social Market Foundation calculates that other changes including freezing all elements of the Working Tax Credit for three years and reducing the maximum money given to help pay for childcare will mean that a family with two or more children could lose up to £36.80 per week (just under £2,000 a year) or up to £24.30 a week for a family with one child (around £1,200 a year).
The TUC estimates that these changes will hit 830,000 single income families.
“In some cases, the benefit bill of a single out-of-work family have amounted to the tax bills of 16 working families put together.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
FactCheck’s eyebrows raised when the Chancellor dropped in this little factoid in his spending review speech today. Can the benefit bill of one out of work family match that of 16 working families?
Well, yes it can – but it depends on how much those 16 families are paying in tax. You can be a working family and not actually pay any tax – and on this basis, even the average family, let alone an out of work family, claiming child benefit would receive more in benefits than those 16 working families.
Will Hadwen, rights advisor at the charity Working Families told us: “If you work 16 hours at the minimum wage (£5.93) you would be earning just under £5,000 per year and so wouldn’t be paying any tax. And working families can also get benefits, for example council tax benefit, housing benefit and working tax credit.”
So although his claim isn’t untrue, it’s not the full picture.
“In fact, in the last three months alone the economy created 178,000 jobs.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
True, but there’s nothing like picking the figures that suit you best. The Office for National Statistics does say that 178,000 jobs were created in June to August – the last quarter for which figures are available – but this was mainly fuelled by an increase in part-time workers of 143,000 to reach the highest number since comparable records began in 1992.
For comparison, the number of people claiming jobseekers allowance increased by 5,300 between August and September, while the number of vacancies in the jobs market fell by 30,000 over the quarter.
“Over the next four years we will invest over £30 billion in transport projects, more than was invested during the past four years.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010
Yes, but not by much. According to the Treasury the investment in transport in the last four years was £29bn, so not far short of what Osborne is proposing.
