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Our concerns about proposed tax credit reforms

23 October 2015

The Institute for Financial Studies has calculated that 3 million families will be around £1,000 a year worse off if proposed changes to tax credits are implemented

Disability Rights UK believes that disabled people who are in work could be disproportionately affected by the Government’s proposed tax credit reforms than non-disabled workers.

This is because disabled people who are in work are more likely to be in lower paid work than non-disabled people:

  • disabled people are more likely to be at the lower end of the earnings distribution. In 2012, the average hourly wage for disabled people was £12.15, compared to £13.25 for non-disabled people;
  • the pay gap between disabled people and non-disabled people has increased by 35% since 2010;
  • disabled men experience a pay gap of 11% compared to non-disabled men, while the gap between disabled women and non-disabled women is double this at 22%.

Another significant aspect of the proposed tax credits reforms is that child tax credit to be amended to remove the family element of child tax credit for any claims which do not include a child born before 6 April 2017, and also to limit the number of children that can be included in a claim to two unless there is a prescribed exception.

The changes ensure that, for new claims, families can still get the disabled or severely disabled child element for a disabled child born on or after 6 April 2017 but families will lose the basic ‘standard child element’ (£2,780 for 2015/2016) if they have more than two children.

Straightforwardly, the child disability additions within child tax credit are in place to recognise the additional costs of a disabled child.

Research shows that families with disabled children are more likely to be living in poverty than other families and that it costs three times as much to raise a disabled child.

See also our Submission to the Work and Welfare Reform Bill scrutiny committee in respect of the amendments laid as of 8 October 2015