Clegg: 9/10 families with children receive tax credits?

Clegg was on GMTV this morning and made this claim a number of times in order to justify the cuts which are coming next week.

I cannot believe that this figure is even close to being correct. That figure would mean that 90% of households with children have a income of less than £58k or £66k with a <1yr old.  What does everybody think? Where is he getting these figures?

thin air?  i’d be exceedingly surprised if anyone with that income would even bother applying!

Presumably he gets the figures from the HMRC. I don’t think they work it out themselves.

It may be lost in here somewhere http://www.hmrc.gov.uk/stats/personal-tax-credits/menu.htm

I for one am not surprised by the claim. Its the distribution of wealth thats the problem. Its the banding of income, the attached table may or may not be accurate (it being wikipedia) but you can see the over half the population earns between £10 - 35K. 8% earn an extra £10k and it dwindles away then. 

http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

There’s further figures below.

http://www.poverty.org.uk/15/index.shtml

I amke no claim to the authenticity or accuracy as I haven’t counted them myself :-) However, tax credits is well rubbish. A mish mash of other ideas that don’t work in the UK.

As I understand it Tax Credits are a US idea and its an Earned Income Tax Credit that you claim when you file your Tax return i.e. its a deductible (as they say.)

As we do PAYE the sytem isn’t (and wasn’t) fit for purpose.

You and Gordon think the same.

Having a quick look at those stats I’m not sure whether this question can be answered using that NEP report. Those stats seem to be based on net income and are averaged over the entire population, including children unless I have missed something which is entirely possible. I had access to the raw data set (200k respondents, ~150 variables) they seem to be using but my hard drive crashed and I lost it otherwise I could have run the figures myself. If I remember correctly there was also something wrong or misleading about the way they considered tax credits.

However even if 90% of families would be entitled to tax credits I cannot believe that 90% receive them which is what was being suggested. I also completely agree that CB and CTC should be paid out to those who may not necessarily need it then taxed back where appropriate. It isn’t a coincidence that those countries with the most extensive universal benefits are also the ones with the lowest rates of poverty and inequality.

wouldn’t it make more sense just to not tax it in the first place and therefore removing the need to ‘tax back’ and all the resulting overpayments?

I don’t think that method would work as overpayments would still occur and those who did not work or pay enough tax would still need direct payments so the payment structure would still be needed. At the end of the day tax credits are means-tested benefits like any others. They essentially have nothing to do with the tax you pay it just sounds better. By creating tax credits and putting them under the HMRC it also meant they could create a benefit which was independant of existing benefit legislation which had it’s advantages i.e. removing right to appeal overpayment decisions.

I think there’s problems with all systems and Tax Credits more than any other.

I’d think a system of allowances for circumstances measured against income then topped up where necessary by benefit makes much more sense. (sound familiar?)

The wheel doesn’t need re-inventing, just the rough edges knocked off.

Again I think there are problems with those stats as they have been equivalised, you also cannot consider AHC figures since tax credits are based on gross income BHC. It’s been a while so I might be wrong but from the limited info given a couple with children are presented as receiving only £131 for every £200 compared to a couple without children. This means that actual household income for families will be significently higher than is presented in that graph. Doing some very rough and ready figures the 90% mark may be closer to £85k, although again this is a wholly inadequate speculation given the level of statistical manipulation in those figures. It also isn’t immediately clear how they treat single parent families.

This was part of my initial confusion regarding his bold statement since I cannot find anywhere which produces the figures needed to justify the claim (Gross household income of all households with children).

Completely off the point now but do you have the web address for that report? I’d be interested at looking at the Appendix.

@ John Birks – re your earlier post, tax credits are not taxable, they are tax-free.

Really? Well you learn something new every day….......