Working families ‘hit by changes’













Working families from poorer backgrounds will be hit hard by changes to tax and benefits announced in the Autumn Statement, Labour has said.












A working family with children on £20,000 a year would lose £279 a year from April, the party said.


Meanwhile, the Fitch agency has said the UK’s AAA rating is under threat after the chancellor said the coalition would miss its debt reduction target.


George Osborne told MPs “the road is hard but we’re making progress”.


Mr Osborne also announced a fresh squeeze on benefits, as he admitted the UK economy was performing less well than expected.


Most working age benefits, such as Jobseekers Allowance and Child Benefit, will go up by 1%, less than the rate of inflation, for the next three years.


A bill limiting benefit increases is expected to be introduced in the Commons this month, ministers have said.


BBC political correspondent Iain Watson said Labour has not yet said whether it will vote against the government, but Mr Balls is pointing out that many of those in receipt of benefits are not unemployed, but are in low-paid work, and that statutory maternity pay will also be limited to a 1% increase.


While austerity measures will be extended to 2018, Mr Osborne also announced more money for roads and schools and axed a planned 3p fuel duty rise.


He said “turning back now would be a disaster” for the UK. But Labour said his credibility was “in tatters”.


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  • One of the two major statements the chancellor has to make to Parliament every year

  • Since 1997 the main Budget – which contains the bulk of tax, benefit and duty changes – has been in the spring before the start of the tax year in April

  • The second statement has tended to focus on updating forecasts for government finances

  • Under the last Labour government it was called the pre-Budget report


Shadow chancellor Ed Balls, for Labour, accused Mr Osborne of breaking his own rules, on which his credibility depended.


“After two and a half years we can see, and people can feel in the country, the true scale of this government’s economic failure,” Mr Balls told MPs,


He said the average family with children on £20,000 a year would be “worse off” – even with the personal allowance changes.


Mr Balls claimed Mr Osborne’s plan to raise £1bn from pension tax relief on the well-off raised less than £1.6bn given away in Mr Osborne’s first Budget on the same reliefs.


But the chancellor said the measure proved “we are all in it together”.


Mr Osborne had said debt would start falling as a proportion of GDP by 2015/16 – the year of the next general election.


But he has been forced to delay that target by a year because of the worse than expected state of the economy, which is now expected to shrink this year by 0.1%.


The Office for Budgetary Responsibility says the UK has a “better than 50% chance of eliminating the structural current deficit in five years time”, said the chancellor – meaning his other key objective has been pushed back by a year to 2017/18.


But Fitch, which said in March that the UK’s AAA rating was under threat, has argued the Autumn Statement confirmed the scale of the challenge facing the government in reducing the public debt.


A cut to the credit rating would mean that the country is perceived as more risky to lend to, thereby raising the cost of borrowing from international investors.


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In other moves:


Income tax personal allowances will go up by £1,335 – £235 more than previously announced – so no tax will be paid on earnings under £9,440.


The threshold for the 40% rate of income tax is to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.


The basic state pension will rise by 2.5% next year to £110.15 a week.


Mr Osborne announced a fresh crackdown on tax avoidance and a squeeze on Whitehall budgets to pay for a new road and school building programme.


A senior Liberal Democrat source described the Autumn Statement as a “good package” of measures in which the coalition had made “tough but fair” decisions.


BBC News – Business


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