UK Politics

Budget 2012: Ed Balls calls for benefits rethink

Shadow chancellor Ed Balls
Image caption Ed Balls warned thousands of families would be hit hard by changes

Labour has stepped up pressure on the government ahead of the Budget over benefit changes it claims will cost families thousands of pounds a year.

The party wants the chancellor to scrap measures planned for April that it says would see 200,000 working parents lose up to £4,000 in working tax credits.

Shadow chancellor Ed Balls said a rethink was also needed on changes to child benefit.

Chancellor George Osborne is expected to deliver the budget on 21 March.

To qualify for working tax credit from April, couples with children will have to work 24 hours a week between them, not 16 as before, and one of them will have to work at least 16 hours a week.

The government sees this as reducing the disparity between couples and lone parents, who are required to work at least 16 hours a week.

Mr Balls described the child benefit changes due to come into effect in January 2013 as "perverse anomalies" which would affect hundreds of thousands of families.

He said a family with three children on £43,000, where one person was working, would lose £2,500, while a household with two earners on £42,000 each would keep the child benefit.

"That is really, really unfair. These are huge hits to family incomes," he told BBC One's Andrew Marr Show.

"George Osborne should have thought this through, rather than rushing into mistaken policies.

"It's not too late to change his direction with jobs and growth and the economy, but also with this unfairness. There are fair ways to make changes - these are not fair," he added.

The Treasury has previously said the child benefit changes would save £2.4bn in 2013-14 and £2.5bn in 2014-15, but ministers have hinted at changes to the policy.

Asked about the possibility of the 50p top rate tax - introduced by Labour and levied on earnings above £150,000 a year - being axed, Mr Balls said no tax was "set in stone".

"If, in the coming years, we can move on that as a country, fine. But do we really think families on £150,000 plus are the first priority?" he said on Sky News' Murnaghan programme.

'Good principle'

His comments follow newspaper speculation that the Lib Dems are ready to scrap the 50p tax rate in return for a "mansion tax" on homes worth more than £2m.

Lib Dem Foreign Office Minister Jeremy Browne said neither his party nor the Conservatives were "intellectually wedded" to the idea of a 50p income tax rate, and said George Osborne would make the decision on when, or if, the top rate would go.

He said the government needed to make sure it was not vastly out of line with other countries on tax and suggested there was a "legitimate debate" to be had about where to put the burden of taxation.

However, he said the government's priority was to help people on lower and middle incomes by lifting the tax threshold up to £10,000.

Mr Browne's colleague, the business minister Norman Lamb, told BBC One's Sunday Politics show that shifting tax away from employment and on to unearned wealth was a "good principle".

The coalition has promised to raise the income tax threshold to £10,000 by the next election, set for 2015.

National Insurance holidays

Conservative London Mayor Boris Johnson said it was wrong for London and the UK to have tax rates conspicuously higher than global competitors.

He told BBC One's Andrew Marr show the chancellor was looking at the 50p rate but he wanted him to offer national insurance holidays to create jobs, investment in infrastructure and a crackdown on stamp duty avoidance in the budget.

Last week, more than 500 business leaders wrote to the Daily Telegraph calling for the 50p tax rate to be scrapped, saying it was reducing government income and damaging the economy.

Mr Osborne has said the 50p rate is a temporary measure, and has asked officials to assess how much extra revenue it actually brings in.

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