{"id":2672,"date":"2025-04-30T09:49:57","date_gmt":"2025-04-30T08:49:57","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/iprblog\/?p=2672"},"modified":"2026-01-13T14:48:05","modified_gmt":"2026-01-13T14:48:05","slug":"farewell-tax-credits","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/iprblog\/2025\/04\/30\/farewell-tax-credits\/","title":{"rendered":"Farewell Tax Credits!"},"content":{"rendered":"

Tax credits officially ended on April 5th, quietly closing a chapter in UK social policy. Introduced in 2003, they were central to Labour\u2019s efforts to reduce child poverty and make work pay. As another Labour government looks ahead, it\u2019s time to reflect on what tax credits achieved\u2014and what lessons we must carry forward.<\/em><\/p>\n

Jane Millar<\/a>, OBE, FBA, FAcSS is Professor Emerita in the Institute for Policy Research<\/a> at the University of Bath. Her research interests include the design, implementation and impact of family policy, social security and employment policy.<\/span><\/em><\/p>\n

Farewell <\/span>tax credits! It does not seem right to let tax <\/span>credits - <\/span>which close<\/span>d on<\/span> April 5th<\/span> \u2013 to slip away unnoticed<\/span> and unrecognised<\/span>. <\/span>Introduced <\/span>in <\/span>2003, <\/span>the <\/span>Working Tax Credit <\/span>(for people in work) <\/span>and the Child Tax Credit <\/span>(for families with children) <\/span>were <\/span>flagship <\/span>measures <\/span>in New Labour\u2019s <\/span>commitments<\/span> to make work pay and <\/span>to r<\/span>educe child poverty<\/span>. After 2<\/span>2<\/span> years, and with another Labour government<\/span> looking for reforms<\/span>, what lessons might we learn?<\/span><\/p>\n

First, the current government is <\/span>committed<\/span> to <\/span>tackling<\/span> child<\/span> poverty<\/span>. <\/span>Social security is one of the main planks in <\/span>t<\/span>he <\/span>their <\/span>promised child poverty strategy<\/span><\/a>. \u00a0<\/span>An assessment in 2013 of <\/span>Labour\u2019s record on inequality and poverty<\/span><\/a> highlighted significant falls in poverty, and especially in child poverty, and attributed this mainly to the tax and benefit reforms, including tax credits. <\/span>These were key to the fall in poverty rates for families <\/span>And that <\/span>money was spent on children<\/span><\/a>, improving their lives and living standards. Wages and increased employment do reduce poverty<\/span> risks, but there are many families with <\/span>one<\/span> parent<\/span>, sometimes two, <\/span>in work<\/span> who are <\/span>still <\/span>below the poverty line. And not everyone can work. Cash transfers will always be needed to prevent or alleviate poverty.<\/span><\/p>\n

T<\/span>ax credits <\/span>provided a boost to income for many but <\/span>did not escape the austerity years, with various elements frozen in value and <\/span>other cuts<\/span><\/a> also imposed, including the two<\/span>-<\/span>child limit introduced from 2017. <\/span>Families with children have lost out significantly. <\/span>E<\/span>stimates<\/span><\/a> show that <\/span>among the 7.6 million households with children, changes to the tax and benefit system have reduced benefit entitlements by \u00a32,200 per year on average since 2010. <\/span>Some <\/span>catching<\/span> up is needed <\/span>simply to restore that lost support.<\/span><\/p>\n

Second, the current government has <\/span>Universal Credit under review<\/span>, <\/span>including <\/span>looking at assessment and payments periods.<\/span> Tax<\/span> credits were <\/span>based on annual assessment and were <\/span>heavily criticised for the issue of <\/span>overpayments<\/span><\/a> and the impact of paying these back <\/span>on <\/span>claimants. This was one of the arguments made for <\/span>Universal<\/span> Credit \u2013 that <\/span>monthly <\/span>assessment and payment would mean that there would be no <\/span>build-up<\/span> of overpayments. But <\/span>in practice the monthly cycle has proven challenging for many claimants and not well aligned with the ways in which income <\/span>varies over time. <\/span><\/p>\n

There is now <\/span>growing <\/span>evidence on <\/span>the extent<\/span><\/a> and <\/span>impact<\/span><\/a> of earnings and income volatility, affecting in particular the low-paid and those with least protection in the labour market. The monthly assessment in Universal Credit adds to the volatility, and to the <\/span>challenges of coping <\/span><\/a>with income fluctuations. <\/span>Something between the annual tax credit award and the monthly tax credits award would help to stabilise incomes and provide a firmer foundation for people to manage their money.<\/span> Three months, as suggested by the <\/span>Hou<\/span>s<\/span>e Of Lords Econ<\/span>omic Affairs C<\/span>ommit<\/span>te<\/span>e<\/span><\/a>, <\/span>would help to stabilise incomes<\/span> and remove some stress and uncertainty from claimants<\/span>. <\/span>Claimants could report falls in income, which would protect people if they lost their jobs<\/span> or significantly reduced hours of work.<\/span> But increases in income could be disregarded in the award period, giving people a short-term income boost<\/span> and reducing volatility<\/span>. <\/span><\/p>\n

Many people, parents and children, benefited financially from tax credits. \u00a0We need to rebuild our social security and tax systems to deliver fair and equitable redistribution of financial <\/span>support and contribution. Tax credits may not be part of that future, but we should not forget the contribution they made.<\/span><\/p>\n

All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Tax credits officially ended on April 5th, quietly closing a chapter in UK social policy. Introduced in 2003, they were central to Labour\u2019s efforts to reduce child poverty and make work pay. As another Labour government looks ahead, it\u2019s time...<\/p>\n","protected":false},"author":1742,"featured_media":2673,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[108,112,131],"tags":[],"class_list":["post-2672","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-culture-and-policy","category-economics","category-welfare-and-social-security"],"acf":[],"jetpack_featured_media_url":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-content\/uploads\/sites\/115\/2025\/04\/Blog-Images-156.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/2672","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/users\/1742"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/comments?post=2672"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/posts\/2672\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media\/2673"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/media?parent=2672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/categories?post=2672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/iprblog\/wp-json\/wp\/v2\/tags?post=2672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}