Tax credit reform has been at the top of the political agenda for the past week. I have received many emails from residents about the reforms. So I am setting out more detail on the reforms and the plan for a higher wage, lower welfare economy.
We have to live within our means as a nation. At the election the Government set out plans to save £12 billion in welfare spending. It's not wise to spend more, tax more and borrow more. It would wreck our economic recovery here in Dover & Deal and across the nation as a whole. That is why we have to make savings and have been looking to reform the tax credit system. However we must look after the people who have helped drive recovery – people who work hard, are responsible citizens and do the best for their families.
I have listened carefully to all the concerns that have been raised. It is really important that there is a gentler transition to reducing welfare and increasing take home pay. A slower pace of change was planned ahead of the House of Lords taking an interest in the matter this week.
Reforming tax credits is part of a much wider package of reform so people are paid more money in wages and lose less in taxes. This is why we are introducing a new National Living Wage of £7.20 an hour in 2016. This rises to £9 an hour by 2020, at which point someone currently working full time on Minimum Wage will be £5,200 a year better off. It will directly benefit 2.7 million people who are currently paid less than £7.20 an hour and a further 3.25 million people will benefit as employers increase wages. This will be a massive boost to low paid workers here in Dover & Deal.
The Government is also increasing the personal allowance (the amount of money you can earn before you pay income tax). In 2010 it was less than £6,500. By 2020, it will be £12,500. This means a typical taxpayer will be paying £1,205 less a year and millions of low paid people will no longer pay any income tax.
It's also important that we help parents with the cost of childcare. From 2017 there will be 30 hours of free childcare for working parents of three and four year-olds worth up to £2,000 a year.
After taking into account all of the welfare and tax changes most families will be better off by the end of this Parliament. For example a lone parent with one child, working 35 hours on the National Minimum Wage, will see income increased by £1,550. A couple working 35 hours a week on the Minimum Wage with two children will have income increased by £5,570.
We've come a long way together over the last five years. Unemployment has fallen dramatically. Wages are rising. We are helping the least well off to get paid better and taxed less. Less welfare, more work, and bigger pay rises are the way to ensure we continue see more jobs and money here in Dover & Deal.
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