GEORGE Osborne’s claim that a typical family will be £2,000 a year better off after his cuts to Tax Credits was completely rejected by economists yesterday.

Speaking on BBC Radio 4’s Today programme ahead of his conference speech, the Chancellor claimed: “The typical family with someone working full-time on the minimum wage will be better off, not just a little bit better off but £2,000 a year better off, if you include the lower taxes we are providing through the personal allowance; the childcare for three and four-year-olds.”

But Paul Johnson, director of the Institute of Fiscal Studies, said the vast majority of people on Tax Credits would in fact be much worse off.

He said it was “arithmetically impossible” for workers not to lose out.“The biggest change and the one that will affect current recipients is the change to the so-called working allowance – that’s the amount you can earn before you start losing your tax credit,” Johnson said. “That’s being really cut quite significantly.

“The obvious effect that has is that it makes people in work worse off and it potentially reduces the incentive to go into work.”

He continued: “Alongside the other changes to Tax Credits, it’s very clear the average family currently receiving tax credits will be significantly worse off even after you take account of the introduction of higher national minimum wage.”

Health Secretary Jeremy Hunt then found himself being attacked by unions and children’s charities for claiming cutting Tax Credits was a “cultural signal” that would make people work harder.

Hunt told a conference fringe meeting there was no case for taking more time to implement the cuts. “We have to proceed with these Tax Credit changes because they’re a very important cultural signal,” he said.

He then seemed to suggest cutting Tax Credits would help British workers become more like Chinese workers. “My wife is Chinese and we want this to be one of the most successful countries in the world in 20, 30, 40 years’ time.” he said.

“There’s a pretty difficult question we have to answer, which is essentially, are we going to be a country which is prepared to work hard in the way that Asian economies are prepared to work hard, in the way that Americans are prepared to work hard?”

Len McCluskey from Unite called Hunt’s remarks “disgraceful”. “There is nothing as insulting as wealthy Cabinet ministers dishing out tax breaks to the super-wealthy, allowing massive assets to sit idle in bank accounts doing nothing for the common good, while working people wait in fear for the letter telling them the government is cutting their income and ponder joining the food bank queue,” he said.

The charity Gingerbread said: “A working single parent about to lose out under the proposals is going to struggle to understand how they are expected to work harder.”

Hunt went on to say “dignity is not just about how much money you have got”, adding “officially children are growing up in poverty if there is an income in that family of less than £16,500”.

“What the Conservatives say is how that £16,500 is earned matters. It matters if you are earning that yourself, because if you are earning it yourself you are independent and that is the first step towards self-respect.”

Osborne’s conference speech made just the one mention of Tax Credit cuts, when he said the country “simply can’t subsidise incomes with ever-higher welfare and Tax Credit bills”.

It was a wide-ranging speech that was generally seen as his first major audition to replace David Cameron.

At its heart was the decision to allow town halls in England and Wales to effectively keep business rates. Although the money will still go to Whitehall, from 2020 local authorities will be able to apply for the cash. It will also allow councils to cut rates to attract new investment and jobs.

Osborne said it was the start of a “devolution revolution”.

“The way this country is run is broken,” he said. “People feel remote from decisions that affect them. Initiative is suffocated. Our cities held back. There’s no incentive to promote local enterprise. It’s time we fixed it.”

There was criticism that the policy would see the wealthier councils attract businesses with low rates while the poorer councils would struggle.

Andy Burnham tweeted: “Big contradiction at heart of Osborne speech. Says wants to close north-south divide. But then announces taxation reform that will widen it.” Shadow Chancellor John McDonnell said Osborne was “starting a race to the bottom”. “Neighbouring communities will be trying to undermine each other rather than working together for their mutual interest,” he said.

“And without the right safeguards in place it’ll be the poorest areas that are hit hardest.”

Responding to George Osborne’s speech, SNP Depute Leader Stewart Hosie MP said: “George Osborne’s speech ... was a stunning admission of Tory failure on the economy and an act of extraordinary political hokey-cokey by a Chancellor who is giving with one hand while taking far more with the other.

“While the SNP has consistently argued for sensible public spending that supports investment and protects the vulnerable from Tory cuts, the Tories remain wedded to their failed austerity experiment and have now trapped Labour into joining with them.”

He continued: “Of course, today’s speech comes at the same time that both the Tory and Labour parties have signed up to an austerity charter that will see a further £30bn of cuts targeted at our core public services and the poorest. It is clear that the SNP are now the only clear voice arguing against Tory austerity and for the investment needed for a sustained recovery and a strong economy.”

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