Labour urge Chancellor to 'ease the squeeze' on families

The Labour leader Ed Miliband has challenged George Osborne to use this week’s budget to ‘ease the squeeze’ on families by reversing cuts to tax credits.

Labour said that reducing tax relief on the pension contributions of high earners could help fund the reversal of working and child tax credit cuts for the less wealthy.

Miliband also accused the government of being out of touch by spending the last few weeks “arguing about the political cover they need” to cut the 50p top rate of tax for those earning above £150,000 while families’ living standards are squeezed.

Citing figures suggesting the average family will be £530 worse off on average from April 2013, he said that cutting the top rate of tax was the wrong priority for the government.  Instead he urged them to focus on reinstating working tax credits for up to 200,000 working couples ‘trying to do the right thing.’

Shadow chancellor Ed Balls said the Osborne’s reversal of the tax cut on pension contributions for high earners had failed to generate the expected £4bn of revenue for the treasury.  However, he said that by halving the rate of pension tax relief, the government could generate funding for the less well off.

Balls said: "We have a simple proposition today. Based on the House of Commons research, and taking into account the changes to the pension cap that George Osborne has already introduced, a reduction in the rate at which top rate taxpayers can claim pensions tax relief from 50% to 26% would be sufficient to reverse this tax cut – with the funds raised then available to help those on low and middle incomes.

"Taking a deliberately cautious view, if the net revenue to the exchequer from this change was £1.25bn, then reversing this tax cut for people earning more than £150,000 would allow the government to reinstate the cuts to working and child tax credits that the chancellor chose to make in his autumn statement when he announced his borrowing plans were £158bn off track."

Balls also said Labour would support a wealth tax such as the mansion tax favored by the business secretary, Vince Cable, and he had offered to work with Osborne to "get the details right".

But he said the priority for the revenue raised from such a tax would be to help low and middle income earners being affected by rising petrol prices, energy bills and taxes.

The Labour leader and the shadow chancellor urged the Osborne to spell out short-term measures to boost growth and reform the economy so that it ‘works’ for working people facing pressure on their living standards.

Ed Balls also called for measures to tackle unemployment, a British Investment Bank, new procurement rules and an active industrial policy to put in place the building blocks for the future of the economy.

On living standards, he said: "The priority must be to reverse the damaging cuts to tax credits. The cuts that tell working people it's not worth working, that tell working women affordable childcare is out of reach and that tell working families 'you're on your own'. We need a budget with a clear vision of how our economy can work for working people."

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