Tax Credits Act 2002

Tax Credits Act 2002[a]
Act of Parliament
coat of arms
Parliament of the United Kingdom
Long titleAn Act to make provision for tax credits; to amend the law about child benefit and guardian's allowance; and for connected purposes.
Citation2002 c. 21
Territorial extent United Kingdom[b]
Dates
Royal assent8 July 2002
Commencementvarious[c]
Other legislation
Amends
Amended by
Status: Amended
Text of statute as originally enacted
Revised text of statute as amended
Text of the Tax Credits Act 2002 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk.

The Tax Credits Act 2002 (c. 21) was an act of the Parliament of the United Kingdom passed by the Labour Government at the time, led by Prime Minister Tony Blair. The act established the administrative framework for the implementation of tax credits and sets out who is entitled to tax credits.[1]

Background

The Labour Party continued to make radical changes to employment and welfare laws; in order to facilitate additional top-ups to the low paid. Thresholds were set down by law but changed by revision upwards on an annual basis. Annual changes were also made to the National Minimum Wage. The aim of the act was to reduce poverty, condemn bad employers for poverty pay, and raise standards.

The tax credits under the act had been introduced in 1999.[2]

Provisions

The act provided for working tax credit (WTC) for those in low-income employment and child tax credit (CTC) for families in poverty.[2][3]

Further developments

In 2015, the newly elected Conservative majority government determined that Tax Credit abolition would save £4.5 billion from annual expenditure. The plan proposal involved lowering the threshold and increasing the taper rate, in order to take the low paid out of taxation altogether. The Exchequer argued that tax credits were robbing taxpayers by subsidising low pay by employers; effectively repaying the poor from taxed wages.

The House of Lords, that no longer had an in-built Conservative majority reported that they would consider rejecting the bill of repeal. Government ministers reminded their Lordships that there were precious few precedents for the revocation of a Statutory Instrument of this kind. The Lords has no constitutional authority over financial bills in Parliament. John McDonnell, Shadow Chancellor of the Exchequer argued for bi-partisanship to save what he described as driving 200,000 children into poverty depriving the poorest families on average of £1,300 per annum.[4] Former Chancellor Ken Clarke argued that tax credits subsidised employers to pay low wages. Government policy mantra was "a low tax, high pay, high growth economy."[5]

Notes

  1. ↑ Section 70.
  2. ↑ Section 69.
  3. ↑ Section 61.

References

  1. ↑ "Tax Credits Act 2002 - Explanatory Notes". Legislation.gov.uk. 2002.
  2. 1 2 Knight, Barry (31 December 2017). "Tax, Marriage and the Family". Rethinking Poverty. Policy Press. p. 292. ISBN 978-1-4473-4063-8.
  3. ↑ Tiley, John (2006). "Tax, Marriage and the Family". The Cambridge Law Journal. 65 (2): 289–300. ISSN 0008-1973.
  4. ↑ "Labour 'would support U-turn' over tax credits". BBC News. 25 October 2015.
  5. ↑ Jenkins, Simon (7 October 2015). "The No 10 handover has begun – and Osborne's rivals have a target". the Guardian. Retrieved 19 August 2022.


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