PRESS RELEASE 10 December2001

Working Tax Credit - but not for those under 25

The Low Pay Unit today welcomed the Government’s plans to improve on the current tax credit structure. By splitting the WFTC into Child Tax Credit and Working Tax Credit and improving on eligibility rules, there will be clear advantages for over a million working households with or without children.

But the Unit expressed concerns over the inconsistencies in the definition of ‘adulthood’ where the rights and responsibilities of young people are concerned – as the Government will argue today* that the new Working Tax Credit should only be extended to low paid single people and childless couples over the age of 25.

The Government has always argued that the NMW underpins its tax credit model and is imperative to its success, yet it has excluded 16 and 17 year olds from any minimum wage protection. Nevertheless, those with children in this age group will be entitled to WTC, whatever their level of pay.

The Government defends its policy that workers aged 18 - 21 receive a lower NMW by arguing that this ensures they are not excluded from the labour market. Paradoxically, however, it reasons that under 25’s should not be entitled to WTC because they do not face such severe barriers to work as those older can do.

However the Government’s own statistics show:

• Young people aged 21-24 earn over £100 per week less than those aged 25 and over those aged 18 – 20 earn over £150 per less.
• Unemployment (ILO count) amongst 18 - 24 year old rose by 8000 over the year and now stands at 389,000.

Bharti Patel, Director of the Low Pay Unit, welcoming the Bill, said:
“We will pay a heavy price in the longer term for our treatment of young adults - pushing them into low- paid jobs and into poverty. If the Government is concerned with persistent poverty among those aged over 25, they must ensure that no one entering that age range in the future does so in poverty.

“Ultimately the success of the Government’s policy in reducing child poverty and ensuring that work pays more than benefits, will depend on the rates at which the new working tax credit will be paid; the rates at which they will be withdrawn and whether the structure will facilitate wage growth.”

For further information call Bharti Patel, Director, on 020 7435 4268 or 07887 567 494 or Jeff Masters, Policy Officer, on 020 7435 4268

Notes to Editors:
* Second reading of the Tax Credit bill in Parliament on Monday 10 December 2001.