Chancellor makes small gifts to students

Published on 16 March 2005

We were glad to see the Chancellor make some improvements to help most people whom we try to support.

Students

We take particular pleasure in a small change for students. In our 2001 ReportStudents: the case for making life easier we identified that a provision to encourage employers to sponsor students in full-time education was in need of modernisation and upgrading. We recommended a revision and increase.

As from September this year, employers can pay up to £15,000 per annum tax-free to employees who are studying at universities or technical colleges. This more than doubles the current headline exemption figure. It also introduces certainty where before there was none. The present exemption - £7,000 or, if more, the amount that a public awarding body would pay to a student in similar circumstances - is hard to fathom as it is almost impossible to find out what the public bodies pay.

There is also a welcome extension of a NIC exemption for students.

Pensioners

Personal allowances for pensioners are increased in line with inflation. Pensioner households get a refund of £200 off council tax bills (although the very poorest will not pay council tax). Free bus travel is extended and hospital hotel charges are abolished. All this is welcome.

Tax credits

We applaud the generosity of the tax credits system and welcome the Government's commitment to make it even more generous. Next tax year the Chancellor will increase the working tax credit rates and thresholds, raise the elements for children in the child tax credit in line with earnings, and uprate the levels of childcare support.

However, the manner in which overpayments are recovered from low-income families remains a real problem about which the Government are in denial. Not once in the 52 page Treasury Paper Tax Credits: reforming support for families is the word overpayment even mentioned. Yet we have seen overpayment recovery mechanisms reduce some parents to well below income support levels, and cause others to give up work because they can no longer afford both to pay for childcare and to repay their overpayment. This tendency in the system to cause, not alleviate, poverty, and to act as a disincentive to work, runs counter to the Government's avowed strategy. Surely the time has come to grasp this nettle.

(16-03-2005)

Contact Name: Robin Williamson (Contact tel: 0844 579 6700, Fax: 0844 579 6701)