Tax credit hike aims to hit poverty target

The government announced plans to increase child tax credit last
week after warnings that its target on reducing child poverty could
be missed.

The chancellor outlined plans to increase the child element of the
child tax credit by £180 to £1,625 a child each year from
next April. The government claimed that, as a result, it was now on
track to meet its target of reducing child poverty by a quarter by
2004-5.

A recent report by the Institute for Fiscal Studies had warned that
increases in child tax credit were essential for the government to
reach its target.

Adam, a research economist at the institute, said the extra money
might help the government meet the target when housing costs were
included in disposable income. But he warned that the objective
might not be achieved when housing costs were excluded.

The disabled child elements of child tax credit will be uprated in
line with inflation for 2004-5.

The working tax credit will also rise in line with inflation, as
will the rates of child benefit and guardian’s allowance.