11/02/2012 02:41 GMT | Updated 11/02/2012 05:17 GMT

Tax Credits: More Than 200,000 Families Will Lose Out Under Planned Changes, Claim Labour

More than 200,000 families working part-time will lose out on £4,000 a year in tax credits under changes planned by the government, Labour claimed on Saturday.

The party say a change in the rules, to come in this April, will mean more than those earning under £17,700 will have to up their hours of work by a minimum of eight hours or lose out on all their working tax credit.

Speaking at a conference later on Saturday, shadow chief secretary to the Treasury Rachel Reeves will describe the figures as a "bombshell."

"In this climate, very few people in part-time work will find be able to increase their hours by up to 50 per cent at the moment. And for a couple with children losing around £4,000 a year, or £75 a week, from this change could mean going out to work makes no sense," she is expected to say.

“This tax credits bombshell is now just a few weeks away. For thousands of families it means going out to work won’t pay and they’ll be better off on benefits. That makes no economic sense at all. The government urgently needs to think again.”

Cathy Jamieson MP, Labour’s shadow Treasury minister, who uncovered the figures said: “This out-of-touch government doesn’t seem to understand what life is like for families on low incomes who work part-time and look after their kids.

“Parents can’t just increase their working hours when the government’s failed economic policies mean the extra work is simply not there. And the government hasn’t even exempted families with disabled children and full-time carers. Unless Ministers see sense by the time of the Budget this deeply unfair policy risks plunging thousands of families into poverty and worklessness.”

A spokesperson for the Treasury said: “These figures ignore a range of other measures being taken to help working families. The Chancellor has confirmed that working age benefits will go up by 5.2 per cent in April and the child element of the Child Tax Credit will increase by inflation from April – which could mean up to £135 extra per child.

"We also know that families are worried about the cost of living and so we’ve cut fuel duty and frozen council tax. Families will also benefit from the increases in the personal allowance which have taken more than million off tax altogether.

“When it is introduced, the Universal Credit will give nearly 3 million households a higher level of entitlement and enable more parents to get into work by helping 80,000 families with childcare support.

“Ultimately there is nothing fair about running huge budget deficits and burdening future generations with debts we cannot afford to pay. If the deficit is not tackled now, the impact on families will be worse in the long term with less money to deliver the public services that they rely on. This has meant tough decisions, but the government has made them in the fairest way, taking real action to benefit families in all aspects of their lives."