Opposition and coalition trade blows over major tax and benefit changes including raising personal income tax allowance
Labour ramped up the rhetoric ahead of the major tax and benefit changes that come into force, claiming they represented "one of the most ruthless assaults on the finances of low and middle income families ever seen".
The claim by the shadow chief secretary to the Treasury, Rachel Reeves, on the eve of the new tax year came as Labour and the coalition traded blows on the impact of the changes, including the raising of personal income tax allowance.
Labour claimed families with children will be on average £500 a year worse off.
The government claimed the tax reforms will leave 24 million income tax payers £5.50 a week better off, but the Institute of Fiscal Studies challenged this figure, saying the true sum is 81p.
David Cameron, campaigning in Wales for the local elections, insisted: "If you are looking at what we are doing with the personal allowance we are actually raising it in this tax year, so 24 million taxpayers will benefit to the tune of £6.50 per week". He took the rare step of claiming that the respected IFS was mistaken.
Cameron was primarily referring to the rise in the tax-free threshold on income, which rises by £630 to £8,105 from on Friday.
The shadow chancellor, Ed Balls drew on IFS research to claim that the average family would lose £511 a year from changes .
Labour said more than 850,000 families on modest and middle incomes would lose all their child tax credit, which is worth about £545 a year.
Up to 212,000 working couples earning less than £17,000 a year will lose all of their working tax credit – worth up to £3,870 a year – if they cannot increase their working hours.
According to Labour, a couple with two children on the minimum wage will be better off quitting their jobs if they cannot work at least 19 hours a week.
It is the first time the IFS has put these calculations in cash terms. IFS economist Robert Joyce, responsible for the Labour commissioned research, said Cameron's figure includes the effect of inflation – and even if the government had done nothing, the personal tax allowance would have gone up with inflation.
The £630 rise in the personal allowance, the IFS said, would have gone up by £420 anyway just because of inflation – so the true increase in the allowance above inflation is £210. That translated in lower tax to £42 a year or about 80 pence a week."
Cameron may also have been referring to increases in the state pension.
Balls said his figures were powerful and showedfamilies with and without children would be losers. He said cuts to tax credits represented a breach of previous election pledges made by David Cameron.
The Liberal Democrat chief secretary to the Treasury, Danny Alexander, said the changes were fair and said his party had not made the same commitment on tax credits as his Conservative colleagues.
Balls said raising the personal allowance "applied to people on middle and upper incomes because most lower income people don't pay tax at all, but even then it's small money".
Alexander said between 2003 and 2010, spending on tax credits rose from £18bn to £30bn a year. He said this "huge expansion" meant "we had reached a position where nine out of ten families were in receipt of those means-tested benefits".
"We will still be spending, this year, £31.6bn on tax credits, so we are effectively holding the amount of spending constant."
He added: "I think it is right to say, in a situation where you ask a single parent, for example, to work 16 hours a week before they can receive working tax credits, that you ask more of two people.
"If you are going to ask a single parent to work two days a week before they can receive working tax credit, I think asking a couple to work three days a week between them is a reasonable position.
"And when you take into account too the fact that 24 million people are benefiting from income tax reductions, delivered by this coalition government, that came from the Liberal Democrat election manifesto, I think that is a fair position which encourages and incentivises work, which, after all, must be the purpose of the tax and benefit system."