OK, tax credit cuts *are* wrong

Given the political landscape in the UK now looks more like two opposing student unions have been handed the keys to the wrong set of buildings, it’s getting increasingly difficult to know what to think and who to believe.

So I was shocked yesterday when, out of the blue, my mind came to a conclusion without prior warning over a topic I didn’t know it had been debating. Now I have decided, the answer is obvious: tax credit cuts are wrong and the reason why is complicatedly simple. I’m not sure why I want to tell you about it nor what I feel this blog will achieve, but here goes anyway.

Back in the budget, George Osborne made two separate announcements. One was the cut to tax credits for people who earn the least. The other was an increase in the national minimum wage.

Since then, we seem to have accepted that given that one change takes away a payment made to the low paid and the other increases a payment to the same people that the two announcements are linked – but are they?

No one has been minded to stop the connection, after all, but why would they? If it looks like a strategy, then it must be one and like most humans Politicians do like to look like they know what they’re doing.

I don’t think they are linked at all.

The ultimate aim of all this messing about is to keep everyone who works earning enough to feed and clothe themselves and their families and keep the heating on, and to increase wages paid by employers to get there instead of asking the taxpayer to step in instead.

It’s an aim we should all be united on really. No one can argue against decent wages and I suspect few would argue that taxpayers should top up wages on behalf of profit-making companies but actually, achieving that aim doesn’t need any cuts.

Tax credits have always been means-tested. In other words, they ‘fade away’ when families earn more. I can remember back to the first year my mother received them. For the several years after that she was paying back supposed over-payments because her income in the Government’s computer was a bit squiffy.

So the only thing that needs to happen for a family to ‘get out’ of the tax credit system is for their income to increase. If wages go up, tax credit payments go down. That already happens, even if we do nothing.

So unless you think that people earning just over £6,000 a year are earning too much then there’s actually very little to be done but push up wages somehow – and that’s exactly what the new National Minimum Wage does.

I’ve thought for a while that taxing people and then refunding it seemed a silly way of doing things, so I was previously actually pleased at the whole thing being fixed. Back when I was watching the budget I have to admit that I fell into the trap, celebrating George’s work on solving the other ‘half’ of this problem – but there is no half and half.

We’re encouraged by Osborne, Cameron and others to ‘look at the big picture’ and take into account the wage increases which compensate for the tax credit cuts – and they do, to an extent.

It is glaringly obvious though that tax credits are being cut because the Government wants to deliver savings more quickly.

The concept of getting working people out of the benefit system and forcing employers to pay a living wage for work is admirable, but that’s not what this does. This is about saving money.

We’ll just have to wait and see if anyone affected bothers to vote.

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: