22 Jun 2015

Rolling the pitch for tax credit rollback

David Cameron has delivered his attack on “merry-go-round” welfare. It’s a piece of pitch rolling ahead of the budget welfare cuts. He’s signalling severe real terms cuts to tax credits next month and attacking the whole principle of “topping up low pay” for the future. Bold stuff when you consider 4.5m people claim credits and two thirds of them  are in work.

Tax credits were at the heart of Gordon Brown’s time at the Treasury. An important figure behind the scenes  crunching the detail was a young Ed Miliband, over-seeing a massive policy area and not yet 30 years of age.

Not much of the agenda was pre-sold to the electorate in the 1997 general election manifesto. This, it could be said, was part of New Labour’s “redistribution by stealth” agenda. It also sat with Gordon Brown’s determination to promote work with income support that appeared in the pay packet rather than as a welfare payment.

And it was a massive buy-in into President Clinton’s earned income tax credit. In practice, recent research by the Resolution Foundation suggests that tax credits helped to propel many women into the labour market and have helped the UK labour market out-perform the US labour market in some areas.

George Osborne’s instincts are always towards cutting back the ivy of state entanglement. He slashed £3bn from the tax credits budget in 2010 when he withdrew them from the better off and withdrawing them more quickly. But at the same time he increased child tax credits for less well off families. And his hired gun, the man behind the “new workers’ party” rhetoric, not so long ago was calling for them to be increased again.

David Cameron said in his speech today that he wanted a low tax/high wage/low welfare economy but the Treasury doesn’t sound minded to get heavy-handed on the “living wage”. Tax credits were a response to systemically low wages and it’s not clear that winding them down will remove that problem.

The government is acutely aware that some of the voters critical to its victory in swing seats were workers at the lower end of the pay scale who were claiming tax credits. David Cameron rehearsed his arguments today about how tax thresholds and childcare were helping these same people but knows it’ll be a mighty challenge to win them over if they see they are worse off by a high three figure or even a four figure sum in a month’s time.

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4 reader comments

  1. Philip Edwards says:


    “Bold stuff”?

    More like Standard Far Right Stuff And Nonsense Thievery.

    Still, now the Cleggies and Balirites are out of the way the tories can only reap the blame for what they are about to do.

    Which is, as usual, enrich themselves and their chums at everybody else’s expense. Even those stupid enough to vote for them and support their own future poverty.

    That’s the thing about this latest version of spivvery: It can’t even recognise the Welfare State was introduced to save capitalism. Which it did – for a (historically speaking) short time. Now the Post War Settlement has gone we’re back to the same old corruption, theft and attack on human and civil rights.

    After this latest round of economic thuggery you can expect matters to get even worse – much worse. You’ve seen nothing yet.

  2. Sue says:

    So glad you’ve raised this. The cuts appear to be huge and because they’re incorporated in universal Credit legislation, they’ve remained hidden.

    The Work Allowance has been cut by over a third and the rate of withdrawal increased from 41% to 65% under Universal Credit.
    For example, the amount a claimant with no children can earn before benefits start to taper drops from £9,850/yr to £1,332/yr and for a single parent (+ 1 child) drops from £9,850 to £3,156/yr respectively. Please see: https://makingworkerspay.wordpress.com/2015/06/07/the-cuts/

  3. phoenix says:

    Mr Cameron wants to get out of his palatial ivory tower and talk to and LISTEN to the ordinary public not the chosen few, we are supposed to be in a democracy, all iam seeing is a dictatorship for the few well off. the CONSERVATIVE party is after saving money to give to the few he is modern day Robin Hood, and don’t forget 2/3 voted against him how is that fair?

  4. Mindori says:

    A “low tax/high wage/low welfare economy” sounds great when you say it like that, but nothing this government has done suggests that the people who enjoy lower tax and higher wages will be the same people who endure lowered welfare.

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