Tax Credit Where Credit’s Due

So yesterday the House of Lords rejected the Tory’s bill to cut the tax credit system (a system of benefits designed to top-up the income of low-income families). The cuts would leave three million families £1,000 a year worse off, despite Tory claims that the reductions would be offset by other changes. This proved too extreme for the Lords, so they rejected the bill.

I don’t think we can remind ourselves enough of this clip when, in direct response to a voter’s question, David Cameron categorically denied that the Tories would cut tax credits. This was the very week before the election (in May). I think it’s also worth reminding ourselves how regularly the Tories bleat out their catchphrase about them being the party of ‘hard-working families.’

They claim that this is all part of their plan to move the UK away from being a low income/high tax economy to a high income/low tax economy. Until shown to be untrue, they also claimed that the tax credit reductions would be offset by future increases in the minimum wage*. But, if you’re the party of ‘hard-working families’, then obviously you’d want to implement such a transition in the most painless way possible i.e. you would gradually reduce tax credits in line with wage increases so that people wouldn’t be left short. You wouldn’t leave people facing bare cupboards now on the promise of wage increases later. And, after all, these wage increases are promised by the same people who promised not to cut tax credits in the first place.

No, clearly something else is going on. This isn’t simply about restructuring the economy. It’s about continuing the same economic policy that the Tories have been pursuing ever since they came back to power. It’s about their obsession with eradicating the deficit. By cutting the benefits now, before enforcing minimum wage increases, they will immediately start reducing the deficit – to the tune of £15 billion per year from 2016.

But, it’s worth reminding ourselves that back in 2010 George Osborne promised that he would eradicate the deficit by 2015. Most commentators now agree that when the coalition government gained power in 2010 the economy was already undergoing a recovery. It was Osborne’s economic policies that strangled that recovery, snuffed it out and led to the slowest economic recovery in history. It was this same economic incompetence that resulted in him so catastrophically failing to achieve his own goal. He didn’t eradicate the deficit by 2015. He only reduced it by a third. In the process he also racked up more debt in his first three years than Labour did in the previous thirteen (and that includes the debt amassed by Labour bailing out the banks). And the Tories, engaging in a level of extreme arrogance that borders on the farcical, actually celebrated this massive failure. They considered it a clear indication of Osborne’s deft hand as chancellor.

And here’s the nub, low-income, working-families are having their benefits slashed in order to cut costs and eradicate the deficit. But Osborne claimed that he would have eradicated the deficit by now. Therefore, the only reason families are having this hardship thrust upon them is because he’s so incompetent that he failed to fulfil his own promise. And it’s Osborne’s destructive mix of arrogance and myopia that stops him from both recognising his abject failure and having the humility to choose a different path. Instead, he ploughs on with his deficit eradication obsession while heaping the suffering it causes upon the very people that the Tories claim to stand for.

*I refuse to call it the ‘national living wage’. That’s just Tory spin. They’re transparently trying to highjack the growing ‘living wage’ movement (i.e. a wage that’s high enough for people to live on). All the Tories are actually doing is increasing the minimum wage while re-branding it in order to appropriate the movement’s positive image. Their proposed minimum wage increases are still below the living wage levels (and only apply to the over 25s).


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One response to “Tax Credit Where Credit’s Due

  • Suzanne

    British politicians have the same tunnel vision and utter the same double-speak we’ve been having to swallow for decades from our own goofballs in the US. My parents came through the Depression and WWII and the US government did a couple of really smart things to improve things after these events – (1) they instituted a raft of financial programs to benefit veterans so we would not have to deal with any possibility of social upheaval that might result if we left them unhelped and (2) we kept the top tax rate at a wartime level of between 90 and 92% into the early 1960s. This allowed us to pay our WWII bills, fund those programs for veterans, including the education mechanism known as the GI Bill, made it possible for veterans to buy houses with low down payments since they’d been fighting overseas and hadn’t saved up much yet so they could start families (VA mortgages, something that still exists). The minimum wage program begun in response to the Depression WAS a living wage but adjusting for inflation went down the toilet as the tax rates dropped – the ultra-rich and the companies they ran couldn’t just keep more money that used to go to the Treasury; they felt burdened by wages – something I suppose the rise in labor unions increased. Again, oversimplification to some extent; but that top tax rate also allowed the USA to build our huge interstate highway system and the families of the “greatest generation” got out and saw the country in their cars, an unthinkable rise in prosperity for huge numbers of citizens. Probably one of the last times a US government policy actually benefitted just about everyone until Medicare was finally signed in to law in 1965 (but this only covers people 65 and older).

    One of our most thought-provoking Senators here, Elizabeth Warren, has been relentless in pointing out the failures of selfish government policies for several years now. During the months (and MONTHS) leading up to the 2016 election, she pointed out that if the US minimum wage had kept pace with inflation, it would be somewhere around $22 per hour instead of wallowing where it is now, around $7 per hour. Sounds to me like the UK has lost track of its workforce to a similar degree. Fooey.


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