Tories in tangle over tax credits

Submitted by AWL on 26 October, 2015 - 10:55 Author: Matthew Thompson

Chancellor George Osborne looks set to go ahead with cuts to tax credits which will see the income of low-paid workers drop by an average of £1,300 next April, despite opposition from Tory backbenchers and voters such as the woman who confronted a Government minister over the issue on BBC TV's Question Time. The changes to tax credits would save around £4.4 billion, or just over a third of the £12 billion the Treasury is seeking to cut from the welfare budget.

Tory backbench opposition to the cuts stems from electoral calculations by MP's in marginal seats (it is significant that the measure has been introduced early in this Parliament) and because it cuts across attempts to rebrand the Tories as the "workers' party", standing up for "strivers".

There is of course a left-wing case to be made against tax credits, a State subsidy to employers paying low wages, just as there is against the millions of pounds of public money handed to buy-to-let landlords in Housing Benefit for charging private tenants extortionate amounts for often substandard accommodation, but in both cases the answer is to eliminate the things that make such things necessary - by raising the minimum wage to a real living wage as opposed to the so-called "National Living Wage" the Tories are proposing, scrapping zero-hours contracts and lower rates for young workers, and introducing rent controls - rather than simply withdraw that support as part of an ideological drive to reduce the role of the State as the Tories are doing.

Although the changes to tax credits didn't appear in their manifesto at the General Election in May, and David Cameron ruled out making cuts to them in the campaign, some Tories, such as former Chancellor Ken Clarke in the debate on an Opposition day motion in the House of Commons last week, have invoked the period between 1909 and 1911 when the Tory majority in the House of Lords attempted to block the Liberal government's "People's Budget" as a parallel to moves by Lib Dem and crossbench peers to stop or delay cuts to tax credits by voting down the unamendable Statutory Instrument being used to introduce them. Whatever the limitations and arcane procedures of Parliamentary democracy, we should nevertheless be at the very least wary, both tactically and on principled grounds, to the unelected rump of hereditary peers, appointed life peers and Church of England bishops acting in this manner. Having said that, it is still amusing to see outraged Tories suddenly become converts to the cause of Lords reform.

Although a U-turn on cuts to tax credits seems unlikely, there are several things Osborne might do to offset them without increasing public spending, including raising the personal allowance for income tax and aligning it with the lower threshold for National Insurance.

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