Tax credits again

The Commons considered and passed changes to tax credits On September 15th by 35 votes  as part of the Budget. Last week the Labour opposition highlighted them again, and the Commons voted down their motion critical of the changes that had already been made. Tomorrow I am told we have to consider them again on an Opposition amendment to the Welfare bill.

I strongly support the policy of cutting tax for people, and at the same time reducing the tax credits. It makes little sense to me to take money off people that they have earned, and then to give it back in a tax credit. That is two handling charges and two elaborate bureaucracies to take the money away and give it back. I also accept the policy of seeking to boost wages. This really requires rising productivity so the pay rises are affordable, as is now beginning to happen.

I want people to be better off as a result of all the changes. I want them to earn more, and keep more of what they earn. The government has twice shown it has the votes to put through this policy, which makes sense to a lot of voters. There remain two issues of implementation. By how much should the tax credits be cut back? What is the timing of tax credit changes and how does this relate to higher pay and lower taxes?

 

I have not myself done the sums. I have urged the government to pursue the policy in a way which means it is always w0rthwhile working, and in a way which maximises the number of people who are better off. The  government should share with us more of its numbers on the pace of these changes.

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155 Comments

  1. stred
    Posted October 26, 2015 at 5:32 am | Permalink

    The problem is that the numbers do not add up. The timing and coverage of pay rises does not match the credit reductions and it appears that this is an attempt to deceive. There are two possibilities. Either the Treasury is incompetent or dishonest. If Mr Osborne cannot do the obvious sums himself, he has Treasury economists and his OOBS, of which he is so proud. Perhaps it should be renamed BOOBS. It was reported that the top officials of each department are married to each other, so perhaps there was a lack of communication?

    • stred
      Posted October 26, 2015 at 8:34 am | Permalink

      Should have been OOBR or BOOBR(s)

    • stred
      Posted October 26, 2015 at 10:12 am | Permalink

      I was thinking of the Office of Statistics when it should have been Responsibility.

  2. Brian Taylor
    Posted October 26, 2015 at 5:55 am | Permalink

    The Media and the Opposition are all over this and quoting figures.
    How many work in the Treasury? They should work this out so the transition is painless to those at the bottom who are under the tax bracket.
    While the opposition can say you are cutting the Deficit on the backs of the poor you all deserve the kicking you get.
    I remember the Poll Tax and thought this a good idea but Nicholas Ridley should have brought this in over a number of years not in one hit.
    What is it about common sense and civil servants, I include MPs in this.

  3. Lifelogic
    Posted October 26, 2015 at 5:59 am | Permalink

    Clearly it make no sense to tax people then give it back again as you say. The reason this was doneness to enable them to tax everyone highly but give some back to those that needed more to live on due to high rents, children, child care etc.

    But the way The foolish IHT ratter, pension and landlord mugger Osborne is proposing is a massive tax grab from the wealth creating sector. A forced wage increase in not a gift from the magic money tree it is a tax increase and a massive money grab from business. Giving them less to pay others, making them less competitive and destroying investment and jobs. Slowly killing the tax Base he relies on. The current proposal to attack poorer hard working families will be worse politically than the poll tax for,Osborne. There is little enough incentive to work as it is for most of the lower paid.

    Bu

    • Lifelogic
      Posted October 26, 2015 at 6:12 am | Permalink

      What is needed is for the adjustment to be done as a net tax cut and a tax simplification. The complete opposite of what he is proposing. To do this he would have to cut government hugely. But there is massive scope for this, the man alas simply has not got the guts to do it.

      Few would notice as the state delivers so little of real value now anyway. This would grow the tax Base, increase the number in productive work and increase wages. A win, win, win but the man has lose, lose, lose socialist genes to his very core. Or so it seems.

    • Lifelogic
      Posted October 26, 2015 at 6:27 am | Permalink

      Furthermore he is pushing up rents for these hard working poor at the same time. This with his absurd attacks on legitimate tax deductions for landlords. Something which will also decreasing the supply of places to rent.

      Does the dope not understand competition, markets, supply and demand, competitive advantage and the advantage of getting more people to do productive things? This rather than them inconveniencing or over taxing and regulating the productive, encouraging them to leave, pushing up energy prices with green religions, or forcing them to employ endless tax lawyers and accountants?

      • Man of Kent
        Posted October 26, 2015 at 10:56 am | Permalink

        I am sorry but it is not a green religion .

        Religion is a faith which cannot be disproved .

        Superstition can be disproved and in the case of climate change I believe it already has been . Extra co2 recently has led to no warming for 18 years 8 months and none of the predictions of apocalypse have come to pass,weird weather has not happened ,the climate is stable with its own ways of keeping equilibrium .

        The IPCC report is a fraud in that its political conclusions do not reflect the scientific evidence .The claim of ‘97% of scientists believe in man made global warming ‘ is not true . Only 0.3% think this is the case.

        It is a superstition dressed up to bring on a totalitarian world government with the active help of the EU ,our Government .

        The sooner we can collapse this pack of cards the better but with the whole establishment behind this fraud ,because they all stand to gain financially ,it will take more than this tiny little email to change things .

        • Denis Cooper
          Posted October 26, 2015 at 12:18 pm | Permalink

          How can you say “weird weather has not happened” when Mexico has just suffered “the strongest storm on record since the Jurassic period”, at least according to Sky News?

          • Ted Mombiot
            Posted October 26, 2015 at 4:13 pm | Permalink

            If you look at the way storms have been recorded over the centuries it is only recently that satellite data has been used to monitor storms and their strength.
            These satellites are discovering more storms and getting more accurate speed data from the eye of the storm, like this recent Mexico one.
            Previously it was not possible to easily fly over or sail into the storm and mainly coastal measurements were used.
            Coastal measurements gave lower speed readings as storms tended to reduce in power as they came ashore.
            So now it appears that there are more storms and they are more powerful than ever.
            But this is not the case.

          • matthu
            Posted October 26, 2015 at 5:03 pm | Permalink

            Weiord weather was based on a computer forecast which never quite turned out as predicted.

            CNN reported: Patricia, the strongest hurricane ever recorded at sea, approached Mexico’s Pacific coast with such ferocity that one official predicted it would become the most dangerous storm in history.

            Thousands were evacuated from luxury beach resorts and impoverished hamlets long before the powerful Category 5 storm touched down Friday evening near Cuixmala in southwestern Mexico. Its crushing 165-mph sustained winds uprooted trees and toppled power lines. Heavy rains unleashed mudslides.

            By late Saturday afternoon, however, satellite imagery and surface observations from northern Mexico indicated Patricia had degenerated into a remnant area of low pressure, according to the U.S. National Hurricane Center.

            The hurricane center’s final advisory on what had been described as a potentially catastrophic storm came hours after Patricia had been downgraded to a tropical depression, sapped by mountainous terrain, with 35-mph sustained winds.

            Mexico apparently dodged a bullet. For now, there are no confirmed reports of storm-related fatalities or major damage.

          • stred
            Posted October 26, 2015 at 5:13 pm | Permalink

            DC. You had better make clear you are being ironic. There are plenty of green folk out there who may think dinosaurs had anemometers. I gather it petered out after it lost contact with El Ninio.

          • tom william
            Posted October 26, 2015 at 6:57 pm | Permalink

            Does anyone really believe there are accurate records of extreme weather going back more than 100 years ago, let alone the Jurassic period? The storm doesn’t seem to have killed anyone.

          • Hefner
            Posted October 26, 2015 at 6:59 pm | Permalink

            Denis,
            Some on this blog do not seem to be able to consider what happens much farther than the end of their garden (or their island). So Mexico, Philippines, Alghanistan, Australia, … anyway they just include non-English.

          • Hefner
            Posted October 26, 2015 at 7:34 pm | Permalink

            Ted,
            Intensity of storms has been measured by the minimum pressure at their centre much before the satellite era! So a comparison over more than a century is still likely to make sense.

          • Timaction
            Posted October 27, 2015 at 2:34 pm | Permalink

            They can’t accurately predict next weeks weather let alone a year from now or 10 years. CO2 is a trace gas that makes up 0.04% of the atmosphere. It is a plant food, without which neither plants nor animals could survive.
            etc ed

        • yosarion
          Posted October 26, 2015 at 1:39 pm | Permalink

          OK more of a doctrine, the outcome is the same and has been for thousands of years. Now people are no longer frightened of the Sky Fairy they have created a new Bogie Man, global warming and do not tell the Witch Finder General that it does not exist.
          I would add that I believe there is a problem with the quality of the Earths atmosphere, however this is mainly caused by too many Humans on the planet and will not be addressed until the worlds two main religions stop trying to out breed each other.

          • Ted Monbiot
            Posted October 27, 2015 at 8:20 am | Permalink

            Hefner.
            Presumably you think they sent a man in a boat or a balloon into the eye of the storm holding an anemometer centuries ago.
            It was all estimates of pressure readings back then, taken by ships nearby or coastal stations doing calculations.

            Satellite data has recorded storms in the middle of oceans no humans have ever known existed thus increasing the statistics for the annual number and given us hugely more accurate measurements of their peak speeds.

        • Lifelogic
          Posted October 26, 2015 at 5:50 pm | Permalink

          The 97% I understand is just 97% of scientists belief that mankind has an effect on climate – clearly it does. I would therefore be in the 97% too. It is surprising they found 3% who did not think this. The trees, worms, insects, cow farts and countless other things have an effect on climate too.

          It has been distorted to imply that 97% of scientist believe in the man made catastrophic fiery hell vision. They certainly do not.

          PS In response to another thread, what level of personal taxation if any would persuade you to come back to live here?

          • Lifelogic
            Posted October 26, 2015 at 8:02 pm | Permalink

            No IHT and 20% flat rate perhaps, then they might get about 500k PA off me. As it is they get perhaps a tenth of this. I am certainly not prepared to pay over 1m pa and 40% on death. Mind you it is more civilised here in many ways anyway.

    • Lifelogic
      Posted October 26, 2015 at 6:45 am | Permalink

      The man needs to get a sensible advisor in the Alastair Heath mode. Or he could just ask me, for no charge at all. It would have to be by email or Skype as I am certainly not going to submit myself to the bonkers UK tax rates.

      Had governments done so over the years they would would have avoided the common market, the erm, the Euro, the poll tax, the pointless wars, the banking crash, the bloated incompetent state, the misguided attacks on landlords, non doms and private pensions,the millennium dome, the expensive energy religion and many more disasters.

      • Lifelogic
        Posted October 26, 2015 at 6:49 am | Permalink

        We might also not then have had to suffer the appealing leaders of Major, Brown, Bliar, Brown and Cameron.

        • Lifelogic
          Posted October 26, 2015 at 7:05 am | Permalink

          Appalling certainly not ‘appealing’ at all.

      • Lifelogic
        Posted October 26, 2015 at 6:56 am | Permalink

        We would also have had a decent 5+ runway Heathwick hub airport about 10 years back and lots of very cheap shale gas, a good paid for health care and education system. Instead of the basket case NHS we have now.

        • Lifelogic
          Posted October 26, 2015 at 6:58 am | Permalink

          And we would have open borders, but only for people who would be a substantial net asset to the UK.

      • Henry Rogers
        Posted October 26, 2015 at 1:16 pm | Permalink

        Lifelogic, Do you really not live in UK? Do you really not intend to do so? If you do not, why the endless posts here?

        • Lifelogic
          Posted October 26, 2015 at 5:54 pm | Permalink

          No I do not live in the UK. I did (mainly in North London) until about seven years ago. I still have businesses here though and lots of brothers and sisters etc. I fly over quite a lot and want the country to do well out side the EU, as it certainly would if the government got out of the way and cut taxes.

  4. Richard1
    Posted October 26, 2015 at 6:26 am | Permalink

    Of course it is right to get rid of this complex system devised by Gordon Brown to maximise the number of people who feel they are beholden to the State for their income (and therefore gratefully vote Labour). The difficulty of unwinding this immensely expensive programme is another reminder of the baleful long term consequences of Labour and specifically of Gordon Brown’s chancellorship.

    That said, your support above is equivocal – it seems to me that Mr Osbornes team haven’t worked this through. Or if they have they should have done a much better job explaining it. They should make the changes of course, but ensure it is always worth working. If someone in the government or Treasury has screwed up they should be fired, as would happen in the private sector.

  5. Margaret
    Posted October 26, 2015 at 7:19 am | Permalink

    Yes it is stupid to take away and give back and it does cost too much money to loop the process, but the alternative is worrying. If there would be a guarantee that these people would be no worse off by being in work then it is morally acceptable but if it means they would be poorer than their subsidised wage then it is not moral. To stop the time wasting ,money eating process ,both side of the equation need to be adjusted.

  6. alan jutson
    Posted October 26, 2015 at 7:20 am | Permalink

    I agree with your last paragraph.

    The government should publish the figures to back up its claim that tax cuts and the raising of the minimum wage, will balance out the reductions in tax credits.

    Why not give some examples to show exactly the make up.

    Whilst I am for gradually reducing working tax credits, I am certainly not in favour of a sizeable reduction in income, for people who are doing their best to try and look after themselves by working.

    Once again poor presentation by the Government of its policy and position.

    • Bob
      Posted October 26, 2015 at 11:11 am | Permalink

      @Alan J

      I think the bleating is a bit over done, as we saw with that audience member on Question Time who was practically in tears, and then it transpired that she wouldn’t even be affected.

      So many people game the system by setting up “businesses” that have no prospect of making a profit in order to qualify for tax credits; women painting other women’s fingernails being a classic example.

      I had a part timer working for me who refused extra hours because of the impact on her tax credits and other entitlements.

      • alan jutson
        Posted October 26, 2015 at 11:35 am | Permalink

        Bob

        “I think the bleating is a bit overdone”

        If that is the case then it should be very easy to disprove with facts and examples.

        I certainly agree tax credits should not be available to help you run a low priced, home based business, or indeed any other form of business.

        • Bob
          Posted October 26, 2015 at 1:40 pm | Permalink

          @Alan J >“If that is the case then it should be very easy to disprove with facts and examples.”
          http://www.dailymail.co.uk/news/article-3276961/Hardworking-mother-four-stunned-Tory-minister-silence-Question-Time-unlikely-affected-tax-credit-cuts.html

          Many can be easily disproved simply by doing the maths, and in other cases you would need to prove that they deliberately avoid more than 16 hours of work per week (which they would obviously deny).

          The proof will be in the pudding, when the disincentive to work is removed.

          In the case of the nail bar brigade you would need to draw your own conclusions as to whether it’s a suitable pastime to qualify for taxpayer subsidy.

        • stred
          Posted October 26, 2015 at 5:25 pm | Permalink

          Alan. Not too sure about excluding small businesses. It is a good way to get people started and they may succeed and earn more, then become an employer. Why give credits only to those who wish to take low paid employment.

          • alan jutson
            Posted October 27, 2015 at 8:10 am | Permalink

            stred

            The only reason not to give such benefits to those owning small businesses is because profits/losses and paid income can all be manipulated to a degree by the owner to suit the best taxation position.

            I am certainly all in favour of small business start ups, which usually come after a few years of sucessful self employment, so more encouragement for that status should be in any Government programme.

      • Know-Dice
        Posted October 26, 2015 at 1:03 pm | Permalink

        I know that it’s completely un-PC to even suggest this…

        By why is was the question time lady a “single mum of four”?

        What happened to the father or fathers?

        There could be a good reason…or maybe not…

        • alan jutson
          Posted October 26, 2015 at 4:34 pm | Permalink

          Know Dice

          I think many thousands of people are thinking your exact thoughts.

          The only real excuse, (if the reported story is true) can be that he, or they, have unfortunately passed away, in which case the State should certainly help.

          • Know-Dice
            Posted October 27, 2015 at 7:52 am | Permalink

            Certainly if that is the case, then the State should step in and help.

            Always State benefits should be a “safety net”, not a life style choice.

    • Narrow Shoulders
      Posted October 26, 2015 at 2:52 pm | Permalink

      A parliamentary briefing paper is available and quite illuminating.

      http://researchbriefings.files.parliament.uk/documents/CBP-7300/CBP-7300.pdf

      It is quite possible to argue that the changes are large and should be introduced gradually. 48% of earnings between £3,850 and £6,420 are lost and then 7% of earnings thereafter.

      Frank Field’s mitigating suggestion introduces a marginal rate of tax for those earning over £13,100 of 85% (plus NI) so does little to help all but the worst paid and would in fact encourage more people to earn less.

  7. Mike Stallard
    Posted October 26, 2015 at 7:26 am | Permalink

    But…
    “There remain two issues of implementation.”
    Actually there are two more.
    1. A lot of people who voted Conservative, like the woman on Question Time who broke down in tears, voted for a party that would free them from the shackles of Welfare. They feel betrayed and the Labour Party (such as it is) is having a field day with the Tooory Party who only cares for the rich. They are joined by David Davis who is still much respected both on TV and by us out here.
    2. Wasn’t this passed by a statutory instrument? That is awful. Either it was really a secret Directive from the EU (which is unlikely) or else it was a deliberate attempt to by-pass discussion. And now the Conservatives face the music.
    Serves you all right.

    • Denis Cooper
      Posted October 26, 2015 at 9:48 am | Permalink

      Yes, it is a statutory instrument, secondary legislation, not a Bill, primary legislation, and the parent Bill for the statutory instrument gives the Lords the power to veto it, and the Parliament Acts only apply to Bills not secondary legislation.

      And just as the Lords were given a veto over this through Section 66 of the Tax Credits Act 2002, they are now being given a veto over the date of the EU referendum through Section 7 of the government’s Bill, as was first pointed out back in 2013 when it was the Private Members Bill introduced by the Tory MP James Wharton:

      http://johnredwoodsdiary.com/2013/07/06/a-first-step-towards-a-referendum-on-the-eu/#comments

      Reply This SI is a financial matter which is outside the Lords remit. It is an important part of the budget, representing spending of £4bn.

      • Mike Stallard
        Posted October 26, 2015 at 12:22 pm | Permalink

        The House of Lords in the view of a lot of people is now so discredited that all it needs is the pantomime horse.
        And all those people who trusted the Conservatives to get them off welfare if they worked hard enough feel very let down.
        And bypassing parliament is becoming a habit which is very dangerous – as you are just about to discover.

      • Denis Cooper
        Posted October 26, 2015 at 12:37 pm | Permalink

        As I understand this SI is an SI under Section 66 of the Tax Credits Act 2002, which says:

        http://www.legislation.gov.uk/ukpga/2002/21/section/66

        “66 Parliamentary etc. control of instruments

        (1) No regulations to which this subsection applies may be made unless a draft of the instrument containing them (whether or not together with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.”

        So at the time they passed the Bill for that Act MPs willingly agreed that the Lords would have their say on, and a veto over, the regulations.

        It then goes on to say:

        “(2) Subsection (1) applies to —

        (a) regulations prescribing monetary amounts that are required to be reviewed under section 41 … ”

        so at the time they passed that MPs agreed that the Lords would have a veto even on the financial matters, which have therefore been put within their remit with the express consent of MPs.

        You can say that MPs should not have agreed to that back in 2002, they should have insisted that any regulations touching on the financial matters would only need to be approved by the Commons and not also by the Lords, and I would agree with you about that.

        But clearly those MPs were too lazy or careless or incompetent to insist on that, maybe even to think about it, and so they gave that hostage to fortune, just as the current crop of MPs have not thought that it could be a bad idea to give the Lords a veto over the date for the EU referendum.

        • Mike Stallard
          Posted October 26, 2015 at 7:19 pm | Permalink

          …and let me add, the SIs have been overused to push through EU Directives without parliament.
          Which means that parliament is more and more irrelevant. There was absolutely no reason why this change should not have been properly discussed in public. Without discussion, things get missed and this was missed: the Conservatives out here in the country are quite often faced with a loss of salary by what seems like a whim. Arbitrary government is never popular.

  8. JoeSoap
    Posted October 26, 2015 at 7:34 am | Permalink

    Just a reversal of a part of the daft tax legislation put in place by Brown, and probably one of the main reasons that the silent majority didn’t want Labour back again.

  9. CHRISTOPHER HOUSTON
    Posted October 26, 2015 at 7:42 am | Permalink

    A massive tremendous surprise, and one which the media thus far has not in the main deemed worthy as reporting as a separate and comparative item ( for many British people struggling to work where they have no real control over length of working week, conditions of employment, overtime and bonus if any,commuting costs, transport costs in the course of working ), is that people owning and running their own businesses are also getting tax credits.

    How very nice. So, unlike the mere worker, a person with a business which is work entirely of their own choosing, where they pay taxes according to their own responsibility and sums, where they take profit according to their own sums and the timing of which is completely at their own discretion have the national tax-payer financing their business and, them.

    Far be it for anyone to deny the worthiness of small businesses and small business people so dramatically shown on TV but for most people the idea of tax credits financing business activity is wholly inappropriate. It should be cut immediately. Cut before tax credits to other people are cut.

    People reliant on selling their labour to established businesses should not have their tax credits cut until other in-work benefits including higher wages and scheduled child care funding kicks in.

    • Roy Grainger
      Posted October 26, 2015 at 11:16 am | Permalink

      Yes I agree. The woman on BBC QT comes under this heading apparently. Tax credits should not be used to prop up failing businesses.

      I imagine these changes will generate less trouble than the poll tax because far fewer people are affected and most non-benefit recipients are probably quite happy to see benefit cuts. But it is certainly being badly handled by Osborne.

  10. agricola
    Posted October 26, 2015 at 7:50 am | Permalink

    The process of movement from increasing wages and reducing taxes to the proportionate reduction in tax credits should, as far as possible, be completely seamless. If it cannot be done perfectly then it should err on the side of the worker. We are after all trying to make said workers independent of government hand outs, thereby increasing their self esteem. The ultimate aim is to reduce the welfare budget and then perhaps increase government income via tax receipts.

    Act with great care and sensitivity. We do not want a repeat of the badly thought out Poll Tax, which I considered right in principal but wrong in implementation.

  11. Narrow Shoulders
    Posted October 26, 2015 at 8:02 am | Permalink

    Your party can not use the argument about reducing tax for anyone earning below 10.6K (there has been no reduction in NI contributions). Therefore anyone earning less than this amount will be worse off until at least the time minimum wage rises to 9.20.

    The rise in childcare may not be applicable in many cases so your party’s mitigations are largely non existent.

    Come clean and state this is a cost saving measure. Sugar the pill by tapering the reductions gradually and applying the more draconian reductions only to those not in work and who have not contributed in the past year.

    • margaret
      Posted October 26, 2015 at 9:36 am | Permalink

      Then you would get charges of discrimination and bias towards some and not others . Any change needs to be universally acceptable.

      • Narrow Shoulders
        Posted October 26, 2015 at 1:42 pm | Permalink

        There would be no discrimination charge if the eligibility criteria were changed so that those not in work or who had not contributed in the past year were excluded.

    • Lifelogic
      Posted October 26, 2015 at 10:00 am | Permalink

      The self employed will also not get any wage increase and nor will most of those already paid over that level (as the employers with have had to give any money to the lower wage employees instead and the workplace pension half baked nonsense). Many jobs will also just go as they will not be worth doing at the new rates.

      • JoeSoap
        Posted October 26, 2015 at 5:49 pm | Permalink

        There is also the moral hazard element. If you can raise minimum wages to £9 an hour, why not to £29 an hour? Or £129 an hour? It is all silly meddling in the market, and makes me very wary of increasing our workforce on a permanent basis.

    • graham1946
      Posted October 26, 2015 at 2:09 pm | Permalink

      The childcare ‘benefit’ looks to be another smoke and mirrors dodge beloved of governments. The childcare industry does not have the capacity to handle it, the people concerned may not want or be able to use it and I doubt the amount the government will pay will entice any new capacity or whether it will even pay current providers enough to take it on if they had the capacity. A bit like councils paying for care homes – it never covers the full market cost, just some figure dreamed up by an apparatchik.
      So it is like the bedroom tax where you have to pay it (or more accurately have it deducted) even if there is nowhere you can move to to comply with governments’ wish, (or again more accurately), their wish to cut cost rather than any motive of making more efficient use of the extra bedrooms.

  12. Gary
    Posted October 26, 2015 at 8:03 am | Permalink

    get this godlike monstrosity out of our lives ! This corrupt entity deciding how to spend other people’s money , who to gift with a handout and who to plunder, with solemn piousness. We would all be better off without it.

  13. Antisthenes
    Posted October 26, 2015 at 8:05 am | Permalink

    One thing that is certain to boost productivity is to increase the minimum wage beyond that which is affordable for employers as the chancellor has done(politically it was a good ploy to steal Labour’s thunder). Employers will now look to reduce the number of low skilled workers they employ(so much for the minimum wage helping the less well off). One way they will do this is by having fewer workers producing the same or more.

    Tax credits as you say is a wasteful way to subside wages and should be scrapped. However I do not believe if so many are going to be substantially worse off as reported it is being done in the right way. I doubt that the reports I read are that accurate as those making them tend to be those who have a vested interest in making them appear worse than they are. If they are not accurate then the chancellor is not doing a good job at explaining that fact. If they are accurate he needs to do a rethink.

    • stred
      Posted October 26, 2015 at 9:01 am | Permalink

      If employers and small businesses are already working as efficiently as possible and are not working in an area which lends itself to mechanisation, they will have to raise prices. Deliberately increased inflation will be a stealth tax. This increased inflation should be taken into account when working out how to compensate working people for their loss of subsidy. Pensioners will probably be compensated but the rest will not and savers are unlikely to see interests matching inflation, which is far higher than published if including housing and future electricity and water charges.

      • JoeSoap
        Posted October 26, 2015 at 5:51 pm | Permalink

        Not really, we will just increase imports and put more people out of work. Maybe high unemployment isn’t so bad, as it reduces the temptation of Osborne type people to do this sort of thing.

        • stred
          Posted October 27, 2015 at 8:18 am | Permalink

          Service industries cannot import to lower costs and will have to put up prices.

    • A different Simon
      Posted October 26, 2015 at 9:30 am | Permalink

      Most of those MP’s don’t understand that a significant proportion of the workforce works in the global economy .

      However , when even John Redwood starts lending credibility to the policy of trying to increase wages in what is already one of the highest wage economies in the world we are in trouble .

      Pay of UK workers engaged in exports and manufacturing is largely dependent upon by what people in developing countries are earning and currency exchange rates .

      To increase wages in the UK moves jobs and even whole industries abroad . Increasing productivity – as you point out – does not help the workforce in aggregate . It’s not an enduring advantage either .

      The only option is to make the country more competitive by reducing the cost of living so current and even lower wages are sufficient .

      All the kludges like tax credits are just examples of the absurdity of sacrificing the country on the altar of high house/land/rent prices .

      • Narrow Shoulders
        Posted October 26, 2015 at 1:45 pm | Permalink

        tax credits and housing benefit actually have the effect of increasing the cost of living as more are able to afford higher prices.

        • A different Simon
          Posted October 26, 2015 at 5:26 pm | Permalink

          Exactly – that is what I’m saying .

          We saw this illustrated by the huge increase in the cost of food between about 2005 and 2010 .

          If every family which rented became £100 better off per month then rents would rise accordingly to absorb it all .

          The politicians reaction would then be to fan the flames with another £100 of benefits per family per month .

          They will never advocate measures to fix the problem of high and rising cost of living at source .

        • Bazman
          Posted October 27, 2015 at 10:29 am | Permalink

          Interesting idea. However when the government cut housing benefits they continued to rise.
          Strange however that almost all those who are against tax credits and welfare payments are not against housing benefit.
          Not earning enough, then live on the street and market will level up to help you does not seem to apply. I wonder why?

          • Bazman
            Posted October 29, 2015 at 11:23 pm | Permalink

            Well?

      • JoeSoap
        Posted October 26, 2015 at 5:54 pm | Permalink

        Indeed. it is all fine and dandy in a prevailing wind, when the economy is producing jobs. Wait until growth reduces, then watch people being thrown from work on the back of these lovely minimum wages….

  14. Ian wragg
    Posted October 26, 2015 at 8:14 am | Permalink

    I don’t understand John. Camerons used the Parliament Act for gay marriage so why not for this. We all know that minority rites come before taxpayers and defence of the nation but you make yourselves look silly.

    Reply You only use the Parliament Act if the Lords has blocked something and will not change their minds.

    • Denis Cooper
      Posted October 26, 2015 at 9:52 am | Permalink

      See above; it is secondary legislation and the Parliament Acts only apply to primary legislation, Bills, and when MPs passed the parent Act in 2002 they voluntarily gave the Lords the power to veto such secondary legislation.

  15. stred
    Posted October 26, 2015 at 8:31 am | Permalink

    Every time this subject is discussed with ministers, they repeat that the aim is to remove state subsidy to wages and replace it with higher earnings and lower taxation. Have they noticed that almost eyeryone else is quite happy with this but the argument is about whether the amounts taken away and given back at tomes do not remotely coincide? To keep repeating the first without the second insults voters intelligence and will do them no good.

    • Anonymous
      Posted October 26, 2015 at 9:04 am | Permalink

      A family with a joint income of £24k is going to lose £2,464.00 a year.

      That will hit them really hard.

      • A different Simon
        Posted October 26, 2015 at 1:02 pm | Permalink

        Anonymous ,

        If they are living in what is today a £250k house and paying a rental income of 5% gross then their accommodation is costing £12,500 p.a. .

        If the same house was £200k then at 5% gross accommodation falls to £10,000 .

        The salvation of the economy lies not with increasing wages but decreasing the cost of living .

        Once land and house prices reach current levels it is too late to stop people getting hurt .

        Puffing them further is pure wickedness .

        I feel the last 7 years has been wasted and that the reckoning we should have had then has just been postponed and is no more than 24 months away .

        • Anonymous
          Posted October 26, 2015 at 3:59 pm | Permalink

          Very well said, Simon.

        • JoeSoap
          Posted October 26, 2015 at 5:57 pm | Permalink

          Indeed.
          It is all about manipulating property prices up then trying to manipulate wages up to meet them. Induce inflation, a Sterling crisis or both. A bit daft.

        • Lifelogic
          Posted October 26, 2015 at 8:08 pm | Permalink

          Relax planning and reduce immigration and get rid of green chap ott building regulations.

          • Bazman
            Posted October 27, 2015 at 10:36 am | Permalink

            End allowing rich immigrant foreigners to use property as nothing more as an investment often without renting out and in some cases to launder ill gotten gains? No?!
            Building regulation abolished to allow the building of slums one imagines as lets face it how much have developers improved the energy efficiency and build quality for the average house in recent decades. The buyer decides this? Millionaires do and that make it true? More willfull ignorance from you.

          • Edward2
            Posted October 27, 2015 at 10:13 pm | Permalink

            So poor immigrants would move into Mayfair mansions left vacant by billionaire foreigners sould they Baz?
            And wicked property builers would ignore customers requurements and build slums to sell.
            You live in a fantasy world Baz

          • Bazman
            Posted October 29, 2015 at 11:27 pm | Permalink

            How do you square off pig ignorant nonsense edwaxd? Just asking?

    • stred
      Posted October 26, 2015 at 11:28 am | Permalink

      I have just heard that Mr Cameron is thinking of appointing a load of new lords who will take his orders and vote correctly. If he wants to make his government look stupid, arrogant and wasteful, as well as callous, uncaring and incompetent, this is probably the best way to do it. With leadership like this, the Marx brothers must be amazed at their luck. Would it be possible for some MPs to persuade the occupants of 10 and 11 that now is the time to do a Blair, retire and make lots of money talking to Americans who like to hear posh boys speaking?

      • Denis Cooper
        Posted October 26, 2015 at 12:46 pm | Permalink

        It would probably be quicker for MPs to put it into a Bill which would be a Money Bill for the purposes of the Parliament Acts, and then the Lords would only be able to delay it for a month:

        http://www.legislation.gov.uk/ukpga/Geo5/1-2/13/section/1

        Rather than having the regulations in the form of a statutory instrument over which the Lords were expressly given a veto by MPs when they passed Section 66 of the Tax Credits Act 2002.

  16. Bill
    Posted October 26, 2015 at 8:33 am | Permalink

    Agree with all this but have one tentative point to make. The lowest paid and those on tax credits tend to spend their money in local shops, pubs and supermarkets; they do not go for foreign holidays or luxury goods. In other words, the money given to the lowest paid brings benefit to the local economy and by taking this money away from them, the local economy is also somewhat depleted. I am thinking here of Newcastle-upon-Tyne and the north east in general.

  17. A.Sedgwick
    Posted October 26, 2015 at 8:36 am | Permalink

    For me this is another example of Mr.Osborne’s clumsy and complicated approach. I believe that even Frank Field has said in the past tax credits should go, they are a misguided and predictably misguided method of benefiting the lower paid. Mr.Osborne has expanded the tax complexity, probably as much as G.Brown did. He had the opportunity to simplify the basics from 2010 e.g. combining income tax and national insurance probably with full support of the Liberals, who were the driving force for increasing the tax threshold. If the tax system removed anyone paying tax/n.i. on an income up to £12k it would be a strong counter to progressively eliminating tax credits say by 10% p.a.

    Whether the wrong people are going to suffer with these changes I don’t know for sure but my perception is some are and that is wrong and Osborne has probably goofed again.

  18. Anonymous
    Posted October 26, 2015 at 8:43 am | Permalink

    People earning within the tax credit band have had their wages depressed and their costs increased by mass immigration.

    Supply and demand in chasing jobs and housing

    A) Employers would have to pay better wages if there were fewer people competing for their jobs (the upside for the employers is that they would pay less tax)

    B) Housing costs would come down so that low pay would go further and workers would be better off even without pay increases or tax credits

    Alas nothing can be done about mass immigration so the removal of tax credits will not result in a cut in tax. Welfare dependency will increase because we keep importing poor and unskilled people.

    The removal of tax credits is going to result in real hardships among working people who will (rightly) resent the fact that the gap is being closed between them and those who don’t bother getting out of bed in the morning.

    It will be your poll tax moment (unfair because Labour created the problem) but unlike the poll tax protesters (who were wrong) the tax credit protesters will have some real grounds for complaint.

    I agree that tax credits need to be removed – but this is only half a job done and will result in a race to the bottom on wages and an increase in welfare bills if you don’t limit the labour supply.

    • Bazman
      Posted October 27, 2015 at 10:40 am | Permalink

      They have in many cases had their wages depressed by unscrupulous employers refusing to pay higher wages despite massive profits because they can get away with it. These profits in many cases coming from the state and then refusing to pay taxes on them to fund tax credits. Forgot this or do not want to mention this as it does not exist?

      • Edward2
        Posted October 27, 2015 at 10:14 pm | Permalink

        Blame your hero Gordon Browm its all his doing.

        • Bazman
          Posted October 28, 2015 at 6:10 pm | Permalink

          Make no mistake all these politicians/civil servants together and their chums in the media have created a revolving door for themselves, between the private sector and the state, so in this respect you are right edward.

  19. Kenneth
    Posted October 26, 2015 at 8:52 am | Permalink

    Why don’t we just scrap tax credits and wage controls and reduce income tax?

  20. The Prangwizard
    Posted October 26, 2015 at 9:08 am | Permalink

    We must not get too much caught up in the ‘sob stories’ we see on the media, on this or anything else. It has been said that government should give profit/loss figures. We are also told people will lose £1,000/£2000/£3000 a year but these are not proved with profit/loss figures either by the complainants. Many no doubt will be affected a lot less than these figures being put about.

    I saw a piece this morning about a mother, hugging toddler of course, saying she wouldn’t be able to buy toys, or swimming lessons etc.. for her child. And by the way, why do such parents think it such a good idea to do this sort of thing in the presence of their children – encouraged by the media of course? (It’s an old story) At least she didn’t say they would have to rely on food banks!

    Does she mean the child will be completely toy-less, or completely without recreation? I doubt it. It’s all relative, let’s keep our heads. We hear this kind of stuff the whole time, (different subject – same whinging) most people are better off than they admit to.

    The Lords must behave responsibly and not be stokers of trouble and division. There are enough elected MPs and others doing that.

    • Bazman
      Posted October 27, 2015 at 10:44 am | Permalink

      Any increases to such thing as luxury cars or property are however a blow for many rich and will produce a storm of national wailing from right wing newspapers and the like with them claiming that this is a blow to millions they live in houses and drive cars. Get real not Daily Mail real.

  21. Iain Moore
    Posted October 26, 2015 at 9:16 am | Permalink

    The Conservatives are in trouble with this because Osborne failed to make the argument before implementing the policy, and sought to play politics with it, in trying to steal Labour’s clothes on a ‘living wage’ , and hide some Government cuts, hoping that the sheer complexity of it would mean that it would happen before anybody realised about the consequences of the policy.

    Rather than spending his time as Constitutional expert, Northern Power House proponent, Chief Party strategist, Deputy Prime Minister, First Minister, Defense Secretary, Chief EU negotiator, and running a leadership campaign, he should perhaps spend more time on his day job of Chancellor of the Exchequer, which then might save the Conservative party from having to deal with his frequent omnishambles budgets.

  22. oldtimer
    Posted October 26, 2015 at 9:19 am | Permalink

    The direction of travel is right (reducing and then eliminating tax credits within the tax system). What the government needs to get right is the implementation – which should be getting the timing right to alleviate the worst impacts on the worst off.

    The LibDem Baroness Kramer made the preposterous claim, on the BBC Breakfast programme, that this was a welfare issue not a tax issue, thereby seeking to justify voting it down in the HoL. She seemed unable to appreciate that a tax credit has something to do with taxation and financial matters. With luck, cooler heads will prevail when the HoL votes on the issue.

  23. Mark
    Posted October 26, 2015 at 9:19 am | Permalink

    It is unfortunate that attempting to sort out the tax credit mess has been left on one side for later throughout the last Parliament. Had a start been made at the outset, the progress could have been more gradual, yet still achieving savings that are now lost, with plenty of time to adjust the system so as to focus on those with genuine need, while providing the right incentives. It now looks as though the rather larger cut that Mr Osborne wanted to impose will have to be moderated to allow just such a step by step programme.

  24. Anonymous
    Posted October 26, 2015 at 9:37 am | Permalink

    The Daily Mail features one Kim Farry – words left out ed
    Is this sort of thing really STILL going on ?

    It’s the gap, John. That between those who bother and those who don’t. There really needs to be one.

  25. Peter Stroud
    Posted October 26, 2015 at 9:53 am | Permalink

    This is another case where common sense was not allowed to prevail. The idea behind the general policy was both sensible, and in the medium term fair. But as so many others have said, the delivery was pathetic. Osborne should have found some way of sweetening the medicine. Some suggest phasing in the change. Or perhaps creating another short term fund made up from savings in other parts of the welfare budget. And by the way, Cameron must learn to be a little more straight forward.

  26. English Pensioner
    Posted October 26, 2015 at 9:54 am | Permalink

    Assuming that the payments to individuals drawing tax credits was justified in the first place, I am against any net reduction in these individuals’ income. Broadly, I feel that the government is trying to do the right thing and reduce reliance on the state, but between Osborne and the Civil Service, someone has made a total mess of the situation.
    I suspect the Civil Service, which seems to like to complicate even the simplest matter. Simple logic says that no-one receiving benefits should be paying direct taxation, but logic never applies to the Civil Service, their jobs come first so they probably have thousands of reasons why it is impossible to change the system.
    What has happened to the tax simplification that we were promised? Far from simplification, things seem to be steadily getting more complicated as in the case of child benefits where new rules were introduced so as not to pay them to high earners. Why pay any such benefits separately to those in work rather than simply adjusting their tax code? I suspect that this is far too simple, and would cost Civil Service jobs.
    It’s time something real was done about our tax system to simplify it and thus make it easer to catch the real tax evaders.

  27. Bert Young
    Posted October 26, 2015 at 9:55 am | Permalink

    Osborne is no psychologist . There is nothing wrong with his objectives but he has disregarded the level of public sentiment . If you want the donkey to move , first dangle a carrot ; the higher minimum wage is only as good as employment opportunity ; it does not have a direct link in areas of low employment . I do not believe in the mentality of getting something for nothing and I hate those individuals who abuse the system , on the other hand , there are those without choice and they must not be ignored .

    A re-think at this stage is no bad thing and giving ground to some extent may be inevitable ; the alternative could be a huge embarrassment to this Government .

  28. Tad Davison
    Posted October 26, 2015 at 9:58 am | Permalink

    Apologies for the brevity of this post, but this is a complex subject that really needs a fuller explanation to do it justice, and there just isn’t the space.

    The new Lib Dem leader, Tim Farron, made me laugh yesterday when he bragged about how his peers were going to block this measure in the House of Lords. I have spoken before about the inconsistencies of the use of the word ‘democrat’ in his party’s title, whilst they accept of the use of unelected people (as in the EU and the House of Lords) to force their preferred measures through, when they have been roundly rejected through the democratic process at the ballot box elsewhere.

    Turning to Labour, it’s in their DNA to create monstrosities of this kind purely for the sake of giving them the opportunity to say, ‘look at what we have done, we are on the side of the poor’. Yet predictably, Gordon Brown’s tax credit scheme was always going to become more and more expensive to the point where it was unaffordable, unless wages kept up thereby minimising the number of tax-credit claimants.

    Big businesses aren’t daft. They quickly saw how tax credits could subsidise their profits by compensating for the diminishing wages they paid. And if wages HAD risen, that would effectively make our unit labour costs less competitive with all manner of ramifications and consequences thereafter. So Labour’s ‘initiative’ set in train another disaster for somebody else to clear up, because it was inevitable that at some point, this nettle would have to be grasped.

    Whether wage suppression was ever going to encourage people work longer and harder, and thereby increase productivity, was always a debatable point whilst tax credits remained, but it sure made a lot of money for some, at the tax-payer’s expense. The changes the government now wishes to make seems OK to me in principle, but the timing is awful. You can’t (as one senior Labour MP wrote to me a few weeks ago) ‘simply hang people out to dry’. There has to be a transitional period where no-one, especially the poorest, loses out.

    The political price for not getting that transition right, is going to be as negative for the Tories, as the introduction of tax credits were initially very positive for the Labour party, despite the former being essentially good, where the latter was fundamentally flawed, littered with unintended consequences, and very bad in practise.

    Mr Osborne, you have been warned!

    Tad Davison

    Cambridge

    • Denis Cooper
      Posted October 26, 2015 at 12:48 pm | Permalink

      Well, our elected MPs don’t want an elected second chamber, do they?

      • Tad Davison
        Posted October 26, 2015 at 4:53 pm | Permalink

        Well they keep talking about HoL reform Denis, but we see little of it.

        It is said that a revising second chamber is a good thing, and who can deny that those with a lifetime’s worth of experience in industry and elsewhere can be an advantage in ensuring any legislation is well thought out, but I ask, how many experts do we really need?

        Apparently, according to some commentators, the Prime Minister might have to balance things up by giving out lots of new peerages. I could give the HoL a bit of input based on a lifetime’s worth of experience in the real world, and I wouldn’t mind getting £300 for just turning up and signing on, but I can’t quite see David Cameron asking me somehow. I doubt if I’m the sort of pliable, conformist person he wants. And therein lies the problem.

        Tad

    • Anonymous
      Posted October 26, 2015 at 1:03 pm | Permalink

      Tad – We live in a country with a surfeit of cheap labour and a predilection for importing more cheap labour.

      The only answer to this madness is to prop up everyone’s standard of living with the tax funded subsidy of employment.

      When this is withdrawn the reality of the mass immigration policy hits and the low paid will be the first to feel it.

      Taxation cannot be reduced if we keep importing poor people in vast numbers – unless we allow the standard of living to drop drastically.

      The reason for working tax credits was not to make everyone beholden to government (as others here have said) but to mitigate the impact of open borders on our workforce.

      This policy is wrong because it is only half a solution to the problem.

      • Tad Davison
        Posted October 26, 2015 at 4:26 pm | Permalink

        That point does have a certain merit Anon, and tells us much about real Labour values and intentions. They weren’t too bothered about falling living standards for the indigenous population, just so long as they could keep importing more potential supporters who would keep them in office in perpetuity.

        Tad

    • Iain Moore
      Posted October 26, 2015 at 1:21 pm | Permalink

      Cameron must feel a right chump having been made a fool by the Libdems , again. In the previous parliament Cameron gave the Libdems a voting reform referendum without getting anything in return, like boundary reform. In this Parliament he stuffed the Lords with Libdems , when they weren’t deserving any, only to have them vote down his Government’s policies.

      Not a very good negotiator is he? He gifts the other party the goodies only for them to rat on him. Isn’t he going to present us a promissory note from the EU , and then ask us to vote for the EU?

      • Tad Davison
        Posted October 26, 2015 at 4:34 pm | Permalink

        Iain,

        That one had me scratching my head too! I have looked long and hard for the logic behind it, and about the best I can do, is Cameron wanted to ensure he has plenty of pro-EU people in numbers in the HoL just in case he might need them later.

        The Lib Dems deserved to be annihilated, and a good Tory PM would have killed them off altogether, not given them a strong voice in another place.

        Tad

  29. NickW
    Posted October 26, 2015 at 10:06 am | Permalink

    What needs to be in the public domain is the amount of income tax that has to be paid in order to pay £1.00 of tax credit.

    Do the sums and publish the result.

  30. alan jutson
    Posted October 26, 2015 at 10:15 am | Permalink

    From comments so far, it would seem that many thought the Poll Tax was a good idea in principle (myself included) but was very poorly explained and implemented, hence the reason for its eventual withdrawal and failure.

    It would seem you did not learn the lessons from this past experience, and so are about to repeat exactly the same mistake again.

    If Osbourne had any common-sense he would either seek to explain the policy in full (with examples), modify the scheme for the better, or do a “U Turn” before he digs himself and your Party into a deeper hole.

  31. NickW
    Posted October 26, 2015 at 10:16 am | Permalink

    I read an interesting comment about U.S Government spending on poverty which suggested that Government spending does not alleviate poverty because the money spent goes on providing “services” to the poor, not to the poor themselves.

    The lobbyists are the wealthy middle class service providers who are the actual beneficiaries of the socialist spending model.

    Think BBC and NHS.

  32. Atlas
    Posted October 26, 2015 at 10:35 am | Permalink

    This is the second hole that Osborne has dug himself into. With such a track record will he really make a good leader in the future?

  33. Fairweather
    Posted October 26, 2015 at 10:48 am | Permalink

    Why would anyone work full time if their wages can be topped up by the taxpayer ?
    You only have to pretend to work 16 hours and have children to have your wages topped up .
    We know someone who does this and her total benefits exceed 2k a month
    There is so much fraud in the system the media are not mentioning
    Anyway having children is a life style choice and why should I, a taxpayer have to support other people’s children? e.g. The girl on question time

  34. Tony Houghton
    Posted October 26, 2015 at 10:53 am | Permalink

    Perhaps, John, you should do the numbers and publish them. It is apparent that the lower paid are losing out

    • Anonymous
      Posted October 26, 2015 at 11:38 am | Permalink

      Indeed they are losing out, Tony. Up to £2k a year.

      It would help if the EU allowed us to discern who is entitled to working tax credits in the first place. To help us control the problem caused by the subsidy of imported labour by means of in-work top-ups.

      Also £36k a year benefit (recipients as featured in the Mail today are receiving too much – paraphrasing what was written ed).

      Working people are easier to squeeze. The very fact that they are working means that they are compliant and reasonable.

      • bigneil
        Posted October 26, 2015 at 12:55 pm | Permalink

        “Indeed they are losing out, Tony. Up to £2k a year” – yet programs last year showed East European “travellers” – who had not paid a penny – never worked here – coming here for a NI number – and getting thousands a year handed to them – for NOTHING. One was even renovating his house back in Romania – on our handouts.
        Is there any wonder about the £1.5tr debt figure when a govt so far out of touch with reality hands cash over so easily – to the wrong people?

        • stred
          Posted October 26, 2015 at 6:01 pm | Permalink

          There was a Romanian chap shown on tele last year who was a building worker, if I remember rightly, and would have been earning over the minimum wage. He was young and did not have huge numbers of children. Even so, because his living costs at home were much lower, he could afford a large house in a scenic part of Transylvania and was sending money home for his wife to renovate it. If he lost tax credits, this would make this more difficult. But we need builders in London, as there are not enough British skilled workers.

          On the other hand, some (other migrant ed) was funding some ‘palace’ because he could claim for a large number of children. He could still come to the UK, work for a while, then claim for them on DHSS, even if he received no tax credits, with the giro going to a bank in (his home EU country ed).

  35. Tony Houghton
    Posted October 26, 2015 at 10:54 am | Permalink

    It is the transition that again has not been worked out!

  36. graham1946
    Posted October 26, 2015 at 11:10 am | Permalink

    I too wonder whether this is in fact a directive from the EU. If not, it should be. How is it that we are not allowed to help out the steel industry which is in genuine and quite possibly temporary need, because of competition laws, but can permanently prop up low wages offered by profitable companies by way of tax credits?

    The people concerned should not be the ones to pay. Either it needs doing more slowly, or the living wage needs to come in fully at the same time to compensate. There will be squeals from the IoD and CBI as usual, but so what? Companies don’t have votes, people do. Mind you directorships for failed MP’s are not offered by the poor.

  37. Julie Innis
    Posted October 26, 2015 at 11:35 am | Permalink

    John,
    Osborne is right on this one. Unlike our out of touch politicians in their Westminster bubble, especially those on the left, most of us know someone “who can’t afford to work more hours because they’ll lose their tax credits”. They do the required hours and the state pays them a full time wage. Brown killed their incentive to work longer than they have to do to provide for their families.
    The daughter of a friend of ours has just left her loving, hard working husband and father of her three children because she was ‘bored’. She knew her facts before hand, that the state would instantly give her £800 a month extra in child tax credits on top of her full time salary, child benefits and maintenance.
    Tax credits are a disincentive to work longer than the required hours. I hope Osborne sticks to his guns but I have a feeling he, and especially Cameron, will crumble and do a massive u-turn on this one.

    • fedupsoutherner
      Posted October 26, 2015 at 4:21 pm | Permalink

      I’m with you on this one Julie but the government should make sure that if the tax credits are withdrawn then the higher wages for the hours worked and the tax reduction should come in line. If not, they will get bad publicity and I think lose a lot of support. Too many people are now only working 16 hours a week and taking home a bigger pay packet than those working full time hours simply because they have kids. As for (a person who have lots of kids ed) – well, maybe she should have thought about that before having them all. After all she must be aware of the fact that contraception is free in this country and she is not living in the third world. I am sick to death of people having kids to enrich their bank balance and then having a grand time at my expense. People really must go back to being responsible for their own actions and if you can’t afford kids then don’t have them or go without all the perks you enjoyed before you did have them.

    • Bob
      Posted October 26, 2015 at 6:34 pm | Permalink

      @Julie

      “Tax credits are a disincentive to work longer than the required hours.”

      The tax credits system was designed by a socialist, and if socialists understood economics they wouldn’t be socialists.

      • Ken Moore
        Posted October 26, 2015 at 11:06 pm | Permalink

        Indeed they discourage people from working and taking a better paid job and encourage family breakdown – why would a couple going through a ‘bad patch’ stay together if nanny Osborne is happy to come along with his fat cheque book to the tune of £800 a month from the bank of mug taxpayer…..
        Then there will be free child care on top of that……if the government isn’t fit to engage in the running of steel mills or car factories…what is it doing interfering with and running the family home ??

  38. ian
    Posted October 26, 2015 at 11:59 am | Permalink

    Wet & mad and co what to deliver the bill before Christmas to upset the people before the money is dew instead of the people getting the pay rise first and then delivering the tax credit form to fill in and then do the adjustment to make sure nobody loses money but wet & mad want to make a profit out of the poor workers.

    It a petty and corrupt government

    • A different Simon
      Posted October 26, 2015 at 1:10 pm | Permalink

      Ian ,

      Hardly any company is making a profit worth talking about .

      UK wages are 3-5X wages in the developing world and the pound is ridiculously strong .

      Whether we like it or not UK wages and those in the developing world will converge .

      No politician will say this because they are dishonest . Yes this govt is corrupt but can you tell me one in the last 30 years which wasn’t ?

      The solution lies in reducing the cost of living – principally accommodation , not increasing wages .

  39. ian
    Posted October 26, 2015 at 12:34 pm | Permalink

    Nobody saying that tax credit should not go but there are more intelligent ways of doing it, they are little minded.

  40. ian
    Posted October 26, 2015 at 12:57 pm | Permalink

    At the end of the day, if the government wants more immigrant to come to the country it has to pay for it, in housing tax credits working tax credits and in social security and benefits. wet & mad should not be asking people that are already living hear to pay the bill.

  41. James Winfield
    Posted October 26, 2015 at 1:21 pm | Permalink

    This policy is not why I vote Tory and not why I am proud to be a Tory.

    It really needs to be amended so the poorest don’t suffer – Frank Field’s amendment should be seriously considered.

    How can it be fair to spend £1bn on increasing the inheritance tax threshold when some very poor people are going to be made worse off? How is it fair to have the triple lock for pensioners and insist on implementing this as it is?

    Corbyn and co must be secretly loving this.

    • Bob
      Posted October 26, 2015 at 6:42 pm | Permalink

      @James Winfield

      “How can it be fair to spend £1bn on increasing the inheritance tax threshold”

      If you had £100 in your pocket and I stole £80 from you leaving you with £20, would you refer to that £20 as my spending?

  42. Denis Cooper
    Posted October 26, 2015 at 2:32 pm | Permalink

    Off-topic, JR, has the government given any indication of how much we will have to pay into the EU budget after we have left the EU, so that we can still enjoy the privilege of running a trade deficit with them?

    http://order-order.com/2015/10/26/in-claim-out-uk-will-pay-for-no-say/

    “We’d still need to pay into the EU budget to keep trading freely with the EU”

    Reply Most countries outside the EU pay nothing, and so should we pay nothing

    • alan jutson
      Posted October 26, 2015 at 4:30 pm | Permalink

      Reply-reply

      I hope Mr Cameron and or anyone else who talks to the EU when we vote out will understand your perfect logic John.

      As important is for the leave campaign to highlight it will be nothing.

      The staying in, or the, We have given up everything to Brussels camp should be challenged on this latest nonsense.

    • ian wragg
      Posted October 26, 2015 at 5:42 pm | Permalink

      Denis, When Cameron comes home waiving his associated membership papers which are already agreed but will be sold as hard won, nothing will change and our payments will continue as normal.
      Gimmigration will continue unabated and we will be expected to join the Euro by 2025.
      Read the 5 Presidents and Spinelli document. It’s all there.

    • Denis Cooper
      Posted October 26, 2015 at 5:48 pm | Permalink

      You’re too generous, I reckon they should pay us for access to our market.

  43. petermartin2001
    Posted October 26, 2015 at 3:17 pm | Permalink

    The cutting of tax credits is part of this government’s plan to impose austerity on the poor in Britain. However, that they have ‘inherited’ a Tax Credits system in the first place is an indication of the failure of the Blair/Brown led Labour Government to effectively tackle the problem of low pay.

    Instead of legislating that employers pay a decent and living wage they had simply given the bill to the taxpayer. So, as I have made the point previously, there are good reasons for moving away from a system of tax credits to a system of having employers pay a living wage. However, the increased minimum wage proposed by the Government is insufficient to offset the loss of tax credits in most instances.

    In any case, whatever the arguments in favour of the change , they should have been made before the election not now. The only argument I have heard has been along the lines that Labour and Liberal Democrats did warn there were going to be cuts before the election. Since when has the Conservative Party allowed its economic policy to be explained to the electorate via other political parties? The Tory party ought to be ashamed of itself for not having the guts to come clean on this change six months ago.

    • A different Simon
      Posted October 26, 2015 at 5:51 pm | Permalink

      petermartin2001,

      Qu0te 1 “indication of the failure of the Blair/Brown led Labour Government to effectively tackle the problem of low pay. ”

      Quote 2 “Instead of legislating that employers pay a decent and living wage they had simply given the bill to the taxpayer.”

      Your position is that i) low pay is prevalent ii) that companies could afford to pay more .

      Would you dispute that the UK is one of the highest wage economies in the Europe and the World and that even low paid here are well paid on a world scale ?

      If so , isn’t the problem primarily costs – of accommodation thanks to financialisation ?
      Wasn’t letting the cost of housing , education and food get out of control Blair and Browns bigger failing ?

      Won’t widening the difference in wages between the UK and the developing world just drive companies out of business and jobs abroad ?

      In practice it is better for society to subsidise someone in work to the tune of £50/month than for them to join the dole queue and society to subsidise the family £250/month – with the devastating affect that has on relationships and children .

      • petermartin2001
        Posted October 27, 2015 at 1:21 am | Permalink

        “Would you dispute that the UK is one of the highest wage economies in the Europe and the World and that even low paid here are well paid on a world scale ”

        Yes that’s true in exchange rate terms, but we have to consider purchasing power too. Is it possible for a family live to live in London on a minimum wage, for example, given the high cost of living there?

        Ultimately the wealth of a country is defined by its GDP per person. But it doesn’t tell the whole story. The UK now is just about twice as rich, on that measure, per person as it was when Mrs Thatcher won her first general election.

        The argument then from the political right, then as ever, was that the problems of the poorest members of society would be solved by making everyone more wealthy. They would have berated those on the left for arguing that the cake should be divided more equally and instead argued for making the cake bigger.

        So we’ve now got a cake which is twice as big but still we have the same, or even a bigger, problem with poverty. There’s a greater need for foodbanks now than there was then and we have more homeless now than there was then.

        As the Americans would say : Go figure !

        • Edward2
          Posted October 27, 2015 at 8:33 am | Permalink

          We have more because we have considerably more people.
          Because poverty is a relative measure increased population automatically increases the number of people said to be poor.

          The failure is by the State which is wasting the greatly increased tax receipts from all the wealthy people and companies paying ever more tax.
          If they used all this huge amount of money efficiently the problems you mention could be largely eliminated.
          Sadly all the left do is blame the rich demanding they pay even more deflecting the ire away from where it should be directed, at the State.

        • A different Simon
          Posted October 27, 2015 at 11:36 am | Permalink

          Petermartin2001 ,

          Of course it isn’t possible for someone on minimum wage to live in London . That is true for most mega cities of the world .

          If it was possible then that would imply inefficient use of land .

          I specifically did consider purchasing power w.r.t. accommodation .

          Do you think there is scope to raise the wages of the lower paid Briton’s who work in the global economy or will their jobs just move abroad ?

          Or do you think the solution lies more with bringing the cost of living , particularly accommodation down ?

          • petermartin2001
            Posted October 27, 2015 at 8:15 pm | Permalink

            “Of course it isn’t possible for someone on minimum wage to live in London .”

            It’s good that you’ve recognised that. Because London does rely on workers of all kinds to keep the city functioning. So these workers DO have to live in London and other expensive regions, like Oxford for example which is possibly even more expensive that London.

            So to your question on accomodation: yes. We need to use whatever acommodation we have to its best advantage. It’s not just council tenants who should be penalised for having empty bedrooms! What about empty properties? Surely that’s much more of a problem.

    • Bob
      Posted October 26, 2015 at 6:47 pm | Permalink

      @peter martin

      “the failure of the Blair/Brown led Labour Government to effectively tackle the problem of low pay. “

      Low pay is a result of mass immigration. It’s not human rights lawyers, City traders or bankers that suffer, it’s cleaners, waiters and waitresses.

      • Anonymous
        Posted October 26, 2015 at 10:15 pm | Permalink

        Bob – The high cost of housing is a result of immigration too.

        High house costs/low pay is why there was a need for WTCs in the first place.

        • Bob
          Posted October 27, 2015 at 9:43 am | Permalink

          @Anonymous
          I’ll see your cost of housing and raise you schools, hospitals, GPs, the welfare budget, the police, social services and the transport infrastructure!

          All things considered, mass immigration was a mistake, and the Labour party have admitted it.

          Thank goodness for Mr “no ifs no buts” Cameron!

  44. stred
    Posted October 26, 2015 at 6:11 pm | Permalink

    One way of funding a delay or lower taxes would be to cancel the barmy Stonehenge tunnel, which will cost £2bn+ need permanent lighting, and could be replaced by a by pass through the pig farm, built in a fraction of the time. Or perhaps the equally barmy HS3, costing many billions more.

  45. Jon
    Posted October 26, 2015 at 7:01 pm | Permalink

    “The government should share with us more of its numbers on the pace of these changes”

    Yes good idea.

  46. DaveM
    Posted October 26, 2015 at 7:22 pm | Permalink

    I had my tax credits taken away a few years ago. Made a bit of a difference, but such is life.

    Regardless of what I think about the issue, it has totally changed my views on the HoL. Again, regardless of what they vote, the fact remins that it is an institution which is basically now full of unelected party politicians which don’t reflect the HoC – which it should do if it is full of politicians, otherwise unelected parties have power over elected parties.

    It would be a massive change, with a lot of work involved and a lot of archaic traditions put to bed, but it’s time to grasp the nettle. Make the HoC the English Parliament and the HoL the UK Parliament. You can still give people peerages, just don’t give them power. That would sort out so many problems. The place needs a renovation, and (without wanting to sound morbid) the Queen won’t be the Queen forever. So, all out, and all back into Westminster Palace with a new constitution and a new monarch in 10 years?

    I wish.

  47. Ken Moore
    Posted October 26, 2015 at 10:56 pm | Permalink

    Come on Dr Redwood, you well know tax credits have got totally and utterly out of hand to something well beyond a ‘safety net’. They are utterly unaffordable and completely unsustainable in their present form and act as a magnet for low skilled mass immigration.

    They were an instrument used by Gordon Brown to transfer wealth from the better off to potential Labour voters – part of his odious ‘client state’ experiment.
    They are routinely abused by both employers and employees. I am sick and tired of people complaining they are in ‘poverty’ because their children cannot have a new playbox or exotic holidays. Time to give spoilt Britain a reality check.
    It’s always the quiet silent majority that have saved carefully and spent wisely that get dumped upon – why should a noisy minority with a vested interest in stirring up the ‘poverty’ industry dictate policy ? .

    If you want more children or a higher standard of living..then work harder or cut your cloth accordingly. It’s all about me me me and my rights to this and that..but who is talking about personal responsibility and dignity in this debate.
    Who is going to speak up for people like me ?.

    Can someone explain how we managed to feed and clothe ourselves perfectly adequately before tax credits came in ?. If you reward people for being poor and needy ….you will create a society with more poor people..both in terms of finance and aspiration. This should be the message of the Conservative party – self reliance with a decent safety net for those in genuine need.

  48. Lindsay McDougall
    Posted October 26, 2015 at 11:38 pm | Permalink

    I understand that many MPs believe that the reductions to tax credits should kick in at a higher salary but with a faster taper than the 48% proposed by the Chancellor. Frank Field has some proposals. After today’s vote in the Lords, it looks like the Chancellor will have to change tack.

    Whatever happens, there should be no softening in the reduction of public expenditure. If all else fails, he should accelerate the sale of RBS and Lloyds shares.

    • Bob
      Posted October 27, 2015 at 9:54 am | Permalink

      @Lindsay McDougall

      ” If all else fails, he should accelerate the sale of RBS and Lloyds shares.”

      If he sells the shares the proceeds should be used to reduce our debt not fuel our welfare extravagance.

      Reply He is proceeding at a sensible pace, and the proceeds go to reduce the deficit, not the debt.

      • Bob
        Posted October 27, 2015 at 6:27 pm | Permalink

        @Mr Redwood

        “He is proceeding at a sensible pace, and the proceeds go to reduce the deficit, not the debt. “

        It can only reduce the deficit if he doesn’t keep giving it away.

      • petermartin2001
        Posted October 28, 2015 at 2:02 am | Permalink

        Bob,

        It can only reduce the deficit if he doesn’t keep giving it away.

        This is not necessarily true. Consider what happens to the smallest unit of currency ie £0.01p that the government spends into the system. If it is paid out as part of a salary then the chances of it returning straightaway in a tax or NI contribution is approximately 30% – depending on the size of that salary of course.

        If it is part of a benefit payment then the chances of it coming back straightaway on the first transaction are something like 20%. It will be exactly 16.666% if it is used as part payment of an item of clothing with a VAT rating of 20% but more like 40% if it is spent on an alcoholic drink in the pub. Or if its used to buy fruit and vegetables it could be 0%. Or if on a packet of cigarettes 80% ? You get the idea, I’m sure.

        So that penny will be either collected back in tax or passed on to the next person for the next transaction and odds of it being paid back in tax will be the same again. So sooner or later it will inevitably come back as a tax payment unless some child puts in in their piggy bank! ie If it is saved. That stops the tax man getting hold of it!

        And it is the only way we can stop the tax man getting hold of it!

        • Bob
          Posted October 28, 2015 at 9:16 am | Permalink

          @peter martin

          “And it is the only way we can stop the tax man getting hold of it!”

          Not really. One of the mechanisms used to reduce national debt is inflation.

          • petermartin2001
            Posted October 30, 2015 at 7:04 am | Permalink

            You’re of the opinion that inflation is a hidden tax ?

            Not really. It’s more a rationing mechanism. Inflation is just the rise of prices which always occurs when supply of real goods and services cannot keep up with demand.

            In general, ALL borrowers benefit from inflation and ALL lenders lose out. All readers of this blog who have bought their own house in their younger days, which I would have guessed might be the majority, will have benefitted by being able to borrow money at less than the rate of inflation to buy an asset which will have appreciated at more than the rate of inflation.

            Have they had to pay a hidden tax? More to the point, how much tax relief have they been able to claim on that negative real rate of inflation over the last 30-40 years?

            Those carping on about the younger generation should try and see things from their POV a bit more.

  49. Roy Grainger
    Posted October 27, 2015 at 7:46 am | Permalink

    I see several Conservatives MPs moaning about the Lords delaying the tax credit changes are the same people who refused to back Lords reform in the coalition government (despite it being in the coalition agreement). So, hard to have much sympathy for them, they wanted the Lords to stay as it is and now they suffer the consequences.

  50. a-tracy
    Posted October 27, 2015 at 9:51 am | Permalink

    Most of the people I’ve seen on the news and in reports that are losing out are single parent Mums whose children are in school that work short hours and have their pay made up with tax credits to a full time wage. How can you ever put up the NMW enough to sort that problem out? It was a new tax burden on the rest of the workforce created by Brown and it’s worked because we’re all trapped by it now. Encouraging more single parent households.

    You only ever hear one side, where is Osborne and the treasury? they should be answering about what they’re proposing, if you make someone’s wage up to £18,000 pa with tax credits for working a 25 hour week this would give a NMW of £13.85 for an un-skilled job to expect employers to do it. In years gone by when my mother worked part-time for example my Dad had to work a 60 hour week to fund it, but the majority of people in 1997 voted in a Labour government who decided ‘couple parents’ and other workers would fund a national ‘part-time working parent scheme’ for single parents the Tax Credits system, I didn’t hear that this would be an area that would be cut if we elected the Conservatives you should have been clearer then you’d have a mandate for it.

    • a-tracy
      Posted October 27, 2015 at 5:09 pm | Permalink

      The Guardian “Tax credits, which top up the wages of people on low incomes, were a flagship policy introduced by Gordon Brown when he was Chancellor. They now cost about £30bn a year.

      To qualify for working tax credit, an employee must work at least 30 hours a week, be at least 25 years old and earn less than £13,253 a year if single and childless or £18,023 jointly if part of a couple. The basic payment is worth up to £1,940 a year.”

      So are tax credits in addition to Housing benefit and Child Tax Credits?

      If a single person age 25 does 30 hours @£6.50 ph £195 pw £10,140 do they get tax credits to top the wage up to £13,000?

      How much would a single parent with one child earning £10,140 for a 30 hour week get in Tax Credits, Child Tax Credits, Housing Benefit I don’t know anyone that claims it to ask.

      Also with respect to the self-employed nail technician to get tax credits does she have to work 30 hours per week, does she have to pay herself the NMW?

  51. Bazman
    Posted October 27, 2015 at 11:06 am | Permalink

    Many on this site need to have a think as to the reasons why tax credits came into existence. The main one being to make work pay and ask themselves why work does not pay? They will answer that benefits are to high? Really? Willfull ignorance of the level of benefits and the cost of childcare does not help you and quoting oligarch funded nonsense from right wing newspapers is no way to go through life son.
    My family did receive tax credits until the Tories increased the threshold effectively giving me a tax rise and the more rich and comfortable a tax cut arguing that they somehow contribute more whilst receiving less and are somehow hard done by. As if. Idle rich in many cases with a large number just having this wealth due to circumstances. Past and present. Like the poor in fact. Entrepreneurs do not in general pay high taxes who are getting tax rises as it happen, just the ones who made it.
    What about the likes of us? We saw the writing on the wall paying off the house and taking non jobs close to home ,one of the millions who just turn up for work to pay the bills, raise a child and go to the pub. Where are we represented as non strivers or strivers who have done their striving and are not propping up company profits and tax havens for the rich anymore than we have to?

    • Edward2
      Posted October 27, 2015 at 5:22 pm | Permalink

      Come back paragraphs.
      All is forgiven

    • Bob
      Posted October 27, 2015 at 6:38 pm | Permalink

      “Where are we represented as non strivers or strivers who have done their striving and are not propping up company profits and tax havens for the rich anymore than we have to?”

      Yes Baz. Quite so, time for your lie down now.

  52. Bazman
    Posted October 28, 2015 at 6:24 pm | Permalink

    The interview with Stewart Jackson MP for Peterborough last night was telling. When asked “What representations did you make to the Chancellor about the 76% of children in your constituency who are affected by these cuts?” could not give straight answer. Funny that given as he is a big supporter of tax credit cuts in Peterborough and their MP. Looked like a character out a Dickens novel. Take a look and tell me its not true. Shooting the messenger will not help you here. C4 that is.
    Daily Mail writes about a constitutional crisis as if it is just political parlour game, but what else would you expect?
    Now you know what they are all about and what their priorities are certainly not the average person on 20k a year. The real middle classes. The gloves are off and now they face a real political fight. Lets see how they get along now even the most naive are seeing the true face of the Tories and where their priorities lie.

    • Edward2
      Posted October 29, 2015 at 3:47 pm | Permalink

      Tax credits just subsidise rich employers who pay low wages.

  53. sm
    Posted October 28, 2015 at 8:10 pm | Permalink

    So simplify . why haven’t we still not combined NI/PAYE ?.

    • petermartin2001
      Posted October 30, 2015 at 8:38 am | Permalink

      Simplicity isn’t always best.

      In this instance, elderly people who may pay income tax on their earnings but wouldn’t be entitled to receive unemployment pay would be adversely affected.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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