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.