Tax Credit Cuts Punish the Poor

08 November 2015


TORY plans to reduce tax credits have been defeated in the House of Lords. This is a welcome setback for Osborne, but he is still determined to grab £4.4 billion from low paid workers and the self-employed. The Lords’ vote will delay Osborne’s plans by three years, but his Autumn Statement will reveal fresh attempts to implement these “reforms”.

Osborne has faced unexpected anger over his plans. This was highlighted by a tearful Tory voter on BBC’s Question Time who broke down saying, “You’re about to cut tax credits when you said you wouldn’t”. Tory MP Heidi Allen even used her maiden speech in the Commons to denounce the proposals — but couldn’t bring herself to vote against them.

The cuts would leave over three million families £1,300 a year worse off, and the House of Commons library estimate that some are due to lose £3,000 a year. They will significantly increase poverty in Britain, “cutting people’s ability to survive” as Jeremy Corbyn put it.

Research conducted by UNISON reveals that teaching assistants, social workers and other key public sector workers could lose more than £1,500, at a time when there is already a public sector pay freeze.

The Tory plans are part of a generalised attack that will see £12 billion cut from the welfare budget. Cameron’s “delight” at seeing these proposals passed by the Commons will not be shared by the up to eight million families who stand to lose out.

The changes involve freezing working age benefits and tax credits for four years, as opposed to the two set out in the Tories’ election promises. They also limit the child element of tax credits to the first two children for new claimants, when nearly 850,000 existing claimants have more than two children. But even for existing claimants, credits will be lost if there has been a break in their claims of more than six months.

Finally, the changes will reduce the income threshold to qualify for tax credits from £6,420 to £3,850, and also reduce the work allowances for receiving Universal Credit. This will hit people from both directions, if their already low incomes become “too high” as a result.

The Tories claim that raising the new National Living Wage to from £6.70 to £7.20 per hour will compensate for these cuts. But the Institute of Fiscal Studies say that this is “arithmetically impossible”.

And the National Living Wage is still lower than the existing Living Wage, which has no legal status. This is calculated annually and is currently set at £9.15 for London and £7.85 for the rest of the country. Osborne aims to raise the National Living Wage to only £9.00 by 2020.

The fact that these “reforms” have been delayed by Britain’s unelected House of Lords is hard luck for the Tories, the staunchest defenders of this archaic institution. And it is excellent to hear John McDonnell promise to reverse these cuts if Labour is elected.

But working class families cannot afford to wait that long for Labour, or rely on the Lords to come to the rescue. We need a labour movement prepared to take action on a number of fronts to scupper the Tory attacks altogether, a mass social movement that blocks every single attack on our living standards. Build the resistance in the workplaces and streets now!

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