Sunday , July 14 2024

Working Tax Credits – Resolve is needed

What a state we have come to.  The government, in furtherance of a manifesto promise is seeking to reduce, with the long term aim of eliminating, Working Tax Credits.

These are effectively subsidies paid to workers, who are not paid sufficient by their employers.  They were invented by Gordon Brown.  Brown was very adept at creating long fused bombs for successor Chancellors of the Exchequer.  In this crazy world of Brownomics, people get taxed highly and then get some of the tax that they have just paid, refunded to them.

The Conservative’s approach has been to increase the starting point when taxes commence.  This was a Liberal Democrat idea (also pushed by yours truly) however, the Conservatives, with a strengthening economy have taken this further than the Lib Dems dreamt of.

This surely is the right way to go.  Lift more and more people out of tax, altogether and therefore make work pay, for those trapped on welfare.  Linking this with a reasonable National Minimum Wage means that gradually, the lower paid get to keep more, or indeed all of the money that they earn, and the government gets their hand out of the pockets of the poor and ‘nanny statism’ starts to recede. How could it ever have been right, other than in the fantasy world of  socialistic policy, to take money from people through the wage packet and then give it immediately back?

One can expect die-hard Socialists to support the continuance of such lunacy – big government is what they are all about – but one would expect better of Conservative MPs.  I repeat, the Conservative manifesto included clear reference to the plan to reduce the deficit and to do so, in part, with cuts to welfare payments.  Did these rebellious Conservatives think that David Cameron and George Osborne had discovered the source of Labour’s evergreen money tree?  That welfare would be cut and no one would feel any pain? We need to get people out of the trap that Brown and Labour set for them.  Unfortunately, that means pain.  From a purely electoral perspective, what better time than at the start of a five year parliament?

As a country, we need to stop people ‘gaming’ the system.  Refusing to work extra hours because to do so, would jeopardise their benefits.  As a country we cannot afford it, neither in terms of an over-bloated welfare bill nor in terms of lost efficiency and opportunities in the workplace.

Much as I hesitate to create further issues with this matter, maybe some of the effect can be mitigated by incentivising employers to pay more in salary and wages to the low paid.  Something that gets them to paying above the National Minimum Wage much earlier. Maybe further reductions in employers National Insurance?  Working Tax Credits have acted as a subsidy from the tax payer to low-paying employers.  I doubt that even Labour didn’t intend that but this is a certain consequence.    It is estimated that low paid employees would need around 60-70p per hour extra, to make-up for the shortfall.  That ought to be possible!  Especially when one considers the years of the tax payer subsidy that employers have had!

Not for the first time, Labour is in a mess over Working Tax Credits.  Instinctively they oppose any welfare cut.  They just can’t help themselves.  However, they also understand that Brown’s lunacy has created both a welfare trap for people and a spending trap for successive governments.  So they find themselves in the position of opposing the reductions and yet not committing to reinstating them if they ever got back into power.  Typical Labour hypocrisy – vociferously oppose a measure while quietly hoping it goes through, so as to save yourself the bother of make the tough decision, in the future.

The SNP position?  Well of course, being socialist in nature, they too oppose it.  They are not too noisy about it though.  Maybe they are scared that some might say, if you are that bothered, why not use Holyrood’s tax raising powers and whack 3p on Income Tax, in Scotland and use the money raised to subsidise those Scots affected by the cuts.

There is also mischief being made by the Liberal Democrats and, of course, Labour, in the House of Lords.  They are talking about amendments and opposing the government’s actions by voting against them.  At the moment the Conservatives do not have a majority in the House of Lords.  This could be quickly changed and it should be made clear to these foolish peers that this is something the Conservatives would do.  This might give those peers, pause for thought.  After all, a Conservative majority in the House of Commons, already exists, imagine how much more radical the Conservatives could be if they also had an active majority in the House of Lords!  Maybe something for the ultra-political George Osborne to consider?

These Lib Dem peers know that their proposed actions fly in the face of parliamentary convention.   The Conservative government was elected, into a majority government, on a manifesto that clearly included the prospect of welfare cuts.  Indeed, many commentators attribute the success of the Conservatives, in the election, to their economic policies and the competence demonstrated in the last five years.  The Lib Dems have long held the belief that the House of Lords needs reform, I fear that this is how that will achieve it, though I sincerely doubt this will turn-out well for them.

The UK needs these cuts to go ahead.  Not just to be able to better balance the books but more importantly to wean people off of welfare benefits.  Conservatives must hold firm and do the right thing!

About Tom O'Brien

Tom is an English Conservative Christian currently working as a Finance Manager in Erbil, Kurdistan, Iraq. When not in Iraq, his home is in Grantham, Lincolnshire, United Kingdom; also the hometown of Margaret Thatcher.

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