No serious plan for the low-paid begins with making them poorer by cutting their tax credits
Alison Garnham, Child Poverty Action Group
What is the justification for the cuts? To those opposed to the concept of tax credits they are a handout. It is also fair to say that the tax credits system has long come under fire for being difficult for claimants to understand, equally challenging for HMRC to administer, and vulnerable to fraud and errors.
Allies of Osborne have said reduced tax credits would increase the incentives for people to work. Iain Duncan Smith, the work and pensions secretary, says: “We want companies to pay better salaries, which means less tax credits from us.”
What do those opposed to cuts say? Labour leadership front runner Andy Burnham has said he would oppose attempts to reduce tax credits for those on low incomes. Osborne has also faced opposition from some of his own colleagues.
The Fabian Society, meanwhile, has said that cuts to tax credits would lead to higher child poverty. And Alison Garnham of the Child Poverty Action Group says: “No serious plan for the low-paid begins with making them poorer by cutting their tax credits.”
Opposition has also come from business groups who have said firms cannot be expected to increase wages to compensate for cuts in tax credits. Labour has said there would need to be a 25% across-the-board rise in the minimum wage to compensate the lowest-paid workers if the government was to cut tax credits by £5bn.
Steve Hilton, Cameron’s former adviser, claimed in a recent Daily Mail article that it was a “complete travesty” that giant retailers such as Tesco and Sainsbury’s were making billions of pounds in profits while they are “subsidised by the taxpayer so they can pay their workers a pittance”.