The past few weeks have seen intense debate on the subject of tax credits, and many of you have contacted me on this topic. I would like to take this opportunity to talk in some detail on the issues.
Firstly, as a country we are still spending far more than we raise in taxes – in fact around £1.5billion a week more. We cannot carry on doing this and leave our children and grandchildren with the consequences.
The welfare budget is the biggest single element of government spending. If we don’t make some savings in this area, all the cuts will fall on public services like the NHS, schools and the police. I don’t believe that would be right.
The three largest elements of the welfare budget are the pensioners, disability benefits and tax credits. I don’t believe it would be right to cut the pensions or disability benefits, which is why we have focused on tax credits.
Tax credits were introduced to help people in low paid work, but by the time Labour left office 90% of working families were eligible for them. But it is not solving the problem it was set up to address; at the same time in-work poverty rose by 20 per cent.
Second, tax credits allow employers to pay their staff less than they need to make ends meet, safe in the knowledge that the taxpayer will top salaries up. This isn’t right.
So there is a strong case for reducing spending on tax credits if at the same time we take action to ensure people are paid a living wage and pay less tax on what they earn. That is exactly what the Government is doing.
We are introducing a new National Living Wage, which is forecast to rise to over £9 an hour by 2020. We continue to increase the personal allowance, the amount of money you can earn before you start paying income tax which will be £11,000 next year and £12,500 by 2020.
When you take into account all of the welfare and tax changes announced in the Budget, most families will be better off by the end of this Parliament.
However, whilst I support the principle of these changes, there is no denying that some families will be worse off as a result. I am particularly concerned at the short term impact of people who work part time, the lowest paid and the self-employed, amongst others.
Last week I met with the Chancellor and made my views known that I believe some measures need to be taken to minimize the impact of these changes on the lowest paid. I will continue to press the case for some measures to be taken to address these concerns.
On Tuesday evening the Chancellor made the following statement with regards to the Tax Credit reforms -
'I said I would listen, and that's precisely what I intend to do. I believe we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy, while at the same time helping in the transition.
"That's what I intend to do at the Autumn Statement. I am determined to deliver that lower welfare, higher wage economy that we were elected to deliver and the British people want to see.'
I am delighted that he has listened to the many voices within our party and from the Lords and will bring forward measures to assist the low paid with the transition.
If you believe you are going to be significantly impacted by these changes please to get in touch with me so that I can make sure I can represent you in Parliament - firstname.lastname@example.org