Working tax credit changes are low blow for the poorest people
April is the cruellest month, wrote the poet TS Eliot. And for thousands of families in Stoke-on -Trent, this will prove all too true. The government's austerity agenda is about to bite hard and we need to prepare for its impact.
This has little to do with last week's Budget. That was reprehensible in a different way: giving millionaires a £40,000 tax break while hitting pensioners reveals a strange set of priorities.
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PRESSURE: Changes to Working Tax Credit means some workers will have to look again at their stretched budgets.
Meanwhile, the Chancellor did little for our hard-pressed manufacturing sector, with no capital allowances for investing in plant and equipment, or relief for spiralling energy costs.
It's all very well cutting Corporation Tax, but our businesses need to post a profit first.
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No, next month's misery is the result of a choice made last November to change working tax credits.
Currently, couples with children have to work at least 16 hours a week between them.
From April 6, they will have to work at least 24 hours a week to keep their Working Tax Credit.
This may seem fair at first glance – after all, many parents are forced to work a lot more than 16 hours to make ends meet.
But most people working those hours are already on low wages, mainly in service sectors, such as retail and catering, that have been suffering badly from the recession.
They want to clock on for more hours but the work isn't there.
A survey conducted by USDAW, the retail trade union, found that 78 per cent of its members that stood to be affected by the change said they would not be able to find the extra hours they needed.
Indeed, this is one of the hidden stories of this terrible downturn, not just unemployment – which is at record levels – but also underemployment, as people are forced out of full-time work and into part-time roles.
What makes it worse is that, unlike the withdrawal of Child Benefit from higher-rate taxpayers, there is no tapering off from the tax credit if, for example, you manage to get a few more hours of work, but not quite 24. The entire credit, worth £3,870 a year, disappears without the extra work.
Even more perverse is that for some couples it might pay more if they give up work altogether.
For a couple which has only 16 hours of minimum-wage work between them, they will be £14 a week better off on benefits and that's even without factoring in expenses such as travelling to and from work. They would, however, cost the state an extra £2,675 a year.
From a Government which regularly boasts of its mission to make work pay, this seems an extraordinary own goal.
And it is not some small problem affecting only a few families.
The change will have an impact on entire communities.
Independent research shows that 212,000 couples are affected by this change and some 470,000 children.
In Staffordshire alone some 3,220 families will be affected, with 1,220 of those families based in Stoke-on-Trent. It means a significant real-term cut in living standard for 2,900 children in our city.
Of course, tax credits are not ideal. I would much rather we had an economy that had fairer rules in the first place whereby people's wages and jobs guaranteed their living standards without reliance on state hand-outs.
But the scale of the 'low-pay problem' in our economy is daunting; one million people get paid the national minimum wage, with five million getting paid between the minimum and the so-called 'living wage' of £7.20. And even this last measure is not sensitive to underemployment or the pressures of juggling work and family commitments.
The inconvenient truth is that for people on low and middle incomes, 'the squeezed middle', wage rates stagnated some time before the economic collapse.
Tax credits may not have cured the underlying cause of this situation but they were at least a response, ensuring that working people had enough to maintain their standards of living. They also stood as a sharp rebuttal to the myth that the last Labour Government was not a redistributive one.
But as last week's Budget revealed, those days are long gone. Now we have stealth taxes which redistribute wealth from pensioners to 50p taxpayers whilst pulling an extra 1.3 million basic-rate taxpayers into the higher 40p threshold.
We face tough times in the Potteries and from April 6 families will need to look again at their already stretched budgets.
Comments
by Billcawley
Tuesday, March 27 2012, 10:17PM
“Paying the poor less so that they work harder and paying the rich more so that they work harder does seem something of a contradiction”
by Johntoe
Tuesday, March 27 2012, 4:01PM
“ausiegirl,
and of course here in the UK huge numbers of the general public have been very well trained by our Tory puppet masters, to despise greed in the poorest among us, those few who cheat the benefits system are implied to be the majority, and we are encouraged to think of ALL of them, the sick, the disabled, the unemployed as "scroungers"
and yet when public opinion began to turn against the wealthy bankers and their bonus grabbing greed, We had Tory ministers warning us that we were in danger of whipping up a "witch hunt" against the poor hard done to bankers, No such concern is ever expressed for the poorest in society though,
and NOW they award the richest a tax cut and tell us "it will encourage them to work harder"
and then they threaten to cut the benefits (tax credits) of part-time workers, and tell us, "it's to encourage them to work harder"
and they have the SHEER BLOODY audacity to tell us, "we are all in it together"
Typical Tories 'P" ing on the poor while looking after their own.”
by ausiegirl
Tuesday, March 27 2012, 12:50PM
“Johntoe
here in oz we're in a similar situation where jobs are being outsourced to India and China. They do this because they can save money for the shareholders. What gets me is that, by doing this, they do not support our own economy and they do not contribute to the Indian or wherever economy either. The workers over there are paid a pittance and work an excessive amount of hours to feed their families. I don't begrudge them the work but they are being just as ripped off as the workers who lose their jobs here. It all comes down to getting the biggest profit for the shareholders.
Seems like the whole world revolves around greed.”
by Johntoe
Tuesday, March 27 2012, 12:20AM
“and when I say "Asians" stole my lunch in the 80s, I am, of course, referring to the stampede to sell our manufacturing jobs off to the lowest bidder in the far east, When bosses laid 10s of thousands of loyal British workers off, in order to exploit the terrible, almost slave labour, working conditions out there, in order to maximise their profits,
Throwing hundreds of thousands of Brits onto the dole and planting the seeds of what the Tories, ironically enough, now refer to as "the benefit culture"
Seems it's no longer "a price worth paying" in, 'Tories 2, the return of the beasts'”
by Nicky_Davis_
Monday, March 26 2012, 11:57PM
“For some reason the web link won't go in, it's a site that calculates tax credits which has a section on the April changes.”
by Nicky_Davis_
Monday, March 26 2012, 11:52PM
“null”
by Nicky_Davis_
Monday, March 26 2012, 11:51PM
“"Currently, couples with children have to work at least 16 hours a week between them. From April 6, they will have to work at least 24 hours a week to keep their Working Tax Credit." ..... unless, one of them is in prison! I kid you not.
null
"You'll also continue to qualify for Working Tax Credit if one of you works 16 hours or more, and the other: is in prison"
So a law abiding couple working 16hours per week will lose their working tax credit. On the other hand another couple on the same 16hours per week, but one of them is in prison, get to keep their working tax credit. Where's the justice in this? The world's gone mad!”
by Johntoe
Monday, March 26 2012, 8:36PM
“The Asians stole my lunch in the 80s, I used to work in manufacturing,”
by rich413
Monday, March 26 2012, 7:39PM
“Johntoe:
The companies that make huge profits also invest huge amounts of money. A £1billion pound profit may seem a lot but if you are using £100billion of capital to make it if would be better that you left the money in the bank.
And here lies the rub. If there is not a sufficient return on capital why would anyone invest the money to create the job in the first place?
If we legislate to make wages go up, and in the process that means that investors cannot make a decent return, then the investment moves to other shores and the job evaporates.
UK workers and companies have to compete internationally for capital. The UK Government has to compete internationally for capital. Due to globalisation we now all have to compete for everything. Unless we here in the UK wake up, reduce taxes and rip up reams of debilitating regulations the Asians are going to steal our lunch!”
by rich413
Monday, March 26 2012, 6:54PM
“It's not about loyalty Bill, it's about adding value. If businesses are to increase their profits they have to add value. The same goes for employees.
If you want a pay rise as an employee I advise you become really useful and add lots of value and then begin to suggest that you may leave. You will get a payrise in so that your employer can keep you. So actually dis-loyalty pays. Add lots of value and then threaten to leave - that's the secret!”