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.
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.