Lords Tax Credit Defeat Chancellor Rethinks

Lords Tax Credit Defeat Chancellor Rethinks.

Yesterday, the House of Lords rejected the Chancellors proposals for tax credit changes, although not a total rejection, a majority vote for suspension to rethink and even introduce compensation for those who will lose out was voted through. In short, the Chancellor must rethink the strategy for tax credits.

The benefits system is so complex and depends upon combinations of single, couple, single parent, couple with children under 20 in the house, other dependents, number of hours worked, salary etc, so rather than run through various combinations, we will just give a couple of examples of some cuts:

Child Tax Credit Changes Example
You have one child, you are not claiming Working Tax Credit, because you do not work, the income threshold into the house reduces from £16,105 to £12,125.

Working Tax Credit Changes Example

You are single, work at least 16hrs per week but earn less £6420 pa, you are entitled to 100% Working Tax Credit, this then reduces if you earn more and when you reach £13253 pa income you are not entitled to working tax credit. The £6420 limit is being reducing to £3850 so many people will face reduced and even no working tax credits.

We have seen various calculations online, via financial institutes, broadcasters and the like, and the common them is that on average, low income families face a reduction of around £1000 pa.

The government argues that people will be better off with the introduction of the National Living Wage and increased personal allowances. Clearly the House of Lords disagrees.

Comment

The subject of tax credits is a poisoned chalice left by the then Labour Government, as ever, political parties leave nice little ‘chalices’ for each other. The cost for tax credits has dramatically increased over the years and clearly the Chancellor wants to curb government spending but likewise, socialists do not wish to see children in poverty.

We clearly cannot comment either way and wish to avoid politics, so we do not envy this government or any other government making such decisions. Given that we have always worked and pay significant taxes, both corporate and personal, we want social policy to look after those that need help, but likewise those that could work and fundamentally never do we have little time for.

As fundamental changes needed?

We believe a move as large as starting the National Health Service back in 1948, is what is needed. Politicians need to stop ducking the issue. We all need to contribute to society and with an ageing population you cannot simple keep taxing ever higher those smaller numbers of the population that work hard. The government has astronomical buying power which is not being utilised. Why offer child benefits any way that can be spent on anything and do not have the economy of scale spending power that the government would have?

A national school uniforms company would dramatically reduce costs in this sector. A national ‘before and after’ school club scheme? Start schools early, say at 8am, with activities for better learning or sports after school? A national school breakfast and lunch scheme (don’t most schools have a kitchen which is only operational for a few hours a day (accepting preparation and clear up time)? Would these not dramatically help parents? Even those on lower budgets, to never have to worry that children are dressed for school in appropriate clothing, fed at least twice a day and with before and after school clubs would release more parents to work and contribute to society, those parents could even be employed to run the kitchens, uniform shops, after school clubs. There are 1.5m people unemployed, so there is no shortage of labour.

Is this a utopia that is impossible to find? Is it just too radical? Is there a business idea in this? We don’t know but certainly the system must change and simply cutting benefits as well as ever increasing stealth taxes for those that work will please some and not others, depending upon your circumstances.