MPs argue to postpone Tax Credit Cuts

 

 

 

MPs tell Osborne to postpone Tax Credits. Image courtesy of: Flikr/altogetherfool

MPs tell Osborne to postpone Tax Credits. Image courtesy of: Flikr/altogetherfool

 

MPs have said that George Osbourne should postpone the proposed tax credit cuts for a year to enable a balanced debate over the issue.

The planned cuts were rejected by the House of Lords, leading the chancellor to outline a reformed plan in his upcoming Autumn Statement in an attempt to lessen the impact of the cuts.

The Work and Pension’s Committee have said that there is no “magic bullet” to protect low paid workers from the proposed cuts.

MPs have also accused the Treasury of being “Unacceptably evasive” as they have yet to outline how the different income groups will be effected.

Former Labour Prime Minister Gordon Brown, the “architect” of tax credits, has warned that these changes will “plunge almost another million families into poverty.”

There are also arguments that the cuts will undermine the benefits system, which is ironic as Mr Osborne announced his plans to cut £4.4bn from the tax credits system as part of plans to save £12bn from the welfare bill.

The changes are due to take effect in April 2016, though opponents are still arguing against these plans, saying that more than one million existing recipients – many of whom work but are on low incomes – will be some £1,300 a year worse off as a result.

The government argues that the majority will benefit from other policies due to the increase in the personal income tax allowance and the introduction of the National Living Wage.

The committee overlooking the credit plans argue, “The benefits to those who are helped are generally dwarfed by the cuts, especially in 2016-17.” By 2020-21, 78% of families will be on average £1,500 worse off in real terms, according to their report.

MPs have also cautioned Mr Osborne to “resist the temptation to raid Universal Credit” to pay for various tax credit adjustments. There are concerns that it would “either shift the burden to different low-income families or undermine the objective of making work pay”.

The committee of MPs have stated that they believe, “One of three things has to give: the impact on poverty, work incentives or the cost.

“We recommend that if, indeed, the effects cannot be satisfactorily mitigated, the government pause any reforms to tax credits until 2017-18.

“This would allow a broader discussion of the options in their proper context.”

A Treasury spokesman commented on the report, saying it was “out of date” as Mr Osborne had previously said he would listen to concerns and announce a new transitional measure in his Autumn Statement.

The spokesperson said the examples cited in the report failed to consider other measures the government had introduced or was introducing to support working families.

The House of Lords’ decision to vote down the government’s plans to cut tax credits induced warnings of a “constitutional crisis”, and paved the way for a review of the Lords’ powers.

The review of the Lord’s powers is due to be published before Christmas.

 

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