Tax credit reforms
Over the last few weeks, an issues that has be dominating my inbox is the Government’s proposed reforms to tax credits.
The tax credit system was revolutionary when it was introduced by the last Labour government, allowing those on lower incomes to be supported by the state to help them gain skills and support their families.
But the scheme has become bloated. When they were first introduced, tax credits cost the taxpayer £1.1 billion. In 2015/16 that cost has risen to £30 billion and, if let unreformed, this bill will only in increase.
The Government was elected on a promise to lower the overall well bill by £12 billion. This would be impossible without making changes to tax credits.
It is right that the Government ensures that we are not subsidising low pay. The government should be working to ensure that we do not create the conditions that lead to people being trapped in low-paid work, and that is what these reforms will deliver.
Under the current system it is too easy for employers to get away with under-paying their staff. It is too easy for families to get stuck in low paid jobs. Like the reforms to out-of-work benefits, these reforms will result in more people enjoying the stability of a proper wage packet and being rewarded fairly for their work.
You hear a lot about the desire to create a high wage, low welfare economy. These measures are a major step towards that goal. Since 2010, the typical income tax payer is now paying £800 less than they were. The new National Living Wage will see someone on minimum wage taking home £1,000 more next year, and £5,000 more by 2020.
No-one is claiming these changes won't be disruptive for many family budgets. As someone who has grown up in a single income household, I know how tough times can get. The Government understands that, and will work to minimise the impact of these changes and I have personally voiced my concerns with the whips and ministers to push to ensure that it is a smooth process, and I do not want to see any family worse off.
The Chancellor will set out his final plans in the Autumn Statement this month. We can only wait until then to see what they will be. I trust the Chancellor to make the right decision for working families.