When trying to pass tax credit cuts and the national living wage, did the Treasury have any idea how these measures would affect the poorest households? This point is made in the Spectator today by Fraser Nelson, who is one of the few people who does.It’s best to read the article on the link in the above paragraph, but I am listing a few points below.
- The minimum wage only affects the lowest 4pc of workers, and a surprising number of them are second earners in wealthier households. So the biggest cash gains will go to the richest households.
- Another problem with a £9 minimum wage is that it renders unemployed those whose skills are worth less than £9 an hour: the OBR calculates that 60,000 people – equivalent to the population of Aldershott or Margate – will out of work as a result.
- It is not true that tax credits supplement low wages. Wages don’t rise when tax credits fall.
- Under Osborne’s proposed tax credit system, some workers will end up keeping just 4p in every extra pound they earn, an effective tax rate of 96 per cent.
- Osborne’s tax credit cuts are a policy that might have been passed by MPs who did not properly understand the impact it would have.
It is upsetting and deeply troubling that a policy was nearly passed that had not been properly scrutinised, that would hurt low paid workers so badly. On the contrary, it was praised as a revolutionary measure that would benefit the lowest paid workers from “genius” George Osborne.
Fraser Nelson says:
“When we do not follow regular order—when we rush to pass bills a lot of us do not understand—we are not doing our job. Only a fully functioning House can truly represent the people.
Amen to that. Successive politicians and policymakers have taken a superficial approach to poverty and reform, passing bills that they do not understand. There is much interest in policies that generate applause lines in speeches and (now) much interest in a power struggle with the Lords. But not nearly as much interest in how these policies affect those at the bottom.
We forget these words at our peril.
Update: Nov. 4th. Support for Osborne nosedives after tax credit fiasco. George out of step with the Tory Party.
*The word “cockup” is not a swear word, says a senior member of the Word Reference language forum. He says “I’d say it is of general or common register. It strongly implies incompetence – it was ridiculous, a complete farce. For me, the use of “cock-up” denotes the strength of emotion and frustration which can only be expressed by such an expression rather than the lack of vocabulary or perhaps courtesy in using a banal swear word.