Today the government will formally introduce its proposal to cut tax credits. 50% of families with dependent children in my constituency rely on tax credits, the majority of these are families in work. On average, the cut will see over 3 million families, 7,700 of them in my constituency, losing £1,000 a year.
During the General Election campaign, the Prime Minister and the Conservatives misled voters across the country over tax credits, consistently denying that the £12 billion of proposed welfare cuts would affect tax credits. The government’s justification for the cut to tax credits is the increase in the statutory minimum wage which will be introduced from April 2016 and phased in over four years. The cut in tax credits is a one off cut which will be made next year. The government’s argument that families will not be worse off as a consequence of the cut in tax credits because of the increase in the minimum wage is entirely false.
First, it is straightforwardly the case that a one off cut will not be compensated for by a phased increase in wages. At the very minimum, the cut and the increase would need to be introduced according to the same timescale in order for those who rely on tax credits to be no worse off. The Institute for Fiscal Studies has confirmed that it is ‘arithmetically impossible’ for the increase in the minimum wage to make up for these losses.
Second, the increase in pay applies only to people who are earning the minimum wage at present. Many of the households who rely on tax credits are on incomes – still low incomes – which are above the minimum wage. This measure offers nothing but a very harsh cut for these households.
I know, from my surgeries, inbox and conversations on the doorstep, that many people in Dulwich and West Norwood are under financial pressure. Independent research produced by Which? shows that there are areas of significant financial distress in the constituency, the cost of housing has increased very dramatically in recent years, and the staff at our local Food Bank report increasing numbers of people who are in work who are reliant on food banks because they are unable to make ends meet.
At the same time, the government is introducing a cut in inheritance tax for properties worth up to a million pounds, so the Tories can find money for millionaires, but not for working families on low incomes.
The proposed cut in tax credits is unfair and unjustified and will make life even harder for many people in Dulwich and West Norwood. This afternoon, I will be voting against this proposal.
I would like to see the government support a genuine living wage (not the current proposal which is not recognised by the Living Wage Foundation as a living wage), so that fewer people are reliant on tax credits; and action to address the high cost of housing which is a major cause of high expenditure on social security.