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Tax Credits and Austerity

tax credits

The issue turning out to be the biggest controversy for the new Government is the cut to tax credits announced in the July Budget. You may have seen the emotional scenes from last week’s Question Time as single mother-of-four Michelle Dorrell lambasted the Conservatives’ representative on the panel, Amber Rudd, for breaking their pre-election promise not to cut these credits. Ms Dorrell voted Conservative and was right to be angry at the Government – the ‘long-term economic plan’ vaunted by David Cameron and George Osborne was meant to be helping people like her, not squeezing their finances further.

Tax credits are a lifeline to millions of working families. Of course it would be desirable to be in a situation where tax credits are not necessary; where all employers pay their workers enough to support a decent quality of life. But the economy is far from reaching that position (and austerity must shoulder some of the blame for this).

Tax credits were crucial to the progress achieved under the last Labour Government in reducing poverty and raising living standards. If you want a healthy, growing economy you want people to have enough money to meet their needs – to buy a home, raise a family and not have to get into debt.

The cut to tax credits will affect more than three million working families, making them on average £1,300 worse off next year. The increased minimum wage, dubbed the ‘national living wage’, nowhere near makes up for the shortfall (particularly in the short term), leaving many at risk of falling into poverty and debt. In Bristol West a majority of children are in families receiving tax credits, and the constituency has the highest rate of child poverty of any in the South West. I am particularly worried about the impact in areas such as Lawrence Hill, where over 70 per cent of children live in poverty.

Having widespread inequality and poverty is just bad economics. That is why last month Labour MPs voted against these cuts to tax credits; why in tomorrow’s Opposition Day Debate we will vote against them again; and why if elected we would reverse them outright.

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