Wednesday, October 28, 2015

A constructive way forward on Tax Credits

First of all, the tax credits system inherited from Gordon Brown is a bureaucratic and expensive nightmare which takes people who are doing the right thing and should be independent of the government, and turns them into clients of the state.

It was absolutely right to try to find a way to get away from that situation, but offset the losses to working people on low incomes caused by tax credit cuts with tax cuts aimed at the same people e.g. an increase in tax thresholds.

However, it was always important to listen to what people are saying about this and to try to implement the policy in a compassionate way. Following the House of Lords defeat we need to find a positive way forward. And however much the government may have a case in constitutional terms to argue that it was a misuse of the unelected chamber's powers to vote the way they did, it would be a serious political mistake to appear to be ignoring the concerns raised.

Although I disagree with some of what Tim Montgomerie has said on this subject up to now, his CapX article today with ten suggestions for a way forward on tax credits makes a lot of sense and I hope the government will take them very seriously.


Jim said...

Can someone please explain to me why tax credits were introduced. The whole system just makes no sense to me at all. You tax someone on their wage, then you use a selective method to decide who is eligable to receive their money back in a "state hand out" which is only really returning their own money, and then make that look like its the government helping?

how on earth does that work, why not, just Not tax the money, the persons own money, in the first place?

I just honestly don't get the idea, I never have done. Its like me forcing you Chris to give me £100 of your wages next month, then if you meet my criteria, that is you go to work in a clown suit for a week, you can have your £100 cash back, and then me advertising the fact I am helping you by paying you the £100.

Its just makes no sense at all.

Chris Whiteside said...

Why were tax credits introduced?

At the risk of sounding terminally cynical, because Gordon Brown thought they would help build Labour a client state which would lock people into voting Labour.

Jim said...


Nuff said.

Anonymous said...

Notwithstanding that we do need to reform tax credits, sometimes we have to accept we got it wrong, it is a pity that we got to the messy outcome with the Lords but I do hope George Osborne really does listen. We mustn't become victims of hubris otherwise the brilliant work he's done to get the economy on the mend will be undone by giving fuel to the braying opposition - who seem to be without sensible ideas of their own.

Peter Mc

Chris Whiteside said...

I think you're absolutely right there, Peter, and I also think he will do so.