I met with George Osborne’s PPS (Personal Private Secretary) and then the Chancellor himself last week to discuss changes to tax credits. The basic problem facing the Government is that the tax credit bill has trebled over the past decade and even senior Labour figures recognise that the tax credit system has not worked as intended.
Tax credits were intended to support those on low wages, not subsidise employers to pay lower wages. I support the general principle of tax credit reform because it is not realistic for the state to continue to subsidise employers, or for low earners without entitlement to pay for this through their income tax, and it is unreasonable to expect the state to pay these credits to people earning as much as £32,960 pa (this figure will reduce to £26,520 in April next year).
Having said this I spoke with George Osborne because I am concerned about the impact of these changes on families in West Cornwall because we have three particular issues. We have low wages, very low unemployment and have a number of people who are self-employed sole traders.
The overall budget package that includes changes to the income tax threshold and living wage will mean that people will be better off later in this parliament. In the meantime, our low-wage economy means that we will be disproportionately impacted and this will be hard on some families. Low unemployment means there is less competition for jobs and some workers will leave the jobs they enjoy and do well in pursuit of better wages elsewhere (Care and Support Workers and Teaching Assistants are particularly vulnerable to this). We will struggle to fill the void that will be created.
People often start their own business because they have responsibility for children or vulnerable members of the family and being a sole trader allows them to manage both simultaneously. It is right that we support these people and the early years of this tax credit change will have an adverse impact on their current circumstances.
With these local challenges in mind I, along with a number of other back-benchers who have concerns of their own, am asking the Government to give additional help to those worst affected by the changes to tax credits for low-paid workers.
I would like to turn to the debate on Tuesday. This was an opposition day debate. Labour are given 20 days each year for these opposition debates. These debates provide the opposition the opportunity to raise an issue they are concerned about. On this occasion they chose tax credit reform. As many of you pointed out a colleague of mine, Heidi Allen MP, spoke passionately in support of Labour’s motion. It may be useful to know that when the vote occurred she voted against Labour’s motion. I was personally unable to take part in the debate because the vast majority of it coincided with the Select Committee I am on and I am required to attend committee meetings. MPs are required to be present for the opening statements by the Government and Opposition if they want to speak during the debate.
Please be assured that I will continue to work to ensure that the changes to tax credits are fair and proportionate and I, along with fellow Cornish MPs will be meeting with the Prime Minister to discuss our concerns.
Whilst many families will not yet know how the tax credit changes will affect them a family with two children and a sole earner working 35hrs will have an income (pay/tax credit) of £20,322.