The Government defends its Tax Credit Policy by claiming that increases in the Personal Tax Allowances and the introduction of the £7.20 an hour "Living Wage" will compensate for the cuts in working families income. It won't.
I don't think the Chancellor has thought though his Tax Credit Policy, or his defence of it:
Firstly, those on the lowest incomes won't benefit from upping the Tax Allowances simply because they don't earn enough to pay tax. Second, while the 50p and hour increase in the Minimum Wage (now re-branded as the National Living Wage) even if an individual works 40 hrs a week, will only add £20.00 a week. (Note too that the NLW does not apply to the under 25s).
It's hard to find anyone who thinks George Osborne's Policy has any economic merit. Leaving aside pressure from poverty charities and the Socialists in the Labour Party, George Osborne is now having his Tax Credit Policy torn to shreds by his former supporters. The right-wing tabloid The Sun is running a sucessful "Hands off our Tax Credits campaign, Boris Johnson, the Mayor of london and hot favourite to take over from David Cameron before the next election, is saying that the "Chancellor has to do something about it..." and now key members of the House of Lords are making themselves heard.
It will probably take a few more dissenting voices from within the Conservative Party before the Government sees the error of its ways and there are already murmurings by some Tory backbenchers who are saying that George Osborne's Tax Credit Policy leaves a "Sour Taste" in the mouth, but pressure is certainly building against the Chancellor and the Prime Minister to think again on Tax Credits.
Whichever way you look at it the Government's Tax Credit Policy is a socio-economic disaster waiting to happen. You just can't take £1000 a year off working families and not cause suffering to the most vulnerable in society, the disabled, single mums, and the chronically low paid. If George Osborne is not very careful his Tax Credit Policy will become a political disaster for him too.
More on Tax Credits
Update 25th November 2015: In today's Government Spending Review the Chancellor announced a U-Turn in it's Tax Credit Policy.
How to Claim Tax Credits
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