Tax credit cuts divide Tories

by Daphne Liddle

PRIME MINISTER David Cameron last Wednesday struggled to defend the Tories’ planned cuts to tax credits in the House of Commons after it had come under attack not just from Labour but also one of his own backbenchers, from the House of Lords and from the Adam Smith Institute.

Cameron claimed that cutting tax credits, due to come into effect in April, while raising pay was the “right approach” to reducing the budget deficit. If he had actually done that it would indeed be right to stop using tax payers’ money to subsidise greedy bosses who do not pay enough for workers to survive without help from the tax credits.

But his plans to raise the minimum wage (which he now calls the living wage) to £9-an-hour by the year 2020 is far too little and far too late to help families who face losing up to £1,300-a-year in tax credits while gaining only 20 pence-an-hour on the minimum wage this year.

Tory backbencher Heidi Allen stunned MPs when she devoted her maiden speech to a detailed criticism of the tax credit cuts. Allen said she had joined the party in the wake of the 2011 Tottenham riots in the belief they were the only party that could set the country right. But she said she could “sit on my hands no longer”.

“I became an MP to stand up for the vulnerable, to lead the way for those too tired to find it for themselves, that is the role of Government too,” she said.

“Conservatives pride themselves of living within their means, of cutting their cloth. But what if there is no cloth left to cut? How many of us really know what it feels li

And she attacked Chancellor George Osborne’s determination to commit his government and future governments to running a permanent budget surplus.

“I worry that our single- minded determination to reach a budget surplus is betraying who we are.” She told MPs it was not too late to avoid “getting things wrong” and the “timing wrong over changes to tax credits”. “The Prime Minister has asked us that everything we do must pass the family test, cutting tax credits before wages rise does not achieve that,” she said. “The pace of these reforms is s too hard and too fast. Too many people will be adversely affected. Something must give.” The new MP added: “To pull ourselves out of debt we should not forcing those working families into it.”

Labour leader Jeremy Corbyn said people would not believe the PM’s “reassurances” and accused him of “cutting people’s ability to survive”.

The Adam Smith Institute also warned that it will become uneconomic for many workers to stay in employment if their wages are not subsidised by tax credits. Deputy Director of the Adam Smith Institute Sam Bowman said: “Working tax credits are the best form of welfare we have, and cutting them would be a huge mistake. The Government has long claimed to want to make work pay for everyone, but cutting tax credits would disincentivise work and hurt those at the bottom of society.

“Contrary to the Government’s claims, the National Living Wage will do little to help those affected by these cuts and, according to the Office for Budget Responsibility, it risks adding insult to injury by pricing tens of thousands of workers out of the labour market altogether.”

The cuts also face opposition in the House of Lords where Labour and Liberal Democrat peers are set to vote against the cuts and crossbench peer Baroness Molly Meacher declared that she will table a motion halting the cuts.

Cameron reminded her of the Parliament Act of 1911, saying: “I think the House of Lords should listen to that very carefully and recognise it is for this House to make financial decisions and it is for the other House to revise other legislation.”

Shadow Chancellor John McDonnell accused David Cameron of telling an “outright lie” to voters on tax credits during the election and warned that the Tories will become the “new Lib Dems” unless they change tack.