Autumn Statement - don't celebrate tax credit reversal just yet

Thu, 26/11/2015 - 14:05 -- nick

The Autumn Statement provides a second bite of the cherry for a Chancellor to clear up the mistakes they made in their budget earlier in the year.

Yesterday's gave George Osborne the chance to atone for his tax credit debacle, a chance he appeared to take with both hands.

Go back to the coalition years, and the Tories were keen to paint the unemployed as scroungers, people Osborne himself said were 'sleeping off a life on benefits' while their hard-working neighbours went out in the morning seething in anger at their moral failings.

This was always nonsense, based on discredited ideas like every town and city in the UK has equal access to jobs, all disabilities can be seen, and those who need help in looking for work and getting skills are well-served by government programmes.

But it succeeded in its own terms, setting low-paid workers and the workless against each other while the government cut tax for the richest and providing cover for its poverty-promoting policies, and it was partly responsible for the Tory win at the general election.

Any abandonment of this position was always going to offend those it had previously defined on the virtuous side. Hitting the benefits of workers made it look like the Tories were both impugning their morality and unfairly penalising those who had done everything asked of them, only to have the rug pulled out after doing so.

When even The Sun starts campaigning against your right-wing policies it is time to drop them, so there was no surprise when Osborne rowed back on his cuts, claiming that he was abandoning them all together.

While partly true in one detail, in reality they will be imposed along with Universal Credit over the next few years and some elements like child tax credit will still be cut, as Owen Smith MP, Labour’s Shadow Work and Pensions Secretary, said: 

“This is not the full and fair reversal we demanded, as he is still taking £1 billion from working families next year and over £3 billion by the end of the Parliament, as Tax Credits are replaced by Universal Credit.

“As a result, a single parent of two children working full time on the Minimum Wage on Universal Credit will lose £2,400 next year due to the Chancellor’s cuts.

“In short, this is a smoke and mirrors Spending Review from George Osborne, leaving working people worse off and failing to address the big challenges facing the country.”

Others weighed in to confirm this dishonest strategy, including the Chief Executive of Child Poverty Action Group Alison Garnham:

 “It was always wrong to cut support for working families in tax credits and it’s still wrong to cut help for these same families in Universal Credit, which replaces tax credits. The Welfare Reform and Work Bill going through parliament also cuts tax credits for families in a number of ways but it seems will go forward unchanged."

The announcement appeared to do its job though, gaining the immediate positive headlines that were its aim from newspapers too underfunded or ideologically compromised to investigate it properly:

Guardian: George Osborne scraps tax credit cuts in welfare U-turn

FT: Autumn Statement: George Osborne backtracks on tax credits

Standard: Tax credit cuts: George Osborne drops controversial policy in spectacular U-turn during Autumn Statement

Independent: Autumn statement: George Osborne cancels planned tax credit cuts after U-turn

Express: Autumn Statement 2015: Osborne SCRAPS tax credit cuts

Telegraph: Autumn Statement and Spending Review 2015: George Osborne scraps tax credit cuts

These are drawn from among many, but on the day the press was near-unanimous in its belief that tax credit cuts were gone for good rather than part-implemented now, part delayed until later.

There is another level of problem here too. Universal Credit is being rolled out in individual areas at different times: will those in identical circumstances but different locations receive different incomes as a result?

As always with this government, when it comes to benefit issues and poverty it pays to read the small print. Too few in the national press seem to have done so.