James Cartlidge is the Conservative MP for South Suffolk.
One way of looking at the Tax Credit issue is to ask – what is a tax credit? You can best answer by saying what it is not: a Tax Credit is not a tax credit: it bears no relation to tax or NI paid.
A ‘tax credit’ as designed by Gordon Brown is means-tested income support. Its greatest cost and traction is in paying close to full time pay for those working part time hours.
Perhaps if we called tax credits ‘in work income support,’ some would be more willing to question whether creating a £30bn a year system of dependency at a time of general prosperity, for up to nine out of ten families, was a sensible idea.
Certainly, there is a need for greater honesty all round if we are to reform tax credits in our long-term interest rather than descend into a slanging match.
My position is not exactly ambiguous. I have spoken on this subject more than any other, in at least five interventions or speeches since being elected in May. I have been aware since 2004, when I started a small business, how critical this issue is.
I have said it many times before but it is worth repeating again, that my fundamental opposition to tax credits is based on experience: of staff declining pay rises because they would lose too much in tax credits; more commonly, of part time workers refusing any further hours due to the extraordinary generosity of their tax credit ‘top up’.
Trying to move Britain from a dependency culture is horrifically difficult, and I cannot see how it can be done without some pain. But the Government must be honest and not give the impression that no one will lose out (even though no Minister has actually said that).
One new intake colleague has confided to me that they support a compromise but would prefer it if we could at least be honest that some will be worse off. I have found in correspondence with constituents that when I am candid about my position they are actually more accepting, even if – naturally – they still want us to relent.
In particular, we need honesty from colleagues who want a u-turn. What would they cut instead? Would they cut benefits to pensioners or scrap the inheritance tax cut? There is sound logic here, but horrible politics. Cut the NHS or put an extra penny on income tax?
Or are my fellow MPs suggesting we cave in and just allow the deficit to rise?
That may in fact be the most likely fudge, but if we seriously think that the solution to our country’s problems is more borrowing and more benefits than we may as well pack our bags and let Mr Corbyn take over.
Some of the media are being, at best, disingenuous. It is all very well for the Mirror, but for other papers who want action on the deficit, it is fine for them to demand a u-turn, but I hope they will not criticise when the deficit turns out much higher than expected.
The usually excellent David Smith wrote in the Sunday Times (£) that the issue has been poorly handled by Government. It has not. It’s just downright unpopular, as people on low incomes will be hit hard in the real world.
Criticising ‘handling’ when the core of the issue is so controversial is the easy way of escaping accountability. The Government doesn’t have that luxury.
Finally, (and I accept, controversially) we need honesty from those affected. The system is intensely complex and actually working out how people will ‘win or lose’ is tricky. But you don’t save billions by creating winners.
It seems the worst hit will lose about £1500 per year, and implies they have six months to find about £30 per week, no small sum at all, but there are steelworkers who may have weeks to find an entire income. The big question is – are the many part-time working recipients willing to work more hours to be better off?
If so, then the right ‘compromise’ in my view, as hinted at by IDS’s office in the Sunday papers, is to provide targeted support for the worst hit over 6 months and beyond, including perhaps additional child care (which may cost the taxpayer, but far less than an overall u-turn and perhaps minimal in deficit impact).
But do the recipients want that? Or do those large number who are part time on full-ish time pay want to remain like that? If so, a u-turn will just be kicking the can down the road as we wake up to the fact that millions of recipients will remain permanently on welfare.
In many ways the most savage indictment of tax credits is the very row we are now embroiled in. If you use other peoples’ money to make millions of people dependent, it should be no surprise that when the nation’s finances hit the buffers those recipients become vulnerable.
Who is really to blame for that? Those who will fulminate against reform in Tuesday’s debate, particularly on the Labour side, should ask themselves that question and attempt an honest answer.