Westminster is getting its knickers in a twist over George Osborne’s proposed tax credit cuts. It’s not just the Labour Party; the big beasts of his own party have turned on him.
Breaking with tradition, new MP Heidi Allen used her maiden speech to become the latest Conservative to voice her ‘right on’ criticism of Mr Osborne, propelling herself to the top of the poverty virtue signaling league at one and the same time: “To pull ourselves out of debt, we should not be forcing those working families into it,” she said.
But in all this righteous concern for the poor voiced by Tory critics, who among them have asked whether the hundreds of billions devoured by tax credits since Gordon Brown first set this crazy juggernaut in motion have made families any better off than they used to be? How many children has this annual thirty four billion a year benefits bill – for that it what tax credits are – pulled clear of poverty? How many people, especially men, has it enabled to work full time? Has it, in short, been cost effective?
The most compassionate of conservatives would have to admit the answer to these questions is that it has not. Shame on the opportunistic Heidi.
Frankly any Conservative who does not acknowledge this byzantine family and work ‘support’ system needs reforming, if not dispensing with altogether, has to have a screw loose. In turn, this begs the question of how many have bothered to find out what tax credits are, how they came about, or how they have stifled ambition.
The criticism that should be pinned on George Osborne is his failure properly to explain why the time to abolish this chunk of Gordon Brown’s legacy is long overdue, why having 4.6 million of the nation’s families caught up in this tax churn is unacceptable; and why reform of family taxation needs to go hand with the abolition of tax credits. For he cannot do the latter without the former.
Here’s the rub. This is exactly what Osborne doesn’t want to do – either because he not facing up to what is inherently wrong with the ‘social’ agenda underlying tax credits or does not want to admit this truth to his feminist and lefty liberal friends.
For where we today have ‘tax credits’ we used, in the dim and distant past, to have a family tax allowance policy. That, later, was ditched in favour of a family credits and lone parent benefits. Tax credits are the ultimate great deception – the pretence of making non-economically viable families appear viable – the pretence that single parent households are OK and economically viable when they are not. The deception is that the problem is the lack of work. The problem, of course, is single parenthood and the lack of married couples.
Tax credits were Labour’s answer to the increasing numbers of households with only one parent and no breadwinner. As Professor Peter Saunders wrote in 2009 in his Policy Exchange pamphlet: “Today, only five per cent of couples with dependent children have no adult worker, but 40 per cent of lone parents do not work, and of those that do, few earn enough to cover the full costs of maintaining themselves and raising their children. For many sole parent families, government benefits have replaced the financial support that used to be provided by husbands. The result has been a huge increase in government spending.”
There we have it. George Osborne is hoist on the petard of feminism. He cannot condemn single mothers. He believes that the answer to everything is that all mothers must work. But tax credits, in effect, pay them not to.
Insofar as tax credits have become a byzantine and counter productive construct, just ‘cutting’ them back is flawed, as the insightful and clever Ryan Bourne of the IEA has pointed out here. If Mr Osborne wants to shift from a “high welfare, low pay” economy, to a “low welfare, high pay” economy, he has to address what tax credits are there for: a wage supplement to encourage employment or else simply a handout to reduce poverty? For child tax credits have no work requirements, and other households receiving working tax credits work less than a full working week. Ryan also points out that as credits are withdrawn, the interaction with taxes creates severe disincentives to work more hours.
Is George Osborne prepared to say that, Yes the aim of tax credits is ’to reduce poverty”? But this is the inevitable poverty of lone parent families and the radical shifts that have occurred in family life, which have created so many new problems?
Of course,it is right that people with children should be helped with the costs of raising them, but will the Chancellor tell us that what we have ended up with is a very costly and unfair system that undermines the independence and self-reliance of families, rather than promoting it.
Will he and his critics face the the truth that many of the tax credit billions have simply compensated for the absence of husband-fathers who used to support their families and no longer do so.
If he really want to shift families from relying on government hand-outs to greater reliance on their own earnings, then he had better come clean and face the need for radical reform, for replacing tax credits with a new system of family tax allowances.
This in turn presupposes the need for marriage. If we are to have an economically productive and socially viable society emerging from reduced state spending this is the truth that George – the product of one such married family – must face.