david cameron and tax credits

cifpower

Businesses have been well treated in the past 5 years with various credits, reliefs and lower corporation tax. This was necessary so vast numbers of people were not dumped on unemployment. The government's view was that any job was better than no job hence increasing the personal tax allowance to try and offset higher inflation. This did have the effect of reducing tax receipts but it kept people in work.

Now the recovery has become entrenched, with the economy growing, interest rates and inflation still low, unemployment low and real wages rising quite quickly, businesses need to step up to the plate. They need to voluntarily increase wages and not rely on the minimum wage as a benchmark. Companies should be routinely paying well in excess of this.

The government will try to nudge businesses in this direction with quotes in the media today about "poverty wages". They will try and embarrass them into paying higher wages which they can then use as a positive in recruiting.

Hopefully the corporate world will realise that the less government spends on welfare which tops up wages, the lower the deficit will be and the more money government will have to spend on public services and infrastructure which supports both the public and private sectors.

barbedhook

Paid £1200 tax in year claimed £960 tax credits in same year stupid waste of everybody's time.

Pedent

NYM wrote: »

salaries will need to be increased to 'fill the gap'

But what's the mechanism that's going to cause that to happen? If employers wanted to increase wages, then they could have done that already.

If anything, workers will now be poorer (due to reduced tax credits), so more desperate for work, so more vulnerable to exploitation by low-paying employers.

For those who aren't desperate, the extra they get for being on in-work benefits rather that out-of-work benefits is reduced, so low-paid work becomes less attractive.

I just can't see how cutting tax credits will make either wages or employment go up.

andrewmp

Pedent wrote: »

But what's the mechanism that's going to cause that to happen? If employers wanted to increase wages, then they could have done that already.

If anything, workers will now be poorer (due to reduced tax credits), so more desperate for work, so more vulnerable to exploitation by low-paying employers.

For those who aren't desperate, the extra they get for being on in-work benefits rather that out-of-work benefits is reduced, so low-paid work becomes less attractive.

I just can't see how cutting tax credits will make either wages or employment go up.

Agree, I wonder how they can spin this so that it sounds like a good thing rather than just punishing the working low paid?

pmlindyloo

I suspect that the NMW will go up.

Some ideas from the telgraph:

http://www.telegraph.co.uk/news/politics/conservative/11690824/Five-ways-David-Cameron-can-cut-tax-credits-without-making-workers-worse-off.html

andrewmp

pmlindyloo wrote: »

I suspect that the NMW will go up.

Some ideas from the telgraph:

http://www.telegraph.co.uk/news/politics/conservative/11690824/Five-ways-David-Cameron-can-cut-tax-credits-without-making-workers-worse-off.html

NMW going up will make no difference for those earning in excess of the minimum wage already.

Lets say a family's wage earner is earning about £8 an hour, that'll be circa £16k per year. Increasing minimum wage in lieu of tax credits will do nothing to stop the financial hit that family will end up taking.

Naf

nannytone wrote: »

i think tax credits are part of the reason why many employers pay poorly.
they know that their staff will be topped up bu the state.

its caused a vicious circle of benefit dependancy and low wages, and unfortunately, the only way it will change is if the benefits are withdrawn.

What? How does that make any sense? Employers aren't going to change unless they are made to. There's a massive workforce of people looking for work, and forced to take any scrap of hours they can possibly find just for the privilege of staving to death slowly instead of quickly. People seem to think "If the benefits are cut, people will just find more hours; or they should stand up for themselves and earn more" - and that attitude is a joke at the best of times. In the face of cuts like the Tories are likely to implement, its sick. People are going to die.

barbedhook wrote: »

Paid £1200 tax in year claimed £960 tax credits in same year stupid waste of everybody's time.

I've never got how this isn't an obvious way to save? Stop messing around taking with one hand & giving back with the other, and just make the tax codes account for circumstances in the same ways that Tax Credits do now. There would still need to be some TC for people on very low incomes; but loads of people would still have the same amount of money in the end, by not paying it in tax in the first place. It would also make the figures more representative of what's actually happening i.e. the net payout of TC, because currently it just shows everything that's paid out, while more relevant is what's paid out that isn't just being paid back to people who paid that amount of tax.

andrewmp wrote: »

Agree, I wonder how they can spin this so that it sounds like a good thing rather than just punishing the working low paid?

With lies like IDS claiming no link between reducing people's benefits and reliance on food banks. The first thing this is going to encourage is higher benefit fraud.

zagfles

Pedent wrote: »

But what's the mechanism that's going to cause that to happen? If employers wanted to increase wages, then they could have done that already.

If anything, workers will now be poorer (due to reduced tax credits), so more desperate for work, so more vulnerable to exploitation by low-paying employers.

For those who aren't desperate, the extra they get for being on in-work benefits rather that out-of-work benefits is reduced, so low-paid work becomes less attractive.

I just can't see how cutting tax credits will make either wages or employment go up.

As an example, a worker in a low paid job may have the chance of a promotion which would mean more responsibility, more hours, but who may not want to take it because they'll be hardly any better off.

If there is now more financial gain to taking it, then they may be more likely to apply, and increase competition for the higher paid job, at the same time as reducing competition for the lower paid job. Basic supply & demand principles would then suggest the wages for the lower paid job should go up and for the higher paid job should go down.

Obviously loads of other factors will come into play. Interesting how much unemployment in London has gone down since the benefits cap was introduced...

andrewmp

zagfles wrote: »

As an example, a worker in a low paid job may have the chance of a promotion which would mean more responsibility, more hours, but who may not want to take it because they'll be hardly any better off.

If there is now more financial gain to taking it, then they may be more likely to apply, and increase competition for the higher paid job, at the same time as reducing competition for the lower paid job. Basic supply & demand principles would then suggest the wages for the lower paid job should go up and for the higher paid job should go down.

Obviously loads of other factors will come into play. Interesting how much unemployment in London has gone down since the benefits cap was introduced...

What about those without the opportunity for promotion who will be thousands of pounds worse off if the rumoured rollback to 2003 benefits happen?

pmlindyloo

I am the first to admit that I know very little about Universal Credit other than what I have read.

Does anyone else find it strange that DC should be jigging UC re tax credits?

I would have thought that altering the computer system would have cost more than the savings in tax credits.

This makes me think that the claimant committment is going to be tightened up, perhaps increasing the number of hours claimants have to work and tightening up sanctions.

There is no doubt in my mind that people take advantage of the current system. I see many clients who work the minimum hours because it's not worth their while to do more.

The whole system is a complete mess.