Frank Field's proposals for 'tweaking' tax credits cut

pmlindyloo

http://www.frankfield.com/latest-news/articles/news.aspx?p=1021068

Hope it is OK to post on this forum as would welcome comments from those who regularly post on this board, particularly our tax credits 'experts'.

Am I understanding this that the less well off will see no change in their tax credits and the 'better off' will see a bigger loss?

Icequeen99

I think this is a terrible proposal. 65% taper for those on income over £13,000 seems far too harsh.

They need to look at it all in the round. You can't just consider tax credits alone - you need to look at how tax changes, living wage, housing benefit, council tax support, etc...all work together.

Of course the money has to be saved from somewhere.

IQ

BigAunty

Frank Field "Mr Field wistfully discloses: “I only wished my own side 15 years ago paid attention to the pernicious effects of wage subsidies [i.e. tax credits]. We might have won the 2010 election.”

Mr Field has “always opposed” tax credits because they subsidise employers that pay low wages. However, he is aghast at the way the government has gone about slashing them. He thinks tax credits should have been scrapped only when the new living wage was fully introduced.

http://m.insidehousing.co.uk/to-be-frank/7010862.article

[Gordon Brown's] policies have created a situation where a low-paid couple would have to put in a total of 116 hours of work a week to enjoy the same income as a single parent working part-time of 16 hours a week, it claims. The findings come from Frank Field. Mr Field said the system was so 'skewed' that it discouraged lone parents from forming stable relationships.



http://www.thisismoney.co.uk/money/news/article-1611034/Tax-credits-unfair-to-two-parent-family.html

"[Frank Field's big idea is] replacing the welfare state with giant mutual insurance schemes. Field's analysis is that the public's attitude towards welfare is that you should get out what you put in. The trouble is that when Labour was in power it did the opposite. Gordon Brown used means-testing to spray £30bn on tax credits as a subsidy for poor families. "


http://www.theguardian.com/society/2013/oct/29/frank-fields-welfare-contribution-plan
Mr Field proposed any new tax credits claimants be rejected, and those receiving them should gradually stop before 2020. - See more at: https://www.politicshome.com/economy-and-work/articles/story/cut-tax-credits-says-labours-frank-field#sthash.r5rx8lCt.dpuf
Mr Field proposed any new tax credits claimants be rejected, and those receiving them should gradually stop before 2020. - See more at: https://www.politicshome.com/economy-and-work/articles/story/cut-tax-credits-says-labours-frank-field#sthash.r5rx8lCt.dpuf

bloolagoon

Well that's labour siding with benefit claimants and more middle votes for Tories if they accept it. I wonder if this was a trap?

FBaby

So is he saying that those who work full-time on NMW should get the hit, but those working fewer hours, hence under the £13K shouldn't be affected, ie. let's continue to reward families to work as fewer hours as possible rather than those who actually put the hours in?

Sounds to me like the most ludicrous proposal.

MacMickster

Icequeen99 wrote: »

I think this is a terrible proposal. 65% taper for those on income over £13,000 seems far too harsh.

They need to look at it all in the round. You can't just consider tax credits alone - you need to look at how tax changes, living wage, housing benefit, council tax support, etc...all work together.

Of course the money has to be saved from somewhere.

IQ

I completely agree.

Earn an extra pound but lose:

65p in tax credits

20p in income tax

12p in National Insurance

So with the incentive of keeping only 3p of every extra pound earned then this is a huge disincentive to work overtime, increase working hours or take on a higher paid job with more responsibility.

Mersey_2

Frank Field's proposals - as ever - are right in principle. The whole point of Tax Credits for new claimants was to compensate them for their unused Personal Allowance re income tax the previous tax year.


So, if someone was unemployed last year; but, goes self-employed or starts work as an employee part way through the tax year, it makes sense to give them eg £55/week as a top up in WTCs.


But paying eg single 30-year-old people tax credits when they earn over £12k pa was never the intention.


Frank Field's amendments have Cross Party support ie individual Tory, Labour, UKIP, DUP MPs etc.


The Autumn Statement can be used to 'tweak' the implementation in the words of Andrew Mitchell MP.

tomtontom

MacMickster wrote: »

I completely agree.

Earn an extra pound but lose:

65p in tax credits

20p in income tax

12p in National Insurance

So with the incentive of keeping only 3p of every extra pound earned then this is a huge disincentive to work overtime, increase working hours or take on a higher paid job with more responsibility.

The problem here is one of mindset. We should work to be as self sufficient as possible, benefits should not be seen as an alternative to work.

Any solution should include a minimum of 30 hours work a week (excepting disabled people), including for single parents. Then work becomes an essential - you don't get a penny of support unless you're putting in those hours.

Mersey_2

True TTT. IQ - With Council Tax they won't be receiving any benefit at all - but that's Frank Field's point. If you earn over the NMW & Personal Allowance per year you shouldn't receive Tax Credits is his stance.

MacMickster

tomtontom wrote: »

The problem here is one of mindset. We should work to be as self sufficient as possible, benefits should not be seen as an alternative to work.

Any solution should include a minimum of 30 hours work a week (excepting disabled people), including for single parents. Then work becomes an essential - you don't get a penny of support unless you're putting in those hours.

I agree that we SHOULD strive to be self sufficient. We don't, however, live in a utopian society where everyone acts in the best interests of that society, and we never will. Self-interest will almost always play some part in the choices made. The benefit system therefore needs to give people a positive nudge to make the "right" choices for both themselves and society.

Take an example of a traditional 2 parent family with a child who has just started school. Dad (forgive the sexism) works 40 hours per week at the new £7.20 living wage. Mum is considering looking for a part-time job during school hours.

Under Frank Field's proposals, the family would be no better off with Dad working 40 hours per week than if he only worked 35. I certainly can't see him volunteering for overtime or to cover for absent colleagues.

If Mum was able to find a 15 to 20 hour per week job, after paying the costs of travel to work, and donations to the birthday clubs, charity collections etc that most workplaces have then the family could end up with less money in their pockets than if she didn't work at all. Despite the potential longer term benefits, in reality few people would actually choose to take that job.

Equally, if Dad was offered a supervisory position with a small pay increase of £1 per hour, but working unsocial hours on the nightshift, do you really think that the extra £1.20 per week that he would actually benefit from would encourage him to do this?

Frank Field's proposals would effectively trap families in their own poverty by removing any immediate incentive to work harder. It disincentivises the would-be strivers from taking the first steps to improve their lot.

FBaby

Frank Field's proposals would effectively trap families in their own poverty by removing any immediate incentive to work harder. It disincentivises the would-be strivers from taking the first steps to improve their lot.

I think that sums up the way tax credits were set up perfectly. Unfortunately, it's become so much part of the culture that people now think they are being victimised for not benefiting any longer for something that should never have been available the way it was in the first place.

Tax credits should never have existed. They should instead have provided more subsidised childcare and allowed the second adult of the family to claim JSA even if their partner worked full-time up to a certain income bracket, hence truly encouraging people to get into employment.