Working Tax Credits

Today, Tracey Crouch, a Conservative minister, said that families likely to be hit by George Osborne’s tax credit cuts should go without certain things, like TV subscriptions [LINK]. This is a familiar Tory trope, reminiscent of Edwina Currie a few years back claiming that food bank users waste money on dog food and tattoos [LINK].

One argument would be to point out that the Resolution Foundation argues that, in fact, these working tax credit cuts will not just hit TV companies in the pocket, but push many families into poverty [LINK]. This needs to be said, loud and clear, over and over, as Gordon Brown did yesterday [LINK].

But this is to accept the premise of the argument, that it would be a bad thing if recipients of working tax credits spent money on pay television. It’s this line of thought that I want to address.

Superficially, and in a self-centred way, the argument stacks up; why should “we” (the taxpayer) subsidize “their” television? This is what underpins the Conservative line of attack, although it’s worth pointing out that people who receive working tax credits are also taxpayers.

But where does it end? Pay TV is the example Tracey Crouch hit upon, but if you accept that logic, you’re effectively saying that anyone claiming working tax credit should be stopped from spending any money on anything that isn’t a basic human need. If TV subscriptions aren’t ok, presumably a weekend away can’t be justified? What about a trip to the cinema? Why should claimants buy Heinz beans when own brand versions are available? Where does this stop? Rule out pay TV, and the same logic compels you to rule out anything that is above the bare minimum for survival.

Is this the Tory vision for the future? Millions of hard-working families never able to have anything other than the absolute bare essentials? From the party of home ownership, too. What if a family used their working tax credits to help save so they could buy their own house? Surely that would tie in with the Conservative love of thrift, of climbing the ladder? Pick away at this and the Tory logic falls apart.

As well as pushing families into poverty and not making any sense, this is economically stupid. Poorer people, those likely to be hit by working tax credit cuts, have a much higher propensity to spend than richer people. Taking money away from poorer people will have a negative impact on economic growth, as the level of spending in the economy will fall [LINK]. This is not wise in the current economic environment.

So a policy which impoverishes families and restricts economic growth. Looking promising.

All of this may be more justifiable if steps were being made to reverse the impact elsewhere; potentially via a combination of reducing VAT, increasing the minimum wage and raising the personal tax threshold. But the Institute for Fiscal Studies has shown that, even after planned future minimum wage rises, people will be significantly worse off [LINK].

The question is whether Tories see any of this. There is some indication that certain backbenchers do, although this may well be in part motivated by electoral vulnerability rather than empathy for those likely to be impacted [LINK]. Tracey Crouch speaks of the problems the government is having with these cuts as being due to “communication”. This is horribly patronising — not only will Conservatives take the working tax credits away, they’ll tell you you’re too stupid to understand at the same time!

Tory policy on working tax credits right now is akin to taking a man’s crutches away and ordering him to walk. Sadly, many in this position will not be able to. With any luck, however, they may yet be able to give this heartless government a bloody nose.

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