The recent Tax Credit vote in the House of Lords has caused some controversy. Writing for Slugger, the DUP MP, Sammy Wilson talks about the vote and how other parties in Northern Ireland have approached this issue.
Following Jeremy Corbyn’s election as Labour Leader you’d have expected the cries of ‘Up the Workers’ to be ringing through parliament from the Commons. Yet this week it was the lords, ladies, barons, earls and bishops in the upper chamber raised the workers banner and defended the working poor from Osborne’s raid on tax credits.
The Parliamentarian anoraks went ballistic. This was an unprecedented attack by the unelected house on the will of the elected House of Commons. It was an undemocratic assault on the electorate who had given the Conservative Party a majority at the recent election. It overturned the unwritten rules of our parliamentary system that the Lords should not overturn a finance measure passed by the House of Commons but for the millions of low income people across the UK and the 109,000 in N.I. who were set to lose about £1100 per year on tax credits, I imagine the constitutional pin head dancing will not bother them one iota, they will just be thankful that the government has not got its way with an ill thought out policy.
The losses which thousands of low income families were facing from next year were due to a triple whammy through the reduction of the income threshold at which tax credits would be paid, the size of the reduction of tax credits for every pound earned over that threshold and the decision to limit payments to a maximum of two children.
The argument for introducing this change is that the existence of tax credits enabled employers to pay low wages and the tax payer then paid the rest through tax credits. This was unfair, it was administratively complex and the costs had escalated to £30bn per year so it was unsustainable. By reducing tax credits and imposing a National Living Wage which would gradually increase to over £9 per hour by 2020 workers would be no worse off, employers would be forced to pay their way and the fiscal deficit would be reduced. All this seemed a reasonable rebalancing exercise.
All great in theory but in practise nothing of the sort will happen.
First of all the tax credit reductions will happen immediately but the National Living Wage will be introduced over five years so incomes will fall. Secondly the National living wage will not apply to anyone under twenty five so they will get no compensatory increase in wages from their employer. Thirdly not every region or every sector of the economy has a buoyant labour market so some employers will not be able to afford the increase and of course those families with more than two children will lose out due to the two child policy.
The government has countered that other measures such as tax cuts, increase in allowances for child care and rent freezes in the public sector will also help soften the impact of the tax credit cuts. However all the economic analysis of the policy has shown that low income workers will finish up worse off and indeed the policy will act as a disincentive to work. So much for the government’s objective of making work pay.
It was on this basis that the DUP MPs and Lords opposed the government. The SDLP stood with us. Sinn Fein’s boycott policy did nothing for the working poor. Then we have the curious tale of the UUP. Despite their claims of opposition the UUP were notable for the absence. In a key vote in September 2015, Danny Kinahan MP was an absentee despite being in London. In the Lords, every peer who is presently or in the past connected with the UUP voted with the government or absented themselves. On the same day the two UUP MPs voted with the government to keep the tampon tax. Is UCUNF alive and well? Following its failure in 2011 did Nesbitt simply decide not to tell the voters in 2015?
Instead of railing against the turbulent toffs of the upper house the government ought to be thankful that they now have a chance to go back to the drawing board with this ill thought out policy. They owe it to those individuals and families who are struggling on low incomes not to add to their financial burdens.