Over recent weeks there have been significant developments on the Government’s proposals to change Tax Credits, which a number of you have contacted me about. This Government is committed to balancing the books and stabilising our economy, and reform to Tax Credits are necessary to get the welfare bill under control, as we promised at the Election. The Tax Credit system was intended to support those on the lowest of pay, however under the current arrangements, nine out of ten families qualify for means-tested payments – supporting people in a way that it was not intended and in effect subsidising many large employers to pay low wages. I therefore strongly welcome the Government’s efforts to move to a higher wage, low tax, lower welfare economy.
I do however have real concerns that the reforms, as set out, will have too harsh an impact on the lowest paid when introduced next year before the full impact of the National Living Wage and the Personal Allowance tax changes are in place. I would have voted last month to delay the changes if the House of Lords hadn’t already prevented the original proposals from proceeding. I therefore welcome that the Government are now looking at measures to mitigate the impact of the change.