Labour announce they will reverse Tory tax credit cuts

Shadow Chancellor John McDonnell revealed this afternoon that Labour would reverse the Tory cuts to tax credits. This comes after self-employed working mum Michelle Dorrell highlighted on Question Time that Conservative policies are not “making work pay.”

Michelle Dorrell said:

I voted for Conservatives originally, cos I thought you were going to be the better chance for me and my children. You’re about to cut tax credits after promising you wouldn’t.

I work bloody hard for my money. To provide for my children to give them everything they’ve got – and you’re going to take it away from me and them.

I can hardly afford the rent I’ve got to pay, I can hardly afford the bills I’ve got to do, and you’re going to take more than me.

The Labour party compared the tax credits changes to the community charge – better known as the poll tax, the levy introduced by Margaret Thatcher from 1989, that disproportionately affected poorer households, and which is believed to have contributed to her resignation in 1990.

Shadow Chief Secretary to the Treasury, Seema Malhotra, described the cuts to tax credits as a “turning point in peoples’ trust in George Osborne,” as she criticised the policy.

She was, however, criticised for seeming to “dodge” giving a straight yes or no answer on whether a Labour government would reverse the cuts during an interview on the BBC’s Andrew Marr Show. But it was announced last week by Owen Smith that Labour will attempt to overturn the cuts to tax credits introduced in the summer budget by tabling changes to the welfare bill due to be debated, and John McDonnell has further clarified Labour’s position.

Labour had already organised an Opposition Day Debate on the tax credit cuts in the Commons for Tuesday. Owen Smith, Labour’s shadow work and pensions secretary, said the Labour amendment would give Tory MPs one last chance to reverse tax credit cuts for 3 million families before they face a storm of protest in their constituencies about the changes when voters’ pay packets are hit next year.

He said that he wanted to offer Conservative MPs the chance to act before they face protests from constituents when cuts start affecting wages next year.

Already, some Tory MPs have increased pressure on George Osborne to soften tax credit cuts, after the former cabinet minister Andrew Mitchell urged him to do more to “ameliorate” the impact on the low paid. Mitchell told the BBC’s Sunday Politics that there were “two particular efforts we need to take now to ensure we minimise the impact on what you rightly say are hard-working and low-paid families.”

There were also surprising reports over the weekend that Iain Duncan Smith, the work and pensions secretary, wants extra support for those who are shortly to be told how much money they will lose.

The sweeping changes to tax credits, aimed at saving the Treasury billions of pounds, will affect millions of people and could cost some families up to £1,300 a year, according to the Institute for Fiscal Studies.

The cuts were announced by the Chancellor in July, and as well as raising concern that restricting this in-work benefit to the first two children has a whiff of underpinning eugenics, immediate concerns were raised that millions of low-paid working households would lose income.

Recent evidence provided by the Resolution Foundation reveals planned welfare cuts will lead to an increase of at least 200,000 working households living in poverty by 2020 as a result of the budget changes.

Furthermore, we are also witnessing wages drop lower than all of the other G20 countries, since 2010, the International Labour Organisation informs us.

In advance of the debate, Owen Smith has also written to the chancellor, George Osborne, demanding that the Treasury publishes a full assessment of the cumulative impact of the tax credit and benefit reforms.

Working families’ tax credit was introduced in October 1999 by the Labour government to replace family credit as the main form of support for low-income working families with children. It aimed to help reduce child poverty both by attracting parents from previously non-working  families into the labour market and by directing additional support to those already working but living in families with a low income. It was more generous than Family Credit: the credit amount was higher, there was more support for childcare costs included and the rate of credit withdrawal was lower.

The tax credit cuts will come into force from next April, with those affected expected to receive letters before Christmas informing them of the reductions to their take home pay.

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