The Government’s policy on reforming the system of Working Tax Credits (WTC) has featured heavily in the news this week and been the focus of heated exchanges in the Commons. Many of my constituents have taken the trouble to contact me voicing their views and concerns regarding the impacts of these changes. I would again like to take the chance to thank those who chose to contact me. I am aware that the changes to Working Tax Credits (WTC) will affect many in the constituency and I share some of the concerns voiced by some of my fellow MPs.
In light of this I met with ministers from the Treasury and with the Chancellor of the Exchequer explaining my own concerns and those that had been brought to my attention. In these meetings I received assurances that the changes to WTC will not be as severe as reported in the media. I would therefore like to take this opportunity to explain why I have made the decision to continue support the Government on this issue.
Since the creation of the system of WTC the cost to the tax payer has ballooned from £1bn to over £30bn a year. Apart from the cost, WTC represents a direct tax payer subsidisation of the pay rolls and therefore profits of large businesses and corporations. Reforming the WTC is part of the Government’s strategy to devolve responsibility back to employers to pay their employees a reasonable wage. In this vein the new national living wage will rise from £6.70 to £7.20 per hour in April 2016. For an individual working an average 37.5-hour week this represents an increase in annual income of £1000. The living wage is also mandated to rise progressively to £9.35 per hour by 2020 which is an increase of over £5000 per year. Together with the Government’s efforts to raise the personal tax free allowance threshold this means that hard-working individuals will enjoy higher incomes whilst being able to keep a larger share of it. It is also heartening to see that 200 firms already shouldering their responsibility. Household names, like British Gas, Sainsbury’s and Costa Coffee, and are large employers in the constituency, have pre-empted the increase and are already paying their lowest paid employees more than the living wage.
In order to offset some of the changes the Government has also committed to improving access to Childcare, offering 30 hours per week to working parents, worth up to £5,000 per year. Working families will also benefit from the Government’s pledge for Tax Free Childcare, which is worth an additional £2000.
With these points in mind I have decided to continue to support the Government’s reforms to the system of WTC while ensuring those that find the changes affect them most have their voices heard in the Treasury. It is a key component of our desire to build a low welfare, low tax and high wage economy. That puts more money directly into hard-working families’ pockets re-empowering them to make economic decisions and encouraging a moral, contributing, compassionate responsibility to our society.