Cameron - tax credits2
Church of England

Tax credit cuts: Bishops regret "short-term impact", but not the PM's sophistry

 

Tax credits are not given to shirkers, but to strivers. They are paid to the lowest-earning families in society to help them feed their children. There is a ‘working tax credit’ and a ‘child tax credit’, and the average claim was of £6,340 a year. It’s all quite complex in the calculations, but, absurdly, if you had three or more children, it meant that you could claim tax credits even if you were earning as much as £65,000 a year.

There are moral arguments for retaining the system (it helps to make work pay), and arguments for scrapping it (better to reduce income tax,  raise the minimum wage and reduce welfare spending to something sustainable). There is also an argument for some sort of transitional arrangement so that those who really do work hard to live on the breadline can still afford their daily bread. The national debit and lingering deficit are not the fault of hardworking families, but this system does need reform. Higher wages are always going to be preferable to burgeoning welfare.

The Rt Rev’d Christopher Foster issued the following statement in the House of Lords:

The Lord Bishop of Portsmouth to move, as an amendment to the motion in the name of the Lord Privy Seal, at the end to insert “but this House regrets that the draft Regulations fail to take account of concerns about their short-term impact on working families and individuals currently receiving tax credits, and calls on the Government to consult further on the draft Regulations and revisit their impact.”

This is quite tractable. It isn’t a demand that we carry on spending and living beyond our means. It isn’t an insistence that we continue with Labour’s fiendishly complex tax credit system and burden our children and grandchildren with the bill. We’re talking about a saving of £4.4bn a year – some £20bn over the course of this parliament – and every little helps.

The thing is, the Prime Minister stated very specifically that he would not do this. Just days before the General Election, he was asked directly by David Dimbleby on a special edition of BBC Question Time:

Dimbleby: “Clearly there are some people who are worried that you have a plan to cut child credit and tax credits. Are you saying absolutely as a guarantee, it will never happen?”

Cameron: “First of all, child tax credit, we increased by £450..”

Dimbleby: “And it’s not going to fall?”

Cameron: “It’s not going to fall. Child benefit, to me, is one of the most important benefits there is. It goes directly to the family, normally to the mother, £20 for the first child, £14 for the second. It is the key part of families’ budgets in this country. That’s not what we need to change.”

Of course, political sophistry in order to curry the people’s favour is nothing new: democratic politics has not changed since Plato wrote about his ship of state. And there is manifestly some confusion about what the Prime Minister did say or intended to say in this exchange.

But the “regret” of the Lords Spiritual would have been of greater moral force if, in addition to making appeal on behalf of those three million hardworking families who will lose about £1000 a year, they had reminded the Prime Minister of his word, which ought to be his bond. After all, if the Prime Minister is elected having apparently given an assurance that something will not be so but then he makes it so, is it not the function of the Upper House – and especially of the Lords Spiritual – to breathe a little truth into proceedings; to gently rebuke, correct, wade through sophistry and train in righteousness?

Or is it that they are bound on the same whirling wheel, and see through the same glass, darkly?

  • Dreadnaught

    Quite so Cranny. If Christianity is to survive in UK it need to get political; even form its own Christian Democractic Party. Labour is a Dead Polly. All politicians whatever their colours, need reminding that they serve the whole country and while there is no valid Opposition: the door is wide open; for good or bad.

    • David

      I suppose the term ‘Christian Democrat’ covers a broad spectrum. So it depends upon what you might mean by that, in terms of policies. But the German and other similarly named parties of continental Europe seem strangely reluctant to defend any Christian heritage, incredibly keen as they are to suck in ever more millions of Muslims who, though they may not be actively anti-Christian, will in fact, by sheer force of numbers, acting through the democratic process, displace Christian derived ways of forming society. Perhaps you have in mind something a little more robust regarding the role of Christian heritage derived thinking, in relation to our laws, constitution and general cultural approach to … well everything ?

      • Dreadnaught

        Waffle like this will attract no one. Sorry I woke you.

        • Manfarang

          For God and Ulster-the Protestant Unionist Party.

  • len

    The divisions in our broken society are ever widening and ‘the working poor’ are probably the worst treated of all. This Tory bill to kick away the last support of the working family will further add to our broken society and the ever widening gap between the have’s and the have not’s.
    We seem to have a leadership politically and economically who are completely detached from the reality that most people face daily.

  • Anton

    Tax credits were Gordon Brown’s sneaky and expensive way of enacting further redistributive taxation. Because they work as supplements to low income, they disincentivise fulltime work and the transition to better-paid jobs.

    Figures from the Office for National Statistics reveal that, although the average pre-tax earnings of the richest 20% of our population are 15 times higher than of the bottom 20%, the post-tax-and-benefit figure is 3.7 times, while per hour the richest earn only 60% more than the poor. A part-time couple can get the same as a barrister. Just where is the incentive to better oneself today?

    Tax credits harm productivity, which averaged nearly 2.5% pa for the three decades before the 2008 crash. Since then it hasn’t grown even though GDP is at new highs and unemployment has dropped (from 8.5% at its peak to 5.4%). That is because the new jobs are part-time or self-employed – because, in turn, in order to get tax credits and other in-work benefits, claimants must either work 2 days/week or, if they are self-employed, declare that they do. This work is secondary to the benefit income and is consequently unproductive.

    In detail, part-time work pays an average of 6500 pounds/yr, entitling claimants to the maximum tax credit of 6340 pounds. That in its turn entitles renters to housing benefit of 14260 pounds and council tax of 1400 pounds, making a total handout of 22000 pounds (the figure is capped at 26k). A typical part-time couple might earn only 8 pounds/hr for 2 days of the week, but that is tax-free and benefits can take the family’s income after tax to at least 36k before the cap is reached, matching the post-tax earnings of barristers or GPs. There is no incentive to work more than 16 hours, and it is not a coincidence that the median number of hours worked by part-timers is 16.1…

    This system would need reforming even if it didn’t cost taxpayers money. As it is, tax paid in 2014/5 was 604 billion pounds and total government revenue 646 billion. Expenditure is 736bn, making for an annual deficit of 90bn (commonly divided into 45bn interest on loans and a remaining ‘structural’ deficit’ of 45bn). In the 7 years since 2008 the national debt has risen by more than 900bn, because of the rapidly rising welfare budget. Since 1999 welfare spending has risen by 50% post-inflation to 214bn. This extra 71bn of welfare spending exceeds the structural deficit and is a threat to all other spending on the NHS, education, defence etc.

    The debate that matters is no longer about unemployment benefit but about these figures. Those who grumble about cuts to tax credits need to be asked what should be cut instead.

    • sarky

      The idea is good but the system is not. When I was starting on my career and my wife was in nurse training, they were a godsend. However, when my wife qualified and I started up the slippery slope we found we didn’t need them and tried to cancel the claim, only to be told that ‘your entitled’ just take the money. It was only when we were earning significantly more than the threshold that they actually stopped. The government basically paid my beer money for a couple of years!!
      If credits could be targeted in such a way that they only helped people meet their basic needs (food, heating, shelter) then good, but if they are paying for luxeries then they need to be stopped.

      • You could have donated the money to a worthy charity rather than spend it on beer – or trips to the local Pound Shops.

    • IanCad

      Thanks for that Anton. A lot of time and effort must have gone into it.
      Makes us more appreciative of HG who does such on a regular basis.
      I am not up on the economy of this land – your post has been very helpful.
      Thanks again.

      • Anton

        The hard work was done by one James Ferguson in an article in the current issue of Money Week, which I merely summarised.

    • And employers pay low wages for full time work too because they know employees can make up their wages with tax credits which they tell them to go and do.

      • Anton

        Yes, economics is full of knock-on consequences which the dishonest and the incompetent ignore.

    • IanCad

      Anton,

      Am I understanding correctly that, if say, a man working at B&Q for 15 hours a week, earning about a hundred and ten pounds per week; was offered a job that paid three hundred and fifty pounds for thirty three hours work he would have little incentive to take it?

      If indeed, that is the case, such governmental largesse/irresponsibility is unsustainable and almost criminal in its effects.

      • Anton

        I believe that is indeed the case. It is why a vicar of my acquaintance actually found someone a job only to have the offer rejected. Iain Duncan-Smith has come in for much criticism for his welfare reforms but this is what he is up against and it is the poisonous legacy of Gordon Brown.

        • IanCad

          Makes it rather tough for new businesses to recruit, as I see it.

    • michaelkx

      tax credits are a excuse to pay low wages and O- hour contracts. and to maximise profit. vote UKIP they could not do any worse could they?

      • Anton

        Tax credits muck up both supply and demand. The issue of zero-hour contracts is a bit more complex. It is better known as casual labour and many people prefer to be employed on that basis. Large employers are prone to abuse it.

  • David

    Making full-time workers dependent upon hand-outs from government is simply a device to solidify a group of permanent Labour voters, as client – supplicants of Big State. This does not assist anyones self-esteem or stimulate self-reliance, let alone ambition. The morally preferable approach would be to encourage higher wages, so that a full time worker does not require extra state top-ups, thus building self-reliance, individual industry and, in time, ambition.
    However Labour’s commitment to the EU and the free movement of all workers, even foreign low skill ones that offer nothing unavailable within the UK already, frustrates a healthy upward pressure on employers to increase wages. It all equals an incoherence of policies, but of course helped to retain Labour in power. It is a very cynical approach that merely uses but not assists the less well off section of our society.

  • chiefofsinners

    Lots of comment here about the necessity of reforming tax credits, but not much on the actual point of the article: Cameron is a bare-faced liar and the noble upper house has become little more than a vicars and tarts party.

    • Anton

      Hardly a basis for discussion, though, is it—ie, who is going to prove the opposite, and how?

      • chiefofsinners

        Many issues arise. The moral authority to govern if elected on false promises. The damage done to democracy – by a government that considers democracy a basic British value. The raison d’être of an upper house or of Lords spiritual.

        • Anton

          Ah, you edited it from “raisin d’etre”. I was going to make a joke about wine. More seriously, those are substantial points – go for it!

          • chiefofsinners

            Predictive text, my old nemesis. Perhaps Cameron could use that as an excuse…

          • Phil R

            I agree the issue is the lie(s).

            Cameron does not care because his calculation is that nobody expects or expected him to tell the truth.

            Corbyn is going to be a problem in the long run, not because of his polices, but because he offers an alternative and people will believe he will do what he says

          • chiefofsinners

            Politics has reached a new low if Cameron is operating on the basis that no-one expects him to tell the truth, but it’s hard to argue with on the present evidence.
            I notice that George Osborne has said that tonight’s Lords vote ‘raises constitutional issues’, as if lying to the electorate is just fine, and how dare the Lords do anything about it.

          • michaelkx

            it would be good if we the poor souls that are governed by this government could hold them to account. but we can not till the next general election, by which time a certain person ( I can not say gentleman) will hope we the poor fools who voted him in would have forgotten, what he has done. So may I suggest to my fellow members of this flock we write it on the wall or some place that can not be missed the sins of this forked tonged disreputable person and his friends, and vote UKIP.

          • chiefofsinners

            It happened last time around with same sex marriage. No-one should be surprised.
            I think the government is secretly rather pleased about this defeat. It gets them out of a hole. In their 70 most marginal seats the number of losers from the tax credit change would have been greater than the Tory majority.

          • Anton

            4.5 years is longer than most people think which is why now is the time to make unpopular changes. Lying is wrong, but so are tax credits as I detail lower down this thread.

          • chiefofsinners

            …and two wrongs make a right. No, actually they make a budget deficit and a democratic deficit.

          • Anton

            Spot on! But how to vote if you are a Lord – for a deceitful U-turn or against the better policy for the country? Maybe better to be absent from the House.

          • chiefofsinners

            The better policy for the country is not one that has been planned secretly before the election and concealed from the electorate, which this one evidently has. What price democracy?

          • But that’s how representative democracy works – a small oligarchy controls an essentially uneducated and disinterested public though holding all the levers of power and moves ahead doing what it can get away with under the guise of legitimacy.

          • chiefofsinners

            How very un-British to undermine our fundamental values with your cynicism. George Osborne might have to reform you.

          • Jack is not only British but also entitled to both Irish and Jewish nationality so can comment from a wider vantage point.

        • alternative_perspective

          The problems lay in the party system.

          Enforce a return to loose, informal groupings within parliament rather than the party system and introduce the right to recall and suddenly these problems are solved.

          • Anton

            The party system has become ever more iron with time, but it is a natural evolution and it is not clear how to prevent such coalescence of MPs even if you start with no parties.

  • Tax Credits are ridiculous. Nearly half my net income now comes from the state. I appreciate having all that free money and – since everyone else gets it as well – that’s now the level needed to keep the playing field level. I’d much rather pay less tax in the first place. It would be great if the tax system just took a straight % of everyone’s income to pay for essential services. Straightforward & simple. No idealogical ‘redistribution’ of money.

    • Anton

      Yes. That’s what Mosaic Law did. Progressive rates of taxation provide an incentive to governments to create inflation because they can then push everybody into higher tax brackets without raising the rates of taxation.

      • chiefofsinners

        Mosaic law required tithes but the concept of offerings was also stronger than it is in our society. What’s more the year of jubilee provided for a far more radical redistribution of wealth than anything we have today.

        • Anton

          Jubilee was not about redistribution but about debt forgiveness; it is God’s bankruptcy law.

          • chiefofsinners

            No, it was far more than that. All land was originally distributed fairly and the jubilee reset that position.

          • Anton

            Yes absolutely, but the radicalness was more in the legislation that gave every family their own land in perpetuity. Contrast with the feudal system…

          • chiefofsinners

            The point being that the 10% flat tax rate in Mosaic law sat within a wider framework that was far more redistributive than the current regime in the UK.

          • Anton

            It was less redistributive but all families were more or less equal in their land division. In contrast, UK taxation is more redistributive but there is a wide gap between assets of rich and poor.

          • chiefofsinners

            Where asset ownership is equal, flat tax rates are appropriate because incomes are roughly equal. When assets are unequally distributed then it may be socially desirable to redistribute either income or assets. Not with tax credits, though.

          • Anton

            To me the elephant in the room is fiat currency, which violates fair measures regulations, but that’s another subject.

          • Dorothy Day advanced many of these arguments. Of course, she has been ‘claimed’ by the left as a proto-socialist but a careful reading suggests otherwise. She was firmly against State interference. Many of these themes are also present in the writings of Distributism, based upon the principles of Catholic social teaching.

          • Anton

            This is one of the very few issues in modern life that transcends the Left-rRght divide; governments of both types find it irresistible to print unbacked money.

            THE book on the subject is indeed by a Catholic scholar (he has to be Catholic, based on the quotes he reproduces, although he never actually says so): The Ethics of Money Production by JG Hulsmann, (2008) a professor of economics in France. It is not a religious book as he rightly says that there is no such thing as a Christian (or a Catholic) economics just as there is not a Muslim physics. He simply quotes Catholic writers and teaching. This is an outstanding book. Another Christian who attacks fiat currency is Gary North in his book Honest Money, which can be read online. Hulsmann’s is a genuine scholarly book, North understands the point about equally well but his is not written ‘scholarly’ with footnotes and references, and is easier to read.

          • Jack respects your scholarship and breath of knowledge, Anton.

          • Anton

            That’s kind, but the point is to read it!

          • Well, if he hadn’t he wouldn’t have been able to pass his comment.

          • alternative_perspective

            I cannot see how land lent to you in perpetuity from God and returned to you following its let, in accordance with the law, is redistributive.

            Redistributive implies earned wealth from others being taken and given to the poor, when infact the jubilee was the return of land they already owned the rights to.

            If anything redistribution seems weaker for surely it undermines the individualsindividual’s property rights and makes them dependent on the wealthy, thereby cementing in inequality.

          • chiefofsinners

            The net effect of the system God set up was a level of equality unknown in our society. This discussion began with someone trying to use just one part of that system as a model for our economy. My point is that the wider context matters.

    • chiefofsinners

      Except that you would be considerably worse off than you are now, and I would be much better off. As the scripture says “unto him that has, more shall be given”.

      • Then he’ll have to get a better paying job or a 2nd job. We never had tax credits until recently when McBroon introduced them. They just make people and employers reliant on the state when they don’t have to be.

        • chiefofsinners

          My argument is not in favour of tax credits, but against a flat rate of income tax.

          • Anton

            Mosaic rates were flat…

          • chiefofsinners

            Within I wider framework where every 50 years all land (which in those days meant nearly all the capital) reverted to its original owners, according to the original even distribution.

          • Anton

            Yes indeed. A great shame it never happened, as we were told at the time of the Babylonian exile. I’d love to know if those tithe barns, which were meant to contain enough grain to tide the people over the fallow year, were not full enough and the people did not dare not to sow in the 50th year (what would YOU do in those circumstances??), or whether the barns were adequately stocked and the people sowed out of greed (spare grain = money).

          • chiefofsinners

            Either way, the land had its Sabbath rests. They children of Israel were in exile 70 years, which accounted for one year in seven of the 490 before the exile. God will have His way!

          • Anton

            Absolutely!

          • chiefofsinners

            As they were warned ‘if you defile the land it will vomit you out’ and it did.

            For me the most important aspect of it all is Christ saying: “The Spirit of the Lord is on me, because he has anointed me to proclaim good news to the poor. He has sent me to proclaim freedom for the prisoners.” and then the day of Pentecost, the 50th day, bringing that Spirit to us.

          • Umm … but Jack thinks you’ll find that ‘clever’ means were found to get around parts of Mosaic law and others that suited the rich over the poor..

        • My personal situation was even more damning of the tax credits.

          For the past 10 years I headed up a small charity (a proper charity, where we depended on the goodwill donations of people, not government grants); and by “small” I mean with income <£40k pa. As a family we chose to live a lifestyle whereby my wife stayed at home to raise our children and live off my single income. It meant we went without many things lots of people think of as necessities, but we were very comfortable and were very happy to be raising our own children rather than farming them out to some minimum salary teenage girl.

          Times became harder and income to the charity was reducing. I took the decision to reduce my salary – both my rate and my hours. I was fully expecting to have to find a 2nd job. But no need – Tax Credits more than compensated for the reduction in my income! This happened again. Eventually it got the stage where I was able to work full time for the charity – 1/2 time salaried, 1/2 time as a volunteer, but have an INCREASED income! The Lord giveth, and the Lord taketh away, but Gordon Brown giveth back again!!

          What a ridiculous way to run an economy. But it meant I was able to do the job I loved without having to do half as much fund raising!

          • chiefofsinners

            You will have treasure in heaven. Where neither moth nor rust doth corrupt, nor Gordon Brown breaketh in and redistributeth.

  • HedgehogFive

    When the followers of Muhammad assembled to elect his successor, they followed the customs of the Arabs and elected Abu Bakr instead of Ali, the nephew of Muhammad. Only Salman al-Farisi, the Persian companion of the Prophet, with his wider vision, could see that this would lead to trouble, and called out:

    “kardîd va na-kardîd!” (you have done and you have not done.)

    and indeed this was the origin of the Sunni-Shia split.

    I see a strong parallel here with the election of David Cameron, rather than David Davis, as Conservative leader. Only here it was the customs of the Bullingdon club, rather than the traditions of the Bedouin.

    • Anton

      I rather suspect the Bullingdon are not impressed by Cameron’s policies either.

  • The Inspector General

    What on earth was wrong / is wrong with the child allowance? Why was this tax credit whatever ever introduced in the first place?

    The Inspector puts it to you all that it is all part of the socialist plan to have every single member of the population reliant to some degree on state handouts throughout their lives!. It really does irk these blighters that there are people out there who just don’t want to know about state interference in their lives, or who don’t wish to have the state as some damned teat to suck on. The irony is that the money that is being handed out is often entirely your own, which if taxation was not so punitive in this country to pay for such nonsense, you wouldn’t have had to part with in the first place!

    Let’s reduce the number of goody benefits the socialists can temp your vote with to as small a number as possible, what!

    The country has swung to the right of late. Not only is there a majority Conservative administration in charge, there’s also a reserve army of eight million who voted UKIP. This is the time to sweep this malevolence the Labour rotters have cunningly constructed to ensnare you with well away, never to be seen again. THE TIME IS RIGHT. LET’S DO IT, AND LET’S DO IT NOW!!

    • Anton

      Yes, but, er, how?

      • The Inspector General

        It’s happening now, dear chap. Next, the disgraceful enrichment device for landlords has to be seen to. A cap on housing benefit. The landlords say they will give up letting. Let them. Too much easy money, nay, fortunes coming their way for too many years. Let others with lower profit margins in to replace them. Let the market work.

        • Anton

          Fine, but do you really expect Cameron to “sweep this malevolence the Labour rotters have cunningly constructed to ensnare you with well away, never to be seen again. THE TIME IS RIGHT. LET’S DO IT, AND LET’S DO IT NOW!!”

          • The Inspector General

            Can’t figure out Cameron. He’s not usual Tory meat. As the old children’s TV program used to state “anything can happen in the next half an hour”…

          • Anton

            Stingray!

          • The Inspector General

            Exactly, commander…

        • CliveM

          You advocate a housing benefit cap? Then say let the market decide? Is this not contradictory?

          • The Inspector General

            The sums involved are so massive, that only a graduation will do. Remember Clive, the Inspector is a Christian, with a Christian compassion that tempers his disgust of the greedy involved with concern for those the greedy accommodate.

          • CliveM

            How do you feel about the proposal for a rent cap? Ie rent controls.

          • The Inspector General

            What?

    • chiefofsinners

      Yeah. Apart from the NHS, policing, law and order, defence, schooling, sanitation, roads and street lighting… What has the state ever done for us?

      • The Inspector General

        All paid for by the tax payer. Problem with that?

        • chiefofsinners

          No, but your conspiracy hypothesis is too late. We are all already reliant on state handouts throughout our lives. It’s not just tax credits.

          • The Inspector General

            Not at all. If you mean pensions, then they have been paid for…

  • David

    A country that removes the motivation to work and improve oneself is a doomed country. That essential spark of motivation must be returned.
    This is not about pushing people into absolute poverty, but about removing inessential top-ups, paid for by others who work hard.
    Restoring the link between effort and payment will also assist in ensuring that any immigrants come here for the right reasons.
    Once again too many of the bishops are just plain wrong.

  • Albert

    I seem to recall Cameron said something similar about same-sex marriage before the previous election. Perhaps it was opposite day both times.