Friday, 30 October 2015

Tax credit cuts: a few conspiracy theories

Even Hamish McRae, one of the most conservative contributors to the Indy, writes that tax credits were necessary. He does go on to say that they need reform because of the unpredicted fivefold rise in their cost (but does not specify how, except to call for a simplification of the direct taxation code).

The difficulty, he points out, is that

there has been a surge in low-paid jobs and part of the reason for that is that the taxpayer in practice subsidises employers. People are prepared to work for lower rates than would otherwise be the case because the Government pushes up their pay to a more acceptable level. This is what the whole scheme was designed to do: to persuade more people to go out to work. But it has, you might say, been much more successful than its instigators expected.

So far, so good for Conservative ministers, especially David Cameron who relishes at prime minister's questions reading out the rise in employment and/or cut in unemployment in the relevant constituency in response to critical queries from opposition MPs. However,

The UK economy has become a huge job-creating machine, with 2m more jobs since the recession, sucking in workers from all over Europe.

Could this be the objection? Would Cameron and Osborne tolerate a cut in the employment figures if it meant that fewer job-seekers from the continent were attracted to these low-value jobs? A reversal of the EU immigration figures would certainly be welcomed by them.

Dr Monique Ebell at the National Institute for Economic and Social Research, quoted in the article, points out:
“For many couple families, the tax-credit system makes it more attractive for one partner to stay at home, rather than go out to work. It is this adverse and unintended consequence of the tax-credit system that should be a key focus of any reforms.”

Adverse?? Surely the Conservative ethos is that families should be headed by two married parents, one of whom should be a home-maker? Or does that apply only to middle-class couples?

The constitutional "crisis"

There was no need for the government to have a run-in with the upper house. The cuts could have been incorporated in primary legislation which, certificated as a money Bill, could not be voted down by the Lords. The implication is that Cameron and Osborne induced the confrontation on Monday for a reason.

My first thought was that it was an excuse to bring back a Conservative majority by swamping the upper house with a flood of new barons, in spite of the adverse publicity which would be generated by all those extra £300 per day peers.

However, the swift inauguration of a review under Lord Strathclyde suggests another line of attack on their Lordships' house. I would not be surprised if its major recommendation is to take away the power to review any Statutory Instrument, which would suit several parties. Not only the elected dictatorship in Downing Street, but also Sir Humphrey, would welcome the facility to push through delegated legislation with one less stage to worry about.

(Incidentally, Lord Strathclyde was said not to have any great love for Liberal Democrat peers.)

The Lords and law officers have already resisted at least one attempt to create "Henry VIII" powers. I trust that they will continue to be successful.

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