Monday, 22 June 2015

Working poorer

David Cameron will announce today, Monday, the bad news for everyone who did not vote Tory. He will announce what the FT calls "an assault on tax credits" as part of his plan to cut £12 billion out of part of the economy.  

The part of the economy from which he and Giddy Osborne will cut £12 billion is not the part that has a lot of money. It is not the bankers, or the well-heeled-and-toed voters of the Home Counties. It is £12 billion from the poor.

What does that mean for Scotland?

The focus will be on Working Tax Credits (WTC) and Child Tax Credits (CTC). These are payments made to people on low wages or no wages. The system is designed to taper so that families in work whose total income is £6,420 or less receive the full benefit, with a reduction of 41p in each additional £1 they earn above this level. In 2013-4 the Government paid out £29 billion in tax credits, according to the National Statistical Office. It is unlikely that they will take the full £12 billion from this one area (although only "unlikely", not "impossible") but even half of that would represent a 20% reduction in tax credit payments.

The statistics (here) are clear. In Scotland 351,900 families received Working Tax Credits or Child Tax Credits in 2013-14. In these families there were 526,300 children. In 2013-14 these families received on average £5,832 in tax credits. A quick review of the constituency data shows a map of poverty in Scotland, with Eastwood, Pollok, Rutherglen, Hamilton South amongst the places where the poorest people received the largest Working Tax Credits

Imagine that Mr Cameron sticks to a vow. Imagine that he cuts 20% off tax credits. Here is the maths:

In Pollok in 2013-4 there were 6,100 families including 8,800 children, who were receiving either WTC or CTC. This represented a total of £36.6m for the Pollok economy. Imagine that Mr Cameron sticks to this new vow and cuts, say, 20% from that total. He would be taking £7,327,320 out of the Pollok economy. More than £7m from an economy that is already on its knees.

Now translate that figure into income for small businesses, shopkeepers especially. They will cut staff. How many staff? Around 700 full-time jobs in Pollok (basing the calculation on National Minimum Wage and a 35 hour week).

So rather than, say, put a penny on income tax for the people of Surrey and Hertfordshire, Mr Cameron will impoverish the in-work poor and, as a consequence, chuck a lot of people out onto the street. 

Donchalove him?

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