As the Tories come under pressure over tax credit cuts, should Osborne reconsider his decision?

Should Osborne think again? (Source: Getty)

Harry Fairhead is a policy analyst at the TaxPayers’ Alliance, says Yes.

The government should reconsider where it tries to make savings. The working tax credit bill is huge, continues to grow rapidly and so does need to be brought under control.

However, tax credit reforms will hurt those on low incomes, and there are other places in our enormous welfare budget to look first. This could be done, for example, by introducing means testing for some universal benefits.

Is it fair to cut a low-income family’s tax credit before reducing the child benefit for families who can earn almost £100,000 before any of it is withdrawn? Similarly, the Winter Fuel Allowance is known by many middle class families as the “wine fund” and it would be very simple to apply a means test to this universal benefit. The welfare budget is bloated and should be subject to scrutiny as a whole. Tax credits shouldn’t be exempt from this, but they should not be the first to face the axe.

Lewis Brown works at the Centre for Policy Studies, says No.

Events like Question Time and Jeremy Corbyn’s uncharacteristically competent PMQs last week demonstrate that this issue is potentially toxic for the Conservatives.

While a closer look at the finer points of implementation may be necessary – there are concerns about whether the scale of the changes will lead to higher marginal tax rates, acting as a disincentive to work – there is no doubt the tax credit bill has spiralled out of control; from £9bn when initiated to around £30bn by 2010. And a full scale U-turn, however pragmatic, would hand Team Corbyn an easy victory that would embolden their anti-austerity agenda and force the Tories onto the back foot. Better to make the case for their full package of reforms, including the living wage and increased childcare allowances, which should mean very few actually lose out, and look to continue cutting taxes for the lower paid over this Parliament.

If George Osborne really is to earn the sobriquet “Iron Chancellor”, he must show that he is not for turning.

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