It now seems to have dawned on just about everyone that, if the government really does cut £12 billion from the social security budget, most of the pain will be felt by those in work. There have been some interesting reactions to this from right-of-centre think-tanks. The Institute of Economic Affairs said the cuts would be “extremely unfair on the working-age population” while the Adam Smith Institute warned that cutting tax credits would remove incentives to work and make the working poor worse off. The Centre for Policy Studies argued for an increase in the minimum wage to reduce the cost of tax credits.
It’s not just those on the left who think cutting in-work benefits is a really bad idea. In fact, it’s quite difficult to find anyone outside the government and its media cheerleaders who thinks this will do anything other than cause a lot of misery for a lot of people.
As Michael O’Connor pointed out earlier this week, close to half the UK’s families with children are receiving welfare support in addition to child benefit.
A combination of a chronically low-wage labour market and rising housing costs means that people with jobs and children, the archetypal hardworking families the government keeps telling us about, can’t make ends meet without support from the state. People are already looking for better paying jobs and more hours. Cutting benefits isn’t going to magic up any more of them.
Compared to most European countries, the UK’s benefits system does a lot of heavy lifting, especially for those in work, reducing poverty levels from well above to just below EU and OECD averages. Unless there is a significant rise in pay over the next few years, cutting in-work benefits will see this country rising up the international poverty league tables.
Our labour market still isn’t creating jobs that enable people to look after their children and pay for their housing costs without help from the state. Both lefties and righties can see that cutting people’s tax credits isn’t going to change any of that. As one of my lecturers used to say, you can stop a dog from scratching by cutting its leg off but afterwards the dog will still have fleas.