Frank Field MP
Your MP for Birkenhead
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An opportunity to transform the tax credit system as we have known it

11
Nov

A few weeks ago I put forward a cost-free emergency proposal to protect the poorest workers from the Government’s planned cuts to tax credits.

The Chancellor of the Exchequer signalled at the time that there would be no extra money to ease the pain, but the debate has moved on since then.

Both Houses of Parliament have voted to halt to the planned cuts. MPs unanimously supported my Commons Motion calling on the Chancellor to compensate low earners.

This hiatus gives the Chancellor an opportunity to transform the tax credit system as we have known it.

Last Friday I proposed to him five reforms that by 2020 would give us an affordable system that protects the living standards of low paid families with children.

By that date – with a National Living Wage of £16,000 a year – I suggest that taxpayers should no longer subsidise the wages of childless couples and single workers without children.

A second reform would protect those workers who are vulnerable, with mental illnesses for example, and who could not work a full week at present.

The next reform I propose is that entitlement should go to families earning up to twice the level of the National Living Wage. In 2020 this would set a ceiling of £32,000. Beyond that point eligibility to tax credits would cease.

A fourth and crucial reform should be to revamp Jobcentre Plus, whose staff should have the skills to help tax credit claimants think about how, over the next four years, they might increase the hours they work in their current job or increase their hours of work and pay by moving to a new job.

A fifth reform during this four year transition stage should be to allow tax credit claimants to increase their earnings by up to £5,000 in any 18 month period without any claw back of tax credit entitlement. This move would allow some, maybe many, claimants to increase their earnings before any losses incurred from the tax credit cuts.

These five reforms would be much more effective in protecting those in work on modest earnings than anything the Government is proposing. Will there be room for them in the Autumn Statement?

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