George Osborne has blown his cover for the 2020 election campaign that, like the last one, was to be built around the Tories being the party of the strivers as opposed to Labour as the party of welfare.
In a letter to the Chancellor of the Exchequer, Frank Field MP shows that next April’s lowering of the earnings threshold and raising of the taper rate represent the biggest ever single cut to tax credits.
Frank adds: ‘So much then for the Government’s show of solidarity with the low paid workers who, early in the morning, pass the drawn curtains of neighbours on benefit.
‘Just before Christmas 3.2 million low paid workers will receive a letter from the Chancellor telling them he intends to cut their wage packets on average by £1,350 a year. Tory MPs will then be under siege from
their constituents. My letter to the Chancellor offers him a way out by protecting the lowest earners and their children. He must seize this opportunity or face the prospect of his 2020 election strategy going up in
Frank writes: ‘There is one cost neutral policy in particular which could protect National Living Wage-earners: a secondary earnings threshold paid for by a steeper withdrawal rate for those earning above this new minimum rate.
‘This option would retain the existing £6,420 income threshold but introduce a second gross income threshold of £13,100, the equivalent of working 35 hours a week on the National Living Wage. For gross earnings between £6,420 and £13,100, the taper rate would be kept at 41%. The lowest paid working families, therefore, would experience no reduction in tax credit income compared with the current system.
To keep the policy cost neutral, gross earnings above £13,100 would need to be tapered at 65%.’
You can read Frank's letter to the Chancellor of the Exchequer by clicking here.