18 September 2015


Tax Credits and Tax Avoidance : The two £12 billion



This week, Jeremy Corbyn has shone some much-needed natural light into Prime Minister’s Questions, a weekly session of political theatre within the Westminster bubble

He dispensed with the in-house rules on drama at Prime Minister’s Questions, and instead he read out questions from ordinary people outwith Parliament who had asked him to raise their real issues with David Cameron :

He quoted Paul :

“Why is this Government taking tax credits away from families?

“We need this money to survive so that our children don’t suffer.

“Paying rent and council tax on low income doesn’t leave you much .

“Tax credits play a vital role and more is needed to stop us becoming reliant on foodbanks to survive.”

He quoted Claire :

“How is changing the thresholds of entitlement for tax credits going to help hard-working people or families.

“ I work part-time, my husband works full-time earning £25,000.

“We have five children.

“This decrease in tax credits will see our income plummet.

“How is this fair?”

Jeremy Corbyn has already denounced the cuts in tax credits as a “work penalty”.

And there are over 3 million families set to lose on average £1,000 a year through the actions of the Tory government which Jeremy Corbyn describes as “intent on punishing the people of this country for a crisis they did not cause. “

Tory claims that the losses in tax credit cuts would be recouped by the new level of the Minimum Wage (their "National Living Wage") have been dismissed by the Institute for Fiscal Studies.

Labour are proposing an alternative to reduce spending which includes support for trade unions to push for higher pay, a £10 an hour National Minimum Wage, and tackling the housing crisis in dealing with high rents.

The tax credit cuts are part of an overall Tory plan to cut welfare spending by £12 billion.

Tax credits were introduced to top-up the wages of the low paid and ensure that families are better off in work.

Their reduction as part of the £12 billion in cuts will ensure that many will struggle on the poverty line.

There is, however, another different £12 billion that the £12 billion in welfare can be compared with.

And it exists in a different economic world from the one where tax credits are set to be slashed and where Office of National Statistics figures show that the poorest 20 per cent pay a higher percentage of income in tax than the richest 20 per cent do. ( 37per cent to 35 per cent)

Research by Dr. Kevin Farnsworth - 'Corporate Welfare State: Public Provision for Private Businesses’ examines the annual cost to UK taxpayers of” corporate welfare” - subsidies for private sector business, which he estimates at as much as an annual  £180 billion

Corporate tax avoidance is estimated to cost the exchequer £12 billion per year. "

As we have already seen , £12 billion is also the identical sum of money being cut from welfare spending by the Tories

If we are to get the country’s economy and the lives of the many on a sound basis, then we need fairer taxes on the wealthiest, not big reductions in the standard of living for those who can afford it least.

And we need to invest the proceeds of fairer tax in people’s skills to raise their productivity and their incomes, not cuts in tax credits that are “arguably the biggest single cut to families’ income ever implemented by a government”, as Labour describes them..

We need tax justice.

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