10/07/2015 - Tory budget claims to be party of workers are lies

The Tories called it the blue-collar Budget. Chancellor Osbourne attempted to cover up benefit cuts for low-paid workers in Wednesday’s Budget by announcing a “national living wage” of £7.20. Welfare axeman Iain Duncan Smith led cheers as the Chancellor hailed it as proof the Tories were “the party of the working people of Britain.”

But his claim was soon proved a lie by Institute for Fiscal Studies (IFS) calculations showing that m...ost working people will lose more than £1,000 a year. Speaking at the IFS post-Budget analysis, director Paul Johnson said: “The key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of the losses that will be experienced by tax credit recipients. That is just arithmetically impossible.”

He added: “Unequivocally, tax credit recipients in work will be on average made worse off by the measures in the Budget.”

Their verdict was a second major blow for the first all-Tory Budget since 1996, after the Living Wage Foundation dismissed Mr Obsorne’s claim that a 70p increase in the minimum wage was a “national living wage.”

Before tax, around 2.7 million low-paid workers will collectively receive £4 billion by 2020 through the higher minimum wage. But welfare spending will be cut by £12bn, including £6bn worth of cuts to working and child tax credit. Thirteen million families will lose £260 a year by a four-year freeze on all working-age benefits, while three million of those will lose £1,000 a year after tax-credit cuts. The income threshold for tax credits was cut from £6,420 to just £3,850 and families will no longer receive support for any more than two children. At the moment 870,000 families with more than two children claim tax credits, according to HMRC.

“A higher minimum wage will bring gains for some, but for many working families the Budget is a wolf in sheep’s clothing,” said TUC general secretary Frances O’Grady in response to the analysis. “These households will find that their tax credit losses are much larger than any gains from higher pay.”

Pat Harrington, general secretary of Solidarity commented:

"I am sympathetic  to cuts to Working Tax credits as they effectively transfer public wealth to subsidise bad employers but  poorer families shouldn't  lose out. It seems to me, however, that both the timing of balancing increases in wages with cuts to WTC and of amounts lost and gained are wrong."