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Chancellor picked wrong fight going after working families

By Liam Clarke

Published 29/10/2015

Chancellor George Osborne’s plans to cut tax credits were stymied in the Lords
Chancellor George Osborne’s plans to cut tax credits were stymied in the Lords

When you live on £3.8m of inherited wealth and are a Cabinet minister, like George Osborne, the Chancellor, it is easy to forget, or caricature, how the other half lives. It is also easy to misjudge what is possible politically.

There are two elephants in the room, one is inequality and the other is lack of social mobility. The second may be more important for Conservatives. Tories have always appealed to the aspirational working class, people who want to get on and climb through the system.

They went into opposition when Labour, under Tony Blair, succeeded in tapping into this demographic.

Margaret Thatcher knew this. The grocer's daughter disdained old money and encouraged promotion by talent. Would she have congratulated Osborne and Little, Mr Osborne's family firm, for paying no UK corporation tax last year?

Loadsamoney, Harry Enfield's get-rich-quick builder, like City yuppies with East End accents, were symbols of Thatcher's era.

She undermined the unions, but she convinced many people that she would make it possible for them to get on and buy a house.

Mr Osborne doesn't seem to see a problem. He has a mandate to introduce £12bn in welfare cuts and considers that the clincher.

Many people on tax credits were Tory voters who don't consider themselves welfare recipients and will see this as a low blow.

The background is increasing inequality. New Labour pulled up the ladder of free university education which they had benefited from.

The Tories then pushed fees higher still, making university, with £35,000-£40,000 loans to follow, a daunting prospect for anyone from a low-income family.

The recession involved a major transfer of wealth to the owners of property and assets from wage-earners. Redressing the balance is one way to stimulate demand for local goods and stimulate recovery.

Instead, low income families have suffered higher inflation since 2007. They were hit harder by rising food and energy prices, but benefited less from falling interest rates.

Mr Osborne may not hear many complaints about this among his business friends. It may not even be a hot topic in constituency clinics in Tatton, one of the wealthiest parts of rural Cheshire, which he represents. But it is a concern for others in his party.

Heidi Allen, the newly-elected Tory MP for South Cambridgeshire, used her maiden speech to condemn Mr Osborne's plans as an attack on working families. The Institute for Fiscal Studies (IFS) and the Resolution Foundation have both warned that it should be phased in over three years to allow for mitigation measures, like higher wages.

The changes are also likely to produce a crisis here.

The DUP's Sammy Wilson, a former finance minister, estimated "the reductions proposed without a proper arrangement to increase wages paid by employers will result in great hardship for more than 100,000 people in Northern Ireland, who on average will lose £1,000 per year, or in the case of some families with two or more children, £2,500 per year." Sinn Fein and the SDLP are unlikely to support them either.

If we introduce welfare reform here - essential if Stormont is to survive - cutting tax credits will have a complex effect on Universal Credit, the main out-of-work benefit.

Torsten Bell, the Resolution Foundation's director, told a parliamentary committee that for single parents on the minimum wage, the reforms would mean a hit amounting to a 76% loss of income for every £1 earned as soon as a single parent worked 10 hours a week, as opposed to the current 22 hours a week.

None of this can be rushed into and perhaps it can't be done at all.

The problem, though, isn't a technical one about the powers of the Lords, or phasing in.

The problem is that "hard-working people", the voters the Tories target, want a society where they feel they have a chance to improve themselves without being clobbered by the taxman.

Belfast Telegraph

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