Monday 19th October

As so often seems to happen – a solution to one problem creates a different one.  The Labour Government, headed first by Blair and then by Brown, despite many mistakes and lost opportunities did much to help alleviate some of the worst aspects of poverty.  The current Government is rapidly trying to reverse that of course.  It was soon realized by Chancellor Brown that despite the introduction of a National Minimum Wage (opposed incidentally by Cameron and the Tories, who claimed it would lead to mass unemployment) many people could barely drag themselves out of dire poverty.  And these were people who were working, not those on any benefits.  The solution was the creation of the Tax Credit System and a pretty revolutionary idea at the time.  Everyone would pay income tax, but many on low wages could claim a credit and get some of their tax back to supplement their low wages.  The Tories hated it, and are now trying to dismantle the scheme by reducing the amounts paid and raising the eligibility bar.

Now, there is some truth in their argument that many employers are deliberately paying low wages because they know that those employees can supplement their miserable wages by Family Tax Credits.  I have knowledge of the way employers think and have witnessed this in action, where a single mother was told to accept a lower wage and that she could get the rest paid by Tax Credits.  Disgraceful, yes – but that is just one of the unexpected consequences of an originally good policy.  Another; incidentally, is that for millions of workers, many of them young, the Minimum Wage will also be their Maximum Wage ever.  The Tories argue that by increasing  the minimum wage they can afford to reduce Tax Credits.  But we live in an imperfect world.  What will happen in practice, and again I have been privy to discussions by bosses on how to deal with this new increased wage cost, will be either reductions in staffing levels or fewer hours allocated to do the same work.  So despite earning more per hour, for many workers their hours will be cut so they will earn the same or even less.  And their tax credits will be being cut at the same time.  So, yet again, an answer to a problem – Government inadvertently but effectively subsidising employers low wage policy by tax credits, may well create more poverty than it is ‘supposed’ to alleviate.  More and more workers are being asked to be more flexible, work unsociable hours, zero hours contracts, temporary contracts, less protection at work, attacks on Trades Unions etc – and all to compete in the Global Market (or chasing down low pay in competition with China and other emerging nations).

Now there is no easy solution, and certainly increasing the Minimum Wage is a policy we can only applaud (though there needs to be rigorous enforcement of this) but cutting Family Tax Credits is not any sort of solution.  Guaranteeing minimum hours would certainly be a step in the right direction.  Unfortunately whatever laws are passed Private Enterprise will try to find ways to subvert them, so we have to be constantly vigilant and keep closing down loopholes – because this is not a level playing field, and Companies will do whatever they can to protect their Profits, so Government needs to do whatever it can to protect its citizens.