My Irish News article on the tax credit changes - from three months ago, when they were announced...



Although tax credits are not devolved, Stormont politicians still have plenty to say about chancellor George Osborne reducing them.
“Parents will not be able to buy fresh fruit and vegetables”, SDLP MLA Mark H Durkan warned on budget day, two weeks ago.
“More than 100,000 children in the north will be worse off,” Sinn Fein MLA Megan Fearon added a few days later.
The budget’s welfare reform measures “spell the end of the Northern Ireland assembly,” DUP MP and MLA Sammy Wilson told the Commons this week as it voted them through - although most of those measures relate to tax credits.
But while our MLAs are outraged, there is no matching sense of indignation from the people actually affected. The budget reduces tax credits to virtually every working household in Northern Ireland by an average of £100 a month. If a comparable cut was announced to wages, pensions or out-of-work benefits there would be poll tax-style protests on the streets, yet the tax credit change is barely a topic of conversation.
Admittedly, the changes do not take effect for another 12 months but they have been widely publicised and it is easy to assess their personal impact. The BBC news website, which was accessed by 40 per cent of the UK’s population within a day of the budget, had a simple tax credit calculator online in hours. If anyone in Northern Ireland has used it, they do not seem to be bombarding politicians or the media with complaints.
Perhaps the reaction in most households has been like the reaction in my own, where we will lose £200 a month due to my high-earning celebrity lifestyle. Surveying our results from the BBC calculator, I experienced a sensation that blended the thought ‘easy come easy go’ with a feeling not unlike relief. I think I always knew that I should never have been receiving benefits, that the whole system was bizarre and that as such there was a danger of becoming reliant on it.
The less you earn, the more this sense of danger grows. Tax credits are assessed 12 months in arrears so the slightest change in circumstances in one year is amplified across all payments in the next. Nobody wants to become dependent on something so erratic.
This is supported by 2012 research from the Institute of Fiscal Studies and the universities of Kent and Warwick, which found that up to 90 per cent of child benefit increases are spent on alcohol and adult’s clothes, with the highest percentages in the lowest income households. Far from being evidence of bad parenting, the authors cited this as evidence of good parenting, indicating that people ensure they do not rely on child benefit for their family’s essential needs. If that is the attitude taken to a universal, flat-rate payment in place since 1946, how much more careful are people not to depend on tax credits?
The unreliability of tax credits is a result of their political purpose. Their financial purpose could be achieved promptly and cheaply through tax codes and rebates. However, that would just look like a tax cut and any gratitude for it would be quickly forgotten. So instead, New Labour packaged it as an ‘in-work benefit’, plainly hoping to build a client state of voters who would be grateful forever.
The remarkable acquiescence to the Tories slashing most people’s payments suggests those hopes have not been realised. If anything, tax credits have just highlighted the absurdity of in-work benefits in general. Being self-employed I have an annual reminder of this when I fill the same numbers into different tax and tax credit forms - in recent years getting almost exactly the same amount back as I pay out. The cynical circularity of this is not as clear-cut for everyone but enough people must perceive it at some level. Osborne’s plan to raise the minimum wage as tax credits fall will not offset a fraction of most claimants’ losses. But earning your own money and keeping it has apparently struck the public as more natural than earning your own money, giving it to the taxman then getting it back as pseudo-welfare a year later, even if what you were getting back was ten times greater.
It seems distinctly possible that even those most affected by tax credit cuts are deeply ambivalent about the whole system. If so, what is the audience - let alone the purpose - for bringing Stormont down in a futile gesture against a non-devolved matter?

Newton Emerson
Irish News
23 July 2015

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