Working tax credits subsidise big corporations to exploit poor people

This post was written by Salman Shaheen on September 13, 2013
Posted Under: The Welfare State

HM-Revenue-and-CustomsEd Miliband’s summer of silence has been criticised from the left as the perception grows that Labour has failed to provide a coherent and effective alternative to austerity.

The standard riposte to those who claim there is little that now separates Labour from the Tories is to say look at the party’s achievements in government: working tax credits, the minimum wage.

Certainly both policies have been vital to offer some modest protection to the lowest paid workers from the full brunt of market forces. Certainly both are a darn sight kinder than the Tory bedroom tax.

But the minimum wage, at £6.31 an hour, is not enough to meet the basic needs of Britain’s working people. Harder still for struggling families in London as rent rockets and the cost of living soars.

Working tax credits are a life line to people on the bread line. Around 5 million people claim working tax credits, costing £6 billion a year. This is a cost the taxpayer shoulders because we rightly accept that the tax system should be redistributive, that those who earn a little more should help those in more precarious positions. This is a cornerstone of social democracy.

But, in reality, working tax credits effectively subsidise big corporations to exploit poor people. Companies don’t pay their workers enough to live on, so the government tops up their wages, easing the pressure on employers to pay employees fairly.

Now, as the government prepares to roll out its chaotic universal credit system, is the perfect time for Miliband to end his silence and enter the debate for a bold alternative.

Let’s stop subsidising some of the world’s biggest companies to exploit some of Britain’s poorest people. Let’s scrap tax credits. And let’s bring in a mandatory living wage that will ensure everyone has enough to lead a decent life.

Of course, people will worry about the small family-owned cafes or the niche bookshops who struggle to turn a profit next to the likes of Starbucks and Amazon. But there are better, more targeted ways to support small local businesses than through tax credits.

Miliband has pledged to back a voluntary living wage. But when was the last time a big corporation voluntarily stopped exploiting someone?

Labour needs to find its voice and it needs to deliver real policies that help people. Replacing tax credits with a mandatory living wage would be the perfect way to demonstrate a commitment to helping the crushed bottom under the boot of austerity, whilst at the same time saving £6 billion a year.

But in signing up to Conservative spending plans and refusing to pledge to repeal the bedroom tax, Miliband has shown he lacks the vision necessary to make policies that resonate with Labour’s core working class supporters.

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