Skip to main content

Adam Smith Institute says tax credits best form of welfare.

Opposition and criticism of the governments proposed cuts to working tax credits is coming now from across the political spectrum.

It has been widely reported in the newspapers that he right-wing think tank, the Adam Smith Institute has criticised the governments proposed cuts in tax credits.  In a press release the ASI said:

"Working tax credits are the best form of welfare we have, and cutting them would be a huge mistake. The government has long claimed to want to make work pay for everyone, but cutting tax credits would disincentivise work and hurt those at the bottom of society.

"Contrary to the government’s claims, the National Living Wage will do little to help those affected by these cuts and, according to the Office for Budget Responsibility, it risks adding insult to injury by pricing tens of thousands of workers out of the labour market altogether.

There is little evidence that tax credits ‘subsidise’ employers, except to the extent that they make more people willing to work in the first place, creating a larger pool of workers. The politics of this looks dangerous, too: when it’s working families at the bottom of the income distribution that are being hit hardest, it’s hard to say that we are ‘all in this together’. We urge the Chancellor to rethink these cuts and find savings elsewhere instead."


The ASI further recommend that the best way of providing a 'living wage' would be to raise income tax and national insurance allowances to the level of the full time, full year, minimum wage. This the government could do immediately. 

The ASI also challenge the view that working tax credits 'subsidise' employers.  In a working paper published this week they claim It isn’t greedy employers, but greedy government, that is keeping people in in-work poverty; without tax on low earnings even workers on the 2015 minimum wage would earn a living wage. 

The main critisism of the government strategy on cuts in working tax credits is that it puts the cart before the horse.  Mr Cameron put the argument in his reply to the Leader of the Opposition at PMQs that the cuts a mitigated by the move to a living wage and increase in tax thresholds, but it assumes that those who gain on the roundabouts and also those that lose on the swings.  Figures from the Institute for Fiscal Studies demonstrates that the poorest will lose most even taking account of other changes. 

Now the Adam Smith Institute argues that instead of imposing a mandatory National Living Wage, it would be  better to for the Chancellor to  remove taxes from the lowest paid, giving workers a similar level of post-tax income while forgoing the 60,000 higher unemployment and £1.5 billion lower GDP that the Office for Budget Responsibility predicts will accompany his plans. 

The ASI say that government should not have as its objective cuts in working tax credits, but to cut poverty. the title of their briefing is provocative  Abolish the poor.  

Comments

Popular posts from this blog

Ian Duncan-Smith says he wants to make those on benefits 'better people'!

By any account, the government's austerity strategy is utilitarian. It justifies its approach by the presumed potential ends. It's objective is to cut the deficit, but it has also adopted another objective which is specifically targeted. It seeks to drive people off benefits and 'back to work'.  The two together are toxic to the poorest in society. Those least able to cope are the most affected by the cuts in benefits and the loss of services. It is the coupling of these two strategic aims that make their policies ethically questionable. For, by combining the two, slashing the value of benefits to make budget savings while also changing the benefits system, the highest burden falls on a specific group, those dependent on benefits. For the greater good of the majority, a minority group, those on benefits, are being sacrificed; sacrificed on the altar of austerity. And they are being sacrificed in part so that others may be spared. Utilitarian ethics considers the ba

The lion and the wildebeest

Birds flock, fish school, bees swarm, but social being is more than simply sticking together.  Social groups enable specialisation and a sharing of abilities, and enhances ability, learning and creating new tricks. The more a group works together, the more effective they become as a team.  Chimpanzees learn from each other how to use stones to crack nuts, or sticks to get termites.  All around us we see cooperation and learning in nature.  Nature is inherently creative.  Pulling together becomes a rallying cry during a crisis.  We have heard it throughout the coronavirus pandemic.  "We are all in this together", a mantra that encourages people to adopt a common strategy. In an era of 'self-interest' and 'survival of the fittest,'  and 'selfish gene', we lose sight of the obvious conclusion from the evidence all around us.   Sticking together is more often the better approach.  This is valid for the lion as it is also for the wildebeest.   We don't

No evidence for vaccine link with autism

Public health bodies are worried that an alarming drop in childhood vaccinations is leading to a resurgence of diseases in childhood that we had all but eradicated.  Misinformation and scare stories about the harmful effects of vaccines abound on the internet and in social media.  Where they are based on 'science', it is highly selective, and often reliance is placed on falsehoods.  Conspiracy theories also abound - cover-ups, deception, lies. As a result, too many parents are shunning vaccinations for their children.  So, what does the published, peer-reviewed literature tell us about vaccincations? Are they safe and effective, or are there long term harmful effects?  A new report now provides some of the answers. New evidence published in the Cochrane Library today finds MMR, MMRV, and MMR+V vaccines are effective and that they are not associated with increased risk of autism. Measles, mumps, rubella, and varicella (also known as chickenpox) are infectious diseases cau