Work And Pensions Committee To Hold Urgent Session On Tax Credit Reforms

The chances of the government being defeated on plans to cut tax credits in the Lords next week have risen markedly after the Liberal Democrat leader, Tim Farron, instructed his peers to vote for the fatal motion to block them.

The Commons Work and Pensions Committee will hold an urgent session on proposed reforms to the tax credit system next Monday. There is an Opposition Day debate on the reforms today, Tuesday 20 October 2015.

The Committee will question representatives of respected independent think tanks that have analysed the plans. The areas the Committee will cover include:

•    The impact of the April 2016 tax credit cuts (in isolation and in the context of other welfare measures in the Summer Budget), and the National Living      Wage
  •    the winners and losers and their characteristics;
  •    the extent to which the National Living Wage will compensate individuals receiving lower tax credit payments;
  •    the distributional impact of these measures, individually and combined,
  •    the scale of the financial gains/losses to households and what influences this;
•    The quality of the analysis produced by the Government to support their proposals;
•    Other options for achieving savings from the tax credit system that will mitigate the impact on the least well off.
•    The implications for work incentives and the Government’s wider objectives in welfare reform;

On Monday 26^th October at 3.30 pm, venue TBC:

Paul Johnson, Director, Institute for Fiscal Studies

William Elming, Research Economist, Institute for Fiscal Studies

Torsten Bell, Director, Resolution Foundation

Frank Field MP, Chair of the Committee, said:

“We hope to be in a position to help the Government reform the tax credit system on three fronts – to make it fairer, simpler and more affordable. Our reform blueprint will be built on suggestions that make tax credits a more effective anti-poverty benefit, so that work always pays a decent income, at no extra cost to the taxpayer.

“A crucial element of this blueprint will be to make it easier for future governments to make changes at the top end of the income spectrum that do not necessarily affect claimants at the very bottom of the pile. One of the flaws exposed by the current political debate on tax credits is the inability to remove relatively high earners from the welfare system without also clobbering the poorest workers and their families. We will aim to address such shortcomings and hope an announcement of mitigating measures will be forthcoming.”

Richard Graham MP, Committee Member, said: "I believe many MPs need more clarity about the details of the financial impact of all welfare changes, including social housing rents. Then there are philosophical and behavioural issues to consider, and lastly a practical question. Is there a way of reducing the huge tax credits bill that affects the poorest earners by less while achieving the overall goal? We'll take verbal evidence on all these points