Just to be clear, I make no apologies for the dramatic title because I’m fed up of the mainstream media shoving dramatic headlines down our throat that in many cases diverting the reader from the facts (sometimes from the facts contained within the supporting article). In this case, I have given up on stating that Osborne is incompetent and unqualified to be Chancellor. He is the face for a background team that have the intelligence to know exactly what they are doing and Osborne is so morally inept that being the face of these destructive policies does not bother him in the slightest.

Why is Cutting Tax Credits Such a Big Deal?

I’m hoping that most people will acknowledge the tax credit system is nothing more than another way of subsidizing private companies, i.e. if people were being paid at least a living wage on which they could live comfortably then the tax credits system for workers may not be required. A living wage being an actual wage you can live on not a watered down version of a minimum wage that George Osborne throws around!

The tax credits system operates, in theory, to ensure that people are taking home a net wage, after tax, on which they can have a decent life for themselves and their families. Some would argue that is a reasonable compromise from the State if they are unwilling to legislate for companies to pay a Living Wage (although I would argue that the State is merely placing a temporary patch on a permanent problem).

However, we must now take into account the constant focus on “cost efficiencies” which enables companies to justify reducing employee wages. It is rarely the wages of those at the top of the company and most regularly the wages of those at the bottom of the company.

I must point out at this stage that there is a glaring inequality in the UK between the treatment of small businesses and that of larger corporations. A small business that is making a small but reasonable profit should feel obliged to pay its staff well and I would not have an issue with providing some kind of tax relief for small, local businesses which create value in the local economy through reinvesting locally (whether that is through the owners expenditure or that of its employees).

When it comes to larger companies and publicly quoted corporations, my sympathy dies away very quickly when it comes to the use of “cost efficiencies” argument to justify lower wages for employees and higher wages for management. In particular, in the case of publicly quote corporations, “maximizing shareholders’ wealth” has been one of the biggest causes of lack of growth in recent years. Cutting costs by exporting jobs to lower wage jurisdictions, cutting employee wages, increased share buybacks and dividends for already wealthy shareholders. The list goes on….

So we are in a situation where wages are under severe downward pressure in both the private and public sector, particularly in jobs which were at the lower end of the salary scale to begin with and the “enabler” for lower wages, i.e. tax credits, is now being cut so the working class in the UK have been hit with a double whammy of lower wages and lower tax credits meaning further increases in the inequality gap, in-work poverty, child poverty and child deprivation across the UK.

It is an absolute disgrace and yet people still buy into the farcical rhetoric around “living within our means”, “austerity”, “the deficit” and “Government debt”. I have dealt with each of these issues in previous blogs:

http://www.aviewfromtheattic.com/austerity/

http://www.aviewfromtheattic.com/uk-government-debt-l-the-banks-l-austerity/

Why Should We Be Angry? Is it Just a Necessary Evil to Balance the UK Books?

Interestingly, this particular policy of cutting tax credits exposes the Tories in a big way. If they truly wanted to balance the books, they could force corporations to pay a living wage and cut tax credits which would mean reducing the deficit (i) by the amount of savings from cutting tax credits; and (ii) increasing the tax revenue received through employees paying tax on their higher wage. Makes sense doesn’t it?

Not if you buy into the idea of “trickle-down economics” whereby all investment and wealth should be injected at the top of the chain and it will trickle all the way down to the working class. The idea is that companies should do what it takes to maximize shareholder wealth, i.e. cutting salary costs and the State should step in to subsidize the employees as a result of them being paid low wages.

However, State involvement only appeals to the Tories when it is absolutely necessary and making people poorer does not matter to most Tories! The reason this is an outright attack on the working class is that the Tories, not satisfied with the age old system (rightly or wrongly) that low wages and tax credits create some kind of equilibrium for wealth creation, have now gone one step further and said that you will have low wages AND the Government will not step in to ensure the impact of low wages does not create further poverty! Osborne has now effectively stated that he does not care what the impact of low wages will be to people, as long as companies are making profits and he reaches his ridiculous and unnecessary target of “balancing the UK’s books”.

So it seems we are going to take a trip back in time with the Tories to a point where the working classes have absolutely no protection from poverty and the Government has absolutely no intention of doing anything about it.

Something has got to give here. It is at the stage where we have two options:

Let the inequality gap increase in the UK and destroy peoples’ lives; or Reduce the inequality gap in the UK and improve peoples’ lives

The main argument I see that is preventing us from having a society where it is acceptable to re-distribute wealth is the “I had to work hard to get to where I am and so should everyone else” argument. However, this just shows complete ignorance to the fact that most working people are knocking years off their life from working so hard and the stress that comes with it but still struggle to make ends meet. I’ve done alright for myself and live reasonably comfortably (aside from all the debt!) but I have struggled along the way and will be the first to acknowledge that I needed a lot of luck and a lot of support to get to where I am today. If everyone acknowledged that (because I guarantee it is true in all circumstances despite what people will tell you) it would go some way to changing the current mindset so that we can elect a Government that is willing to develop and implement policies that reduce inequality in the UK.

The most interesting part of all this is that reducing inequality and increasing wealth for all in society means more spending in the economy, more tax revenue, less cost to the Government on health and a generally happy population. It makes absolute sense to me!

The Tories don’t appear to have any ideas on increasing tax revenue, just driving down welfare costs (including tax credits). It makes absolutely no sense whatsoever and is stifling the UK economy as a result!

In the meantime, Osborne will have many more weapons to attack the working class with and poverty is the Tory equivalent of collateral damage. I really hope it is not too late by the time we get to 2020!

Like this: Like Loading...