Today a debate will take place about Tax Credit reform, these reforms were voted through on 14th September 2015.
I believe it is the right thing to move Britain from a high-welfare, high-tax, low-wage economy to a lower-welfare, lower-tax and higher-wage and higher skill economy. Tax credit is means tested income support. Its greatest cost and pull is in paying close to full time pay for those working part time hours. This has resulted in the perverse situation where staff decline pay rises so as not to lose too much in tax credits or more commonly part time workers are unable to work further hours due to the extraordinary generosity of their tax credit top up. We need to move Britain away from the dependency culture that has built up over the past 18 years.
Over the past decade spending on tax credits threatened to spiral out of control, more than trebling in real terms between 1999 and 2010. Spending on tax credits would have risen to £40 billion per year by 2016/17. This is the equivalent is 200,000 nurses or 325,000 teachers.
In 2010 nine in ten families with children were eligible for tax credits, reduced to six in ten following the coalition's reforms in the last Parliament. The reforms we now make will reduce this to five in ten, and take spending on tax credits back to where it was in 2008.
Alongside the changes to tax credits, The Government is introducing the National Living Wage, increasing the personal tax allowance and offering increased free childcare as well as cutting business taxes. These measures will help protect families' incomes.
These changes are starting to build the lower welfare, lower tax, higher wage economy we need to balance the books, improve living standards and spread prosperity. Taken together, these policies give employers both the duty and, just as importantly, the ability to pay decent wages. The alternative to finding these savings in welfare spending would be to increase borrowing, raise taxes or cut valuable public services like the NHS and schools. None of these options would be right for Britain.