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Cameron to hint at assault on tax credits in welfare speech

David Cameron is to deliver his strongest hint yet that he intends to launch an assault on tax credits as he pledges to end the “merry-go-round” of welfare payments that means low wages are topped up by the state.

The prime minister will make the comments in a speech in Runcorn on Monday morning just weeks before George Osborne, the chancellor, sets out £12bn of welfare cuts, seeking to justify them in terms of both reducing the deficit and the need for further changes to incentivise work.

In his speech on “opportunity”, Cameron will say Britain needs to move from a “low-wage, high-tax, high-welfare society to a higher wage, lower tax, lower welfare society”.

The prime minister will add that the UK must tackle “complacency in how we approach the issue of low pay”.

“This is what I would call a merry-go-round,” he will say. “People working on the minimum wage having that money taxed by the government and then the government giving them the money back, and more, in welfare. Again, it’s dealing with the symptoms of the problem, topping up low pay rather than extending the drivers of opportunity.”

Cameron’s focus on the subject will be seen as an attempt to frame the debate in terms of changes to people’s lives and the labour market.

Osborne confirmed on Sunday he was planning to press on with the welfare reductions despite pressure from some of his Conservative colleagues to slow the pace of cuts and concern from bodies including the OECD about the impact on the working poor. Figures released this week are expected to show an increase in child poverty.

Alison Garnham, chief executive of the Child Poverty Action Group, told the BBC’s Radio 4 Today programme that the impact of lower incomes for poor working families was already “stark”, with an extra 300,000 children expected to be living in poverty when the figures are published and 700,000 by 2020.

On Saturday, tens of thousands of people rallied against austerity in Parliament Square in central London and cities across the UK; the only Labour leadership candidate to attend the protest was the Islington North MP, Jeremy Corbyn.

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However, the Labour leadership frontrunner, Andy Burnham, launched a blistering attack on the chancellor’s “disgraceful” approach to cutting £12bn from the welfare budget, warning that he would oppose any attempt to reduce benefits for disabled people or tax credits for those on low incomes.

He claimed Osborne was “frightening people” by failing to set out which benefits he would slash.

So far, the Labour frontrunners have not been very specific about which of Osborne’s potential welfare cuts they would oppose. Yvette Cooper, the shadow home secretary, has backed “strong rules on contribution, expecting people to work if they can” but also defended the principle of tax credits for working-age people on low incomes. Liz Kendall, the shadow care minister, has said she wants to wait and see the details of the proposed Conservative cuts before passing judgment.

Previously, Burnham has appeared to adopt a harsher tone on welfare, saying the party had left “an impression on the doorstep, a feeling, some people say, that Labour want to be soft on people who want something for nothing”.

Speaking on Sky News on Sunday, the shadow health secretary appeared to sharpen his rhetoric about the way the Conservatives plan to carry out the cuts. He said he was not against all reductions in the benefits bill to help cut the deficit but he would not “go along with brutal plans that would hurt many vulnerable people”.

Burnham said his “Labour way forward” would include tax incentives for companies that pay the living wage and tackling the dysfunctional housing market that leads to so much housing benefit being paid to private landlords.

“If this chancellor thinks it is acceptable to take benefits off disabled people who can’t replace that income, or if he is coming after the tax credits of people on low incomes in work, then he is going to have a fight on his hands,” Burnham told the Murnaghan programme.

“It is questionable whether he has a mandate for cuts on this scale because he didn’t spell out before the election where these cuts were going to fall. That is wrong.”

During the election campaign, Osborne and Cameron repeatedly refused to outline exactly how they would reach the £12bn figure, apart from saying they would reduce the benefit cap, freeze most working-age benefits for two years and take away housing benefit for under-21s.

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Cameron has ruled out touching benefits for elderly people and child benefit, meaning the bulk of the savings will have to come from other working-age welfare payments. The most likely cuts are restrictions on tax credits and housing benefit.

There have been reports of disquiet among some of Osborne’s colleagues about the scale of the proposed reductions. Iain Duncan Smith is said to have been concerned to make sure the changes are designed to encourage people into work and are not just “salami-slicing” the budget.

Having thrashed out a deal, the two cabinet ministers issued a challenge to Labour, saying: “Even after the comprehensive rejection of their position by the British people in last month’s general election, Labour seems determined to go on as before. But even now, we appeal to their leadership candidates to engage constructively with us and to support the further savings we must make to make welfare fairer and more affordable, while protecting pensioners and the vulnerable.”




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