Wednesday, 28 October 2015

12 things you should know about the Tory Tax Credit cuts


Despite making numerous pre-election public assurances that they wouldn't be slashing Tax Credits, the Tories have been trying to push through £4.4 billion in Tax Credit cuts that will impoverish some 3 million working families.

In this article I'm going to run though twelve issues related to the Tories attempts to slash Tax Credits for the working poor like they promised that they wouldn't.

The pre-election lies

The fact that Tories like David Cameron and Michael Gove blatantly lied to the public about not having plans to slash Tax Credits to working families is an issue of fundamental importance.

It shouldn't matter whether you believe the cuts are necessary or not, you should surely be furious that the Conservatives lied their way into power, and that the bulk of the mainstream media are once again letting them get away with it.

What faith can the general public have in the political system when they can see such obvious examples of politicians lying their way into power, and suffering no consequences whatever for their appalling dishonesty?

"Hardworking people"

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David Cameron and the Tories have been pushing the Orwellian "war is peace" style propaganda narrative that they are the party for "hardworking people", but this economic assault on millions of working families is yet another demonstration that they don't actually give a damn about ordinary working people.

It should be obvious to everyone that the Tories are not on the side of ordinary working people. Just follow the money - the vast majority of donations to the Tory party come from multi-millionaires, bankers, private health companies and the the inherited wealth aristocracy. Why on earth would the super-rich minority fund a political party in order for it to favour the interests of ordinary working people over their own? In what way would that make sense?

The Tories fake "living wage"

What is the usual response of habitual liars when they get caught out? Is it to admit they were wrong to lie and apologise, or is it to double-down with even more lies?

I guess it's little surprise to most people that David Cameron has chosen to double-down with even more lies to justify his economic attack on millions of working families. Neither is it surprising that he's so confident that the mainstream press will let him get away with it that he's even prepared to lie in parliament.

"what our proposals do are reform welfare and at the same time bring in a national living wage" David Cameron, 16th September 2015, PMQs [source]. 
Everyone knows that the Tories are trying to push through the Tax Credit cuts now, while their fake "living wage" is going to be slowly phased in over the course of the parliament, which means that Cameron's claim that the living wage is being introduced "at the same time" as the cuts is yet another lie.

One obvious factor to consider is that if the Tories did significantly increase the minimum wage right now, then the Tax Credits bill would fall dramatically as a consequence because fewer families would be suffering working poverty and relying on Tax Credits to top up their poverty wages. But the Tories have no intention of doing it that way because that would load the economic burden of reducing the Tax Credit bill onto their corporate backers, not onto the working poor.


Contempt

Just imagine the levels of contempt that the Tory party have for ordinary working people that they think they can tell blatant pre-election lies to us, try to con us into believing that they support "hardworking people" as they simultaneously impoverish millions of working families, and then try to fob us off with even more lies about how their fake "living wage" is going to mitigate the harm they are doing, when it's blatantly obvious that it won't because the cuts are being imposed long before the paltry increases in the minimum wage take effect.

In light of this cruel economic assault on the working poor, every single time we hear a Tory politician talking about "hardworking people"  from now on we should be thinking about how much utter contempt they must hold us in to expect us to mindlessly accept such obviously counter-factual propaganda.


The children

Independent studies have shown that millions of families are going to be made significantly worse off as a result of the Tory Tax Credit cuts, and that some 200,000 children (predominantly from working families) will be pushed below the poverty line next year as a result.

What the Tories are undeniably doing is imposing economic sanctions on hundreds of thousands of children for the "crime" of being born into working poor families.

The impoverishment of so many children highlights the absolute callousness of David Cameron saying that he's "delighted" that his MPs voted through George Osborne's economic assault on the working poor. 


The economic damage
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Impoverishing poor people in order to "save the economy" makes no sense from a macroeconomic perspective. It's a well established fact that poor people tend to spend a much higher proportion of their incomes on consumption than the very rich (who save a higher percentage of their incomes, and are much more likely to stash their cash in offshore tax-dodging setups).

You don't have to know the specific term for this phenomenon is called the Marginal Propensity to Consume to understand that taking thousands of pounds away from millions of families is certain to have a negative knock on effect on the amount of demand for goods and services in the wider economy.

It's absolutely clear that nobody who understands rudimentary macroeconomics could support impoverishing the working poor as a tactic for improving the economy, so there must be a different agenda. I'll get to what that agenda is later in the article.


Entrepreneurship

Ever since the rise of Margaret Thatcher in the 1970s the Tories have harped on endlessly about how much they love entrepreneurship, yet these Tax Credits cuts are blatantly an attack on the entrepreneurial working poor who are trying to establish their own small businesses in such tough economic times.

One of the big criticisms of the Tax Credits system is the way that it allows unscrupulous employers to boost their profits by paying poverty wages to their staff, safe in the knowledge that the taxpayer will step in and make up the shortfall. However, things aren't completely black and white. Tax Credits aren't just a subsidy to greedy employers, they're a form of subsidy for entrepreneurs who invest their efforts in trying to set up their own businesses.

This kind of subsidy for small independent businesses is a form of Infant Industry Protection, which takes the form of assistance for small businesses to help them compete against the economic advantage larger more established companies have due to things like economies of scale and brand awareness.

It's common knowledge that many successful businesses struggled to make significant profits in their first few years of operation (due to high capital investment costs, lack of product awareness and small initial customer bases). This means that helping small business owners out with Tax Credits is a way of promoting entrepreneurship, and slashing Tax Credits is a form of dissuading entrepreneurship.


Frontloading Austerity

Anyone who knows anything about economics knows that ideological austerity is bad for the economy. Just look at the graph to the right. It clearly shows that George Osborne's own pet thinktank the OBR have always accepted that ideological austerity is bad for economic growth.

Anyone who knows the economic basics knows that ideological austerity is bad for growth, the OBR know that ideological austerity is bad for growth, and the Tories know that ideological austerity is bad for growth. This is why the Tories frontloaded their harshest austerity measures at the beginning of the 2010-2015 parliament, and why they're frontloading even more damaging ideological austerity at the beginning of the 2015-2020 parliament.

The Tories are playing the age old game of hitting the "lower orders" with harsh economic sanctions at the beginning of the parliament, then easing back towards the end of it, in the hope that people will be so relieved to be able to breathe properly for a while, that they'll completely forget who has been standing on their necks the whole time and flock off to the polling stations to vote Tory.


Undermining social mobility

It's absolutely clear that reducing the spending power of the people who are most likely to spend their incomes on consumption is not a policy that is aimed at promoting economic growth, so the question has to be what is the real reason the Tories are so intent on impoverishing millions of working poor families?

In my view it's pretty obvious. The Tories hate social mobility and hate the idea of "the lower orders" working their way up from the bottom. They want to reserve the wealth for them and theirs and they certainly don't want a load of "uppity plebs" working their way out of poverty to challenge for the wealth the Tory class feel they have an unique entitlement to.

This Tory plan to impoverish millions of working poor families and stamp out entrepreneurship amongst the non-monied classes is not the only example of the Tories erecting deliberate social mobility barriers. Just look at the way they tripled tuition fees to ensure that students from poor and ordinary backgrounds are lumbered with huge (often completely unpayable) debts for the "crime" of aspiring to better themselves, while the children of the wealthy establishment progress through life without having to pay a 9% aspiration tax on their disposable income because their daddy paid their tuition fees upfront.


Constitutional issues

After the House of Lords crippled David Cameron's economic assault on the working poor we were treated to one of the most bizarrely hypocritical spectacles in the history of British politics, namely a load of Tory politicians whinging on about the unelected nature of the House of Lords!

Let's not forget that not only did the Tory party completely scupper the Lib-Dem plan to introduce a bit of democracy to the House of Lords during the last parliament, but also that David Cameron has already added a staggering 187 new unelected peers to the already bloated House of Lords, meaning he's been adding unelected peers at a faster rate than any Prime Minister in history, and the unelected House of Lords is now the second largest legislative assembly in the whole world after China's People's National Congress!

As much as the Tories are whinging on about how terrible it is that the House of Lords dared to vote to amend a Statutory Instrument, it's beyond obvious that the real constitutional issue here must be the fact that the Tories completely lied about having no plans to slash Tax Credits in order to cheat their way into power.

Are members of the public really going to get more upset that the House of Lords went against the obscure informal convention that they don't make amendments to Statutory Instruments, than they are about the fact that the Statutory Instrument in question is something that the government gave explicit pre-election public guarantees that they weren't going to do?

Seriously, which is most important constitutional issue? The House of Lords going against an obscure informal convention, or the government believing that they can get away with blatantly lying to the public?

What will the opposition do?

The Labour leader Jeremy Corbyn has been doing a fairly good job so far by chipping away at David Cameron over the pre-election lies he told about not planning to slash Tax Credits, and the fact that these cuts are going to impoverish millions of the "hardworking families" that Cameron pretends to give a damn about. However I think more can be done.

The fundamental issue here is that the Conservatives lied to the electorate, and if the opposition parties were to work together they could force the Tories into supporting a totally untenable position.

The opposition parties could get their heads together to come up with proposals for some kind of "Integrity in Politics Charter" with the aim of preventing politicians from telling pre-election lies. If the Tories were to oppose it in parliament, they'd be seen to be defending the right they think they have to lie to the public.

I'm not going to say what should be in this integrity charter other than some means of making pre-election manifesto commitments and promises legally binding (barring certain predetermined exceptional circumstances). It's not my job to write proposed legislation, so I'm just throwing the idea out there because such a move from the combined opposition parties would have the potential to back the Tories into an impossible corner where they would be forced to repeatedly defend their presumed right to tell outright lies to the public.

If you think the opposition parties proposing some kind of integrity charter is a good idea, how about you write to your local political representatives to suggest the idea, or contact representatives of some of the opposition parties to suggest they get their heads together on the idea.

Trident

As a final point I'd like to put the scale of the cuts into perspective. While the Tories have been insisting that there is no alternative to slashing £4.4 billion in Tax Credit support to the working poor because of the economy, the estimated price tag for replacing the Trident nuclear programme has been quietly raised from £100 billion to £167 billion.

The idea that we need to thrust millions of working families deeper into poverty to save £4.4 billion is an affront to decency when the price tag for a bunch of ludicrous doomsday machines that nobody in their right mind would ever use has just been increased by £67 billion.


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How George Osborne has created more debt than every Labour government in history combined
                        
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Ideological austerity is a con
                     
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