The British political machine is often, rightly, criticised for lacking vision. Rather than looking at the big picture the political impediment forces short-termism. This is particularly hindering to structural reform as politicians of all hues are reluctant to make difficult and unpopular decisions for fear of losing power at the ballot box. Despite appearances, Osborne and Cameron have been far more radical than Thatcher ever was and are now taking on one of the few remaining sacred cows of British politics, namely the welfare bill. One of the last legacies of socialism in Britain is a dependency on benefits. To give our children better opportunities and to improve the lives of everyone it is vital that we move from a high-welfare, high-tax, low-wage economy to a lower-welfare, lower-tax and higher-wage one. The tax credit budget has spiralled dramatically out of control to over £30 billion a year from an initial £1 billion. It is right that work should pay more than benefits, however, a system where 90% of families are entitled to money is not only financially unsustainable but also grossly damaging to the fabric of our society.
While controversial, and potentially counterproductive in some aspects, reforms are necessary. The Chancellor’s plan looks beyond the next election and seeks to bring parity to work through a new National Living Wage, reformed tax credits and lower taxes. They go hand-in-hand as a new settlement. We are at a crossroads with two distinct options. On the one hand, we can travel the Corbyn route of tax and spend with the perils and pitfalls it will inevitably bring, after all it always does, or take the difficult decision to rebalance the economy as a whole.
Sadly it simply isn’t possible to pick and choose what elements we adopt. We elect politicians to make difficult decisions and we need our MPs to step up to the plate. It just isn’t credible to impose higher wages and leave tax credits as is, lumbering taxpayers with every-higher welfare bills. The money tree is a fabulous socialist illusion and now is not the time to fall for the snake oil salesmen – we owe our children better. Is it fair to commit the next generation to a Britain which is home to one percent of the world’s population, generates four per cent of its GDP, yet pays out seven per cent of all global welfare spending?
The truth is even the Labour Party know the current profligate system of spend on welfare has failed. Former Labour Chancellor, Alistair Darling, admitted that the current tax credit system is “subsidising lower wages in a way that was never intended”. Between 2010 and 2015 the Conservative-Liberal coalition acted to reduce the number of families who qualified for tax credits to six out of 10. Now the House of Commons has approved plans to bring that down to five in 10.
We should not hide from these difficult choices, yes they are controversial like so much of what has to be done such as the removal of child benefit from the better-off, and an annual cap on out-of-work benefits per household. No doubt many will recall the dire warnings on the latter when many on the left made ridiculous predictions of “social cleansing”. Instead, tens of thousands of people who had their benefits capped moved into work reduced their housing benefits claim or no longer claim at all.
The previous government proved that benefits reforms can work and will make a real improvement in people’s lives, the alternative is to burden our children and grandchildren with yet more debt. Rather let us create a fairer balanced economy that encourages growth and ambition.