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The Chancellor should phase out not freeze tax credits – Professor Chris Warhurst

Chris WarhurstProfessor Chris Warhurst is Director of the Institute for Employment Research at the University of Warwick.

He said: “This is a very political budget by a very canny Chancellor. He’s made the right noises on tackling low pay but action to do so will be deferred.

“The welcome flagging by the Chancellor of a ‘national living wage’ of £9 an hour by 2020 is a clever if deceptive move. The introduction of the national minimum wage in 1999 raised the very lowest wages but those receiving it still struggle to afford a decent life and that it has become the going pay rate rather than the minimum pay rate for many jobs has become a national scandal. Over a fifth of workers in the UK are on low wages now. Almost half of retail workers earn below the low-pay threshold and over half of hospitality workers. Tax credits were always nothing more than remedial action by the state to boost low wages. In practice they provided a wage subsidy for some of the worst employers: a form of corporate welfare provided by tax-payers.

“Tax credits were also an example of looking at the wrong end of the problem. Despite rising profits, the share distributed by companies to workers in the form of pay has dropped in the last decade. Making employers pay higher wages is what’s required. The Chancellor has frozen tax credits in this budget and they will be phased out in the future. This action however cannot be taken in isolation. Companies need to make good the shortfall. The profitable ones can and should do so now; other companies will need time to rethink their business strategies and will probably need business develop support to do so. In the meantime, it’s the low paid that again bear the brunt of immediate income reductions. It’s a case of freeze tax credits now, give employers five years to make good the shortfall.

“If he wants the country to balance its books, the Chancellor should do the right thing by low wage workers and allow them to be able to balance their books by phasing out rather than freezing tax credits. He also needs to be more assertive in making employers pay better wages.”

Note to Editors:

Issued by Lee Page, Communications Manager, Press and Policy Office, The University of Warwick. Tel: +44 (0)2476 574 255, Mob: +44 (0)7920 531 221. Email: l.page@warwick.ac.uk.

Contact:

Lee Page

Communications Manager, University of Warwick

Tel: +44 (0)2476 574 255

Mob: +44 (0)7920 531 221

Email: l.page@warwick.ac.uk