UK Politics

Tax credits 'tweak' suggested by ex-minister Mitchell

Andrew Mitchell

A former Conservative Cabinet minister has suggested the government's tax credit reforms could be "tweaked" before they come into force in April.

But Andrew Mitchell said he backed the "very tough" reforms overall.

Shadow chancellor John McDonnell confirmed Labour would reverse the cuts after two frontbenchers declined to make the commitment in interviews.

Labour is challenging Tory MPs to join them in opposing the reforms in a Commons vote on Tuesday.

The government's plans to reduce spending on tax credits were approved by MPs last month.

From April, the threshold at which tax credits begin to be withdrawn will fall from £6,420 to £3,850, and people's income over this amount will be reduced more steeply.


Background

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  • Tax credits are income supplements for people on low incomes
  • Currently those working a minimum of 16 hours a week can claim Working Tax Credit, while parents can also claim Child Tax Credits
  • The amount received is affected by how many hours someone works, their salary and how many children they have
  • July's Budget set out savings of £4.5bn to the tax credits bill
  • Changes to the thresholds come into force in April
  • In 2017, any family which has a third or subsequent child born after April 2017 will not qualify for more Child Tax Credit

Tax credits debate: Finding your way


Mr Mitchell, the former international development secretary and Conservative chief whip, told the BBC's Sunday Politics the changes were needed because the current system was "out of control".

He added: "It's a very tough measure but it's greatly compensated by other changes in the tax and welfare system.

"We've got some time before it comes in so that we can tweak it if necessary but I think it is the right reform to make and overall we can make sure there are as few losers from this as possible."

He said he was sure Chancellor George Osborne was "keeping an open mind" and could make changes in next month's Comprehensive Spending Review.

Mr Mitchell also called for "individual treatment" through the Department for Work and Pensions for those affected, saying the government had to minimise the impact on "hard-working and low-paid" families.


Analysis

by Ross Hawkins, BBC political correspondent

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Worried Conservative MPs may yet mount an assault on George Osborne's tax credit cuts.

But they don't fancy following shadow chancellor John McDonnell into battle for a complete U-turn.

Instead some are looking to another Labour MP: the former minister Frank Field.

He says he has a cost-free plan to soften the blow of tax credit cuts.

On Tuesday he will seek permission for a debate on his idea and he expects to be publicly backed by MPs from other parties.

He even thinks there could be moves in the House of Lords to challenge the device - known as a statutory instrument - that put tax credit cuts into effect.

Some Tories are worried about constituents finding out how much money they will lose around Christmas, and then actually losing the cash shortly before May's crucial elections.

Are they worried enough to fight and defeat George Osborne?

One influential Conservative puts the chances of success at 50-50.

Treasury sources insist there's no chance of a U-turn. One says Mr Field's plan would cost nearly £2.5bn and mean significantly bigger losses for many.

But when it comes to welfare revolts on this, Field has got form. Osborne will be watching him very carefully indeed.


Labour will use an opposition debate on Tuesday to urge the government to reverse the changes, although any vote that takes place will not change the law as the reforms have already been approved by Parliament.

Former Labour minister Frank Field is seeking a separate debate on his own proposals which he says would mitigate the effects of the reforms at no extra cost.

Mr Field said he had cross-party backing for his suggestion, which involves a "secondary" earnings threshold of £13,100, paid for by taking away tax credits at a faster rate for people earning above the minimum wage.

On Sunday, neither shadow chief secretary to the Treasury Seema Malhotra nor shadow international development secretary Diane Abbott would pledge their reversal under a Labour government.

'Lower taxes'

Ms Malhotra said the cuts "should not go forward" while Ms Abbott said Mr McDonnell's "fiscal mandate" would set out the party's policy.

Mr McDonnell then tweeted that if Chancellor George Osborne would not reverse the cuts, "we're making it clear that we will".

Image caption Shadow chief secretary to the Treasury Seema Malhotra would not confirm Labour would reverse the tax credit cuts

More than three million low-paid workers will be told just before Christmas how much they will lose from the changes to tax credits.

The government says other reforms, including a National Living Wage, increased personal tax allowance and expanding childcare, will compensate for the reforms and Prime Minister David Cameron has rejected calls for a change of course.

Speaking on the BBC's Andrew Marr show, Defence Secretary Michael Fallon said the current tax credit system was "not very sensible", saying even some MPs were eligible to receive the payments.

"We need to focus welfare on where it is needed most, and move our country to where you keep more of your earnings - lower tax and lower welfare," he said.

Conservative Chief Secretary to the Treasury Greg Hands attacked Labour's approach, saying the opposition's economic policy was lurching "from chaos to incredibility".

He questioned how Labour would cover the cost of reversing the measures.

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