Tories’ tax credits shame shows they will never understand the reality of low pay

The higher minimum wage for over-25s is welcome, but the Government’s phoney living wage won’t hide their appalling track record on helping the low paid. Because as they give pennies with one hand, they’re ripping whole wedges of cash from low paid workers with the other, hammering those low paid workers trying to do the right thing with cuts to their chaotic universal credit.

The Tories like to say they will make work pay, but the reality could not be much further removed. Figures show that the Tory decade from 2010 to 2020 is set to be the worst decade for wage growth in the UK since the Depression-hit 1920s. Working people are seeing their pay packets squeezed to breaking point.

While the Government may have performed a partial u-turn on their plans to cut £4bn from tax credits after pressure from MPs, the same cuts are just being phased in over the course of this parliament. By 2020, more than two million working families will be £1,600 a year worse off under universal credit, which is why Labour has repeatedly called on the Tories to reverse those cuts in full.

According to the Office for Budget Responsibility, 80 per cent of current tax credit recipients will be moved onto universal credit over the next five years, and the vast majority will lose out. Self-employed workers like brickies, plumbers and taxi drivers will be hit still further, as Tory cuts mean that 800,000 low paid self-employed workers will lose out by an extra £1,000 each.

These severe cuts to universal credit take effect on April 11. After that date, as more people are moved onto universal credit, the Tory work penalty will bite even harder, and any gains from the higher minimum wage will pale in comparison to the losses working families will be made to suffer.

Of course, as ever with the Tories, there’s another catch to their so-called “living wage” – it isn’t a living wage at all. The Living Wage Foundation sets the true Living Wage each year, after the rate of pay needed to live on is independently calculated by the Centre for Research in Social Policy at Loughborough University. It is currently £9.40 in London and £8.25 elsewhere.

Credit has to go to the growing number of employers who pay the real living wage, including many Labour councils who have led the way to benefit their lowest paid staff. I am proud that my own council Torfaen has announced that it will join them, acting as a responsible employer that values its staff. After all, these are the people who help keep our local services running.

So not only are the Tories giving with one hand and taking with the other, but their “living wage” is short-changing low paid workers. That shouldn’t come as a surprise though. After all, as even Iain Duncan Smith lamented when damning the Government’s plans to cut disability benefits, the Chancellor and his colleagues only care about fairness for groups of voters who are likely to vote for them.

So whilst any increase in pay rates is welcome, the Government’s pale imitation of a living wage isn’t about helping the low paid at all. It’s not about helping make work pay, it’s about giving the impression that that’s what they’re doing, when all the time they’re making the system work for those at the top, not for the millions of hard-working people trying to get by.

What we need is a Government that is serious about tackling the scourge of low pay. A Government that, instead of forming a veneer of vacuous soundbites about “strivers” and “shirkers”, actually understands the impact of low pay and how it entraps people, and resolves to recast our economy to reward the many rather than the few. And to end topically, a Government that protects quality, well-paid employment and has a strategy to promote it, not one that sees jobs in industries like steel as expendable in the face of market forces.

Nick Thomas-Symonds is shadow Employment Ministers