1,700 disabled workers to lose their jobs as government cuts subsidy

State-owned Remploy factories to close, in a move that Clegg condemned as "brutal" while in oppositi

The disabled have had a rough ride under the coalition, with welfare reform cutting their benefits and support. Now, ministers have announced that more than 1,700 disabled people will lose their jobs this year, because the government is withdrawing its £68m subsidy from Remploy, the disability employer.

Set up to provide jobs for injured servicemen after the second world war, Remploy runs 54 factories which employ staff with a range of physical and mental difficulties. The withdrawal of government support means that 36 of the 54 factories will close. The remaining 18 will be put up for sale, meaning that hundreds of employees there also face an uncertain future.

This is the conclusion of a battle that begun under Labour: the factories have been operating at a loss for years. In opposition, however, both the Employment Minister, Chris Grayling, and the Liberal Democrat leader, Nick Clegg, pledged to keep the factories open. Here is Clegg railing against the "sheer brutality" of the proposed closure in 2007:


It is a difficult issue. The government's line is that in the 21st century, it is no longer appropriate for disabled people to work in isolation. The Disability Minister, Maria Miller, said that the multimillion pound subsidy to Remploy could be better spent on other programmes to help the disabled into work. She highlighted figures showing that the annual cost of supporting a Remploy worker was £25,000 a year, as compared to the £2,900 cost of the Access to Work scheme, which gives technology and assistance to firms employing disabled workers.

Yet the timing of this move certainly makes it appear rather cruel, and there is no evidence that sufficient efforts are being made to get disabled people into work. Last week, the welfare reform bill passed, cutting much-needed disabled benefits. Across the UK, unemployment is rising. Already, around 50 per cent of disabled people are unemployed, compared with less than 10 per cent in the rest of the population. As Unite leader Len McCluskey said: "In the worst economic crisis since the 1930s, these workers' prospects of finding work are almost zero."

The workers made redundant by the Remploy closure will be guaranteed support for 18 months, in a package worth £8m. But money is not the only issue. For many disabled people, the right to work and be a part of society is just as important. Cuts to disability living allowance already threaten the ability of many disabled people to pay for transport to get to work. It seems unlikely that Remploy will be replaced with adequate measures to provide opportunities for this group. Even in the boom times, those with mental or physical disabilities struggle to find employment. With five people for every vacancy in the UK, it is difficult to see many firms making the effort to employ these workers. Remploy certainly was not perfect, but its closure -- with no clear replacement -- is yet another step in the wrong direction.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.