Grayling pleads guilty to hitting the working poor

Tax credit changes mean some families will be better off on benefits, welfare minister admits.

Chris Grayling's startling admission (£) that tax credit changes mean some working families will be better off on benefits is an important moment. The welfare minister has pleaded guilty to the toxic charge that the government is penalising the working poor.

George Osborne's decision to remove tax credits from those who work fewer than 24 hours a week means 212,000 couples with children will lose up to £3,870 a year. Asked by Labour MP Ann Coffey what would happen to a family working 16 hours a week on the minimum wage, Grayling revealed that the weekly income of a couple with two children would drop from £330 to £257. That's significantly less than the £271 a week that they would receive on out-of-work benefits. In a letter to Osborne today, the Child Poverty Action Group warns that the policy puts "470,000 children at risk of being plunged into poverty".

Grayling's defence is that the anomaly will be resolved next year when the Universal Credit replaces all benefits and "makes work pay". Indeed, the same family will be £95 better off under that system. But until then, Ed Miliband has a potent attack line for PMQs. In one move, the government has undermined its claim to be on the side of working families, rather than "welfare families".

The government has suggested that couples will be able to increase their hours to retain the working benefit but this only makes it look even more out of touch. As the Resolution Foundation's Vidhya Alakeson noted: "In today's economy part-time workers are likely to find it extremely difficult to negotiate extra hours in any case." There are already 1.35 million people working part-time because they can't find a full-time job, the highest number since comparable records began in 1992.

Whether or not the Lib Dems secure a significant increase in the personal allowance, this policy will do nothing for those part-time workers who don't earn enough to pay tax. Now, to add insult to injury, the government is clawing back £73-a-week from their families. This may or may not be the long-awaited "10p tax moment". But the creation of a disincentive to work means the government is now failing even on its own terms.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Tony Blair won't endorse the Labour leader - Jeremy Corbyn's fans are celebrating

The thrice-elected Prime Minister is no fan of the new Labour leader. 

Labour heavyweights usually support each other - at least in public. But the former Prime Minister Tony Blair couldn't bring himself to do so when asked on Sky News.

He dodged the question of whether the current Labour leader was the best person to lead the country, instead urging voters not to give Theresa May a "blank cheque". 

If this seems shocking, it's worth remembering that Corbyn refused to say whether he would pick "Trotskyism or Blairism" during the Labour leadership campaign. Corbyn was after all behind the Stop the War Coalition, which opposed Blair's decision to join the invasion of Iraq. 

For some Corbyn supporters, it seems that there couldn't be a greater boon than the thrice-elected PM witholding his endorsement in a critical general election. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496