The sums don't work. They just make it worse. Photo: Getty Images
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The decline of tax credits: a tale of wishful thinking and saloon-bar logic

It seems that working poverty is about to be made worse. Let’s hope that there is also some clear thinking about long-term improvements too.

Recent high-profile converts are bringing headlines and new vim to the debate on working poverty. Good. But with this comes a cacophony of confusion about the National Minimum Wage (NMW), Living Wage, the role of tax credits and the likelihood that a recovery in earnings will compensate for cuts to in-work support. And this risks obscuring both the implications of what the Budget might mean for working poverty as well as alternative, practical, policy solutions.

The first muddle concerns the idea that in one bold gesture we could merge the NMW and Living Wage. From its conception, the NMW has acted as a wage floor that takes account of potential risks to employment. In contrast, the Living Wage is unencumbered by any job considerations: it is driven by changes in the cost of living (and the public’s perception of what a minimum standard of living looks like). That’s a big difference. It’s for this reason that the Living Wage Foundation opposes making it mandatory as many firms, particularly small ones, would struggle to adapt. Equally, those who’d like to see a more ambitious remit for the Low Pay Commission don’t propose making it chase the Living Wage. The NMW and Living Wage are, and will remain, distinct.

Nor – contrary to endless media repetition – is the Living Wage set at a level that would permit households to cope without in-work support. Its calculation is predicated on full take-up of tax credits, housing benefit and so on. If in-work support is cut then, as night follows day, the Living Wage will rise. For example, if we exclude in-work support then the level of the London Living Wage leaps from £9.15 to £11.65; 80 per cent higher than the current minimum wage. Anyone thinking that something like this might happen anytime soon needs to take a long walk.

Bear in mind, too, that the Living Wage is itself a composite of different wage rates that, together with in-work support, are required to ensure a minimum living standard for a variety of household types. The rate for a lone parent with two kids would need to be over £14, while for a childless couple it falls to well below the NMW at under £5.  Even in the unlikely event that the ‘official’ Living Wage (£7.85) was mandatory – and let’s not forget that over 5 million workers still get less than it – it wouldn’t guarantee families a decent standard of living.

Perhaps the biggest misconception is the voguish notion that if tax credits are cut, employers will somehow decide to offer pay rises to fill the gap. This is saloon-bar economics espoused by some on both left and right. The available evidence suggests that the great majority of the gains from tax credits flow through to employees, not employers.

What about the claim that those working families should be able to absorb cuts in tax credits and other benefits by securing a commensurate pay rise? It doesn’t wash either. To illustrate, consider the idea that’s been floated of cutting Child Tax Credit by £5 billion (accounting for under half of the proposed welfare cuts). A single parent with one child, working 16 hours a week on the NMW could experience a cut in annual income of £845. To prevent this income fall they would need to boost their earnings by nearly £1,500 (due to high effective tax rates) ­– equivalent to a 26 per cent pay rise. Alternatively, it would take 12 years of incremental 2 per cent real pay rises (well above the pre-downturn trend) simply for this family to recover their position. If the family had two children then we can practically double the figures in this particular example.

We should also bear in mind that under Universal Credit it will become harder, not easier, for this sort of family to claw their way back to today’s position as the effective tax rate they face will rise. And are tax cuts going to fill the gap? No. As we’ve often pointed out, a higher personal tax allowance (PTA) won’t give a penny to almost 6 million of the lowest earners. Only about 1 per cent of the cost of the planned increases in the PTA will actually be spent lifting the lowest earners out of income tax (the rest is spread between all tax-payers). The measure that would be most useful – raising the National Insurance threshold – has hitherto been shunned.

So as we head into the Budget week, let’s be clear-eyed about quite how severe the consequences could be for the working poor. But let’s do so while also acknowledging that the status quo needs changing. It’s true that in some important respects our policy architecture has worked well: several decades of blending steady welfare reform, in-work support and the NMW have left our labour market in a far stronger position than some of our key competitors (notably the US). Yet there are big shortcomings to be tackled not least on low pay, work incentives and training. New ideas capable of courting support across the political spectrum are needed.

First, we could prioritise progress on poverty-pay in those sectors that are largely in the government’s gift and that will clear the path to a higher NMW. For instance, a move towards a Living Wage for care workers would offer a pay rise to almost a million of the worst-paid, most overlooked workers in the country and remove one of the biggest road-blocks to a higher wage floor for all workers. Year after year the Low Pay Commission highlights that the care sector works as an anchor on the NMW. Action here would also give the government much greater moral authority to lean on other key low-paying sectors like retail and hospitality, and would cost less than many realise due to the scale of savings from in-work support. Good policy, good politics.

Second, Universal Credit needs to be overhauled so it becomes a significant part of the solution to persistent low pay rather than reinforcing the problem – encouraging people to work more hours and making earning more worthwhile. This is eminently achievable and fully in keeping with the government’s rhetoric. Political will from the Treasury, and an open mind from DWP, are what’s needed.

Third, as part of the push on productivity, it’s high time that the state demanded more from employers on training. Debates on training levies and employer contributions are as old as the hills – all governments examine them only to shy away – but they now have real urgency due to the perilious decline of the adult skills budget. The new government should use its mandate, and its strong hand vis-à-vis employers, to act. It would be a meaningful sign that, amidst the hardship, it is seeking to inch the economy towards shared and sustainable wage growth over the medium term.

It seems that working poverty is about to be made worse. Let’s hope that there is also some clear thinking about long-term improvements too.

Gavin Kelly is Chief Executive of the Resolution Foundation. This piece originally appeared on the Foundation's blog

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Is Google Maps discriminating against people with disabilities?

Its walking routes are not access-friendly.

“I ended up having to be pushed through a main road in London, which was really scary.” Three weeks ago, Mary Bradley went to London to visit her daughter Belinda, who is just finishing her first year at university there. Her other daughter joined them on the trip.

But what was supposed to be an enjoyable weekend with her two children turned into a frustrating ordeal. The apps they were using to find their way around kept sending them on routes that are not wheelchair-friendly, leading to time-consuming and sometimes frightening consequences.

Bradley has been using a wheelchair – when having to go longer distances without a vehicle – for over a year, due to a 45-degree curve in her spine, severe joint facet deterioration in her back, and other conditions.

She lives in Weston-super-Mare in Somerset, and has made the trip up to London to visit her daughter a handful of times. Each visit, they use Google Maps and the transport app Citymapper to find their way around, as neither of them know London particularly well.


Belinda and Mary Bradley. Photo: Belinda Bradley

“It was just horrible,” says Bradley of her most recent trip to the capital. “We’re following the maps, and we go along, then find we are faced with a footbridge, and realise there was no way I was going to get over it, so we had to go back the way we’d come. At one point, we were faced with a strip of narrow pavement the wheelchair couldn’t go down. That was something we found all weekend.”

While Google Maps did highlight accessible Tube stations, they found that once they had alighted to do the rest of the journey to their destination on foot, “it took us three times as long, because the route that it takes us just wasn’t passable”.

They ended up having to try different routes “having no real idea of where were going”.

“It meant that it took so much longer, the girls ended up having to push me for longer, I got more and more embarrassed and frustrated and upset about the whole thing,” Bradley tells me.

At one point, her daughters had to take her down a main road. “Being pushed on a road, especially in London, is scary,” she says. “It was scary for me, it was scary for the girls.”

When they returned home, Belinda, who is a 19-year-old Writing and Theatre student at the University of Roehampton, was so furious at the situation that she started a petition for Google Maps to include wheelchair-friendly routes. It hit over 100,000 signatures in a fortnight. At the time of writing, it has 110,601 petitioners.


Belinda's petition.

Belinda was surprised that Google Maps didn’t have accessible routes. “I know Google Maps so well, [Google]’s such a big company, it has the satellite pictures and everything,” she says. “So I was really surprised because there’s loads of disabled people who must have such an issue.”

The aim of her petition is for Google Maps to generate routes that people using wheelchairs, crutches, walking sticks, or pushing prams will be able to use. “It just says that they’re a little bit ignorant,” is Belinda’s view of the service’s omission. “To me, just to ignore any issues that big needs to be solved; it needs to be addressed almost immediately.”

But she also wants to raise awareness to “make life better in general” for people with disabilities using navigation apps.

Belinda has not received a response from Google or Citymapper, but I understand that Google is aware of the petition and the issue it raises. Google declined to comment and I have contacted Citymapper but have not received a response.

Google Maps does provide information about how accessible its locations are, and also allows users to fill in accessibility features themselves via an amenities checklist for places that are missing that information. But it doesn’t provide accessible walking routes.

“There’s no reason that they couldn’t take it that bit further and include wheelchair accessible routes,” says Matt McCann, the founder of Access Earth, an online service and app that aims to be the Google Maps for people with disabilities. “When I first started Access Earth, I always thought this is something Google should be doing, and I was always surprised they haven’t done it. And that’s the next logical step.”

McCann began crowdsourcing information for Access Earth in 2013, when he booked a hotel in London that was supposed to be wheelchair-friendly – but turned out not to be accessible for his rollator, which he uses due to having cerebral palsy.

Based in Dublin, McCann says Google Maps has often sent him on pedestrian routes down cobbled streets, which are unsuitable for his rollator. “That’s another level of detail; to know whether the footpaths are pedestrian-friendly, but also if they’re wheelchair-friendly as well in terms of the surface,” he notes. “And that was the main problem that I had in my experience [of using walking routes].”

Access Earth, which includes bespoke accessibility information for locations around the world, aims to introduce accessible routes once the project has received enough funding. “The goal is to encompass all aspects of a route and trip,” he says. Other services such as Wheelmap and Euan's Guide also crowdsource information to provide access-friendly maps.

So how long will it take for more established tech companies like Google to clear the obstacles stopping Mary Bradley and millions like her using everyday services to get around?

“You can use them for public transport, to drive, you can use them if you’re an able-bodied person on foot,” she says. “But there are loads of us who are completely excluded now.”

Sign Belinda Bradley’s “Create Wheelchair Friendly Routes on Google Maps" here.

Anoosh Chakelian is senior writer at the New Statesman.