As a country, we must learn to live within our means and protect spending on public services. I recognise that these changes are not easy, but they are fair, and they return tax credit spending to the level it was in 2007-08 in real terms. The original Tax Credit system cost £1.1 billion a year. This year, that cost has reached £30 billion.
These changes will ensure that work is encouraged and will put the welfare system on a more sustainable footing. The sheer scale of Tax Credits is subsidising lower wages in a way that was never intended. By focusing Tax Credits and Universal Credit on those on lower incomes, and freezing in working age benefits for four-years, the welfare system will be kept affordable and provide support for those most in need.
Importantly, the timing of these changes comes alongside the introduction of a new National Living Wage for over 25s. This will be set at £7.20 from April 2016 and I welcome that Ministers are aiming for all over 25s to earn at least £9 per hour by 2020, a direct pay rise to over 2 million worked worth up to £5000 per year.
By Patrick McLoughlin on October 12, 2015