George Osborne and Iain Duncan Smith have clashed over the chancellor’s plans to soften the impact of tax credit cuts by raiding the budget for Universal Credit.
The Centre for Social Justice (CSJ), which was founded by Iain Duncan Smith, insists that the Chancellor could use this month’s Autumn Statement to ease the impact of the controversial changes without risking his drive for a budget surplus.
In a critical report, the thinktank warned against taking money from Duncan Smith’s flagship Universal Credit scheme to sweeten the tax credit pill. Duncan Smith said that he’s concerned that the raid will serve to “undermine people’s incentive to work.”
The CSJ said in their report that the UC reforms meant by 2020 only 9% of those currently getting tax credits would still be receiving them.
Instead, it was suggested that the Government could “help people to work more hours” or introduce a transitional fund for those hardest hit.
But Osborne is nonetheless preparing to fund plans to soften the impact of tax credit cuts by making people claiming Universal Credit forgo as much as 75p of every extra pound they earn. At present Universal Credit recipients lose 65p for every extra pound they earn. Osborne is thought to be examining plans to increase the figure, known as the “taper”, to 75p.
The most expensive course of action would be to only impose the tax credit cuts on new claimants – but the authors note that it would have the “least social and political cost”.
The chief executive of the Centre for Social Justice, Baroness Stroud, who is a former special adviser to the Work and Pensions Secretary said: