Budget 2015 - Attack on tax credits is an attack on the self-employed

Yesterday’s Budget announcement was one of the most divisive in recent history. Much of the press applauded George Osborne’s promise that “Britain is getting a pay rise” – but this only tells half the story.

The Chancellor’s Living Wage pledge is, on the face of it, a good thing. If we want to return the economy to an even footing, and if we want to make sure that the benefits of a recovery are shared fairly, it is vital that the lowest paid in our country are paid more.

A pay hike is therefore to be welcomed. But George Osborne’s announcement is not all that it first appears.

At the same time as revealing the new Living Wage, the government has also launched an unprecedented attack on tax credits. The Child Tax Credit and Working Tax Credit provide a vital lifeline for low-paid employees and self-employed workers. Indeed, the self-employed have been disproportionately affected by the squeeze on earnings seen since 2008. According to figures from the TUC, the average self-employed worker earns just £207 a week – less than half that of an average employee. Tax credits top up the income of those who are in work but poorly paid, and they are crucial for maintaining the living standards of many self-employed people.

Analysis of the tax credit cut suggests that many will be worse off, even with the Living Wage. According to the Resolution Foundation, low-earning workers with children could see their total post-tax income fall by as much as £3,450 a year. Of course, the self-employed, who will not benefit from the Living Wage, will be even worse hit.

By cutting tax credits, the Chancellor is launching an attack on the entrepreneurs that he claims to support. Across the country, struggling self-employed people rely on tax credits to live. By undermining that support, the government is making it harder for people to build a better future for themselves and their family.

A bigger wage packet for the poorest paid in society is welcome and necessary. But by cutting tax credits, George Osborne will make life even more difficult for the self-starting, enterprising individuals who form the backbone of the economy. If he really wants to support entrepreneurship, he must recognise that this means supporting the struggling small business owners who make the country tick.

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