Tax credits: unaffordable and unfair

The government has come in for criticism over plans to reform tax credits, says James Ferguson. But the system as it stands is unaffordable.

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It all started with Gordon Brown

Michelle Dorrell, a self-employed single mother of four, attacked Conservative minister Amber Rudd on last week's Question Time over cuts to tax credits. These tax-free benefits for the low-paid (see below) will be scaled back from 2016, while the minimum wage is being raised. The idea is to cut the deficit (the government's annual overspend) and ensure that "work pays". While claimants fear they will see their income drop, the government fears the welfare system has become not only unaffordable, but unfair and an impediment to growth too.

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James Ferguson qualified with an MA (Hons) in economics from Edinburgh University in 1985. For the last 21 years he has had a high-powered career in institutional stock broking, specialising in equities, working for Nomura, Robert Fleming, SBC Warburg, Dresdner Kleinwort Wasserstein and Mitsubishi Securities.