Merryn's Blog

Time to reform Britain’s unfair in-work benefits system

Britain’s tax credit system is horribly expensive and deeply unkind to both those in receipt of benefits and those paying for them. Merryn Somerset Webb explains why.

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In the post below we look at just how tax credits work and just how much money some families can make out of claiming them.

It isn't a pretty picture it's horribly expensive and deeply unkind. It is unkind to workers at the low end, for the simple reason that it encourages them to do something that is not in their long term interests to work very little. Work only a few hours a day in a low-paid job and your promotion prospects the likelihood of you ended up in genuinely fulfilling work are pretty low. So it seems wrong to incentivise you to do that.

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It is also unkind to net taxpayers why should a family with two full-time workers finance one with one part-time worker? And perhaps even more importantly why should they finance that family if it has only just arrived from another country?

According to the prime minister, speaking today on his demands for a new EU, 43% of EU immigrants to the UK rely on benefits during their first four years here, and some 66% of those are on tax credits to an average of around £5,000 per family.

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The truth, as a government source pointed out to the Times, is that "because of how generous the UK's in-work benefits can be, it can make sense for an EU citizen to go from an average wage elsewhere in Europe to a minimum wage in the UK using the in-work benefits to top up the income."

Why do the UK's taxpayers put up with this? It's just nuts.

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