Wednesday’s budget in some ways typifies the tensions between corporate welfare and social welfare. Tax credits are a good example of a provision that falls into the categories of both corporate welfare (in that they act as a wage subsidy for employers) but also social welfare (in that they provide essential support to low-income families).
Increasing wages at the lower end is good for low-paid workers, and it has the advantage of reducing the cost of in-work benefits and, potentially bringing in higher tax revenues. But it’s also likely to force up the cost of the wages bill for employers. Thus employers and employees alike are likely to lose out in the short term. As the Institute for Fiscal Studies showed yesterday, the new “living wage” will fail to compensate low-income workers from the cut in tax credits. Those who face the biggest barriers to work – the sick and disabled, and those with more than two children – exactly the types of families for whom wage supplements were originally devised, are set to be the biggest losers.
Corporations, on the other hand, will be compensated, most notably through further reductions in corporation tax.
Author: Kevin Farnsworth
Published: July 10, 2015, by The Guardian.