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to think that the Tax Credits system is only really a subsidy for multinationals?

(14 Posts)
TalkinPeace2 Fri 26-Oct-12 16:49:03

Companies pay crap wages and force people to cope with part time and zero contract hours because they know that the tax credits system will pick up the tab.

The worst ones also use interns and workfare rather than paying a wage at all.

Surely it would be better to increase the minimum wage and reduce employers and employees NI so that the money goes directly from employer to employee
rather than through the convoluted and hugely expensive system of tax credits.

crazygracieuk Fri 26-Oct-12 16:53:03

Just multinationals? I bet lots of national and local businesses pay minimum wage.

CogitoErgoSometimes Fri 26-Oct-12 16:54:03

You're probably right. Anyone got a certain Mr G Brown's phone number? (Still can't quite believe he dished out benefits to families on incomes as high as £55k.....)

mrscumberbatch Fri 26-Oct-12 17:25:08

The problem is that small businesses have such poor overheads that they couldn't afford an increase in the minimum wage.

The multinationals could handle it, but we'd have nothing else.

lashingsofbingeinghere Fri 26-Oct-12 17:27:35

Tricky one. Higher wages make us less competitive, unless we improve productivity to match it. So, higher wages may mean higher unemployment. So perhaps taxpayers subsidising low wages is the lesser of two evils?

What would happen without the tax credits? Would wages rise as employers realised they had to pay more, or would they export the jobs?

<Head explodes as lashings realises that higher wages means more money in the economy to buy stuff but also probably leads to price inflation, leading to wage inflation, leading to loss of competitiveness and higher unemployment. Pfffft. Synapses now totally fused.>

TalkinPeace2 Fri 26-Oct-12 17:29:07

What if ERS NI was cut - bearing in mind its currently 13.8% on top of the wage the employee receives ....

If NMW rose to the equivalent of say £15,000
but ERS NI dropped to 5%
and the free bands were increased to £10,000 a year (with NI and PAYE back in line)
then the cost to employers would not be that much more - and employees who were no longer in the benefits system would be more motivated.

SmellsLikeTeenStrop Fri 26-Oct-12 17:36:16

Was there a time before tax credits where employers paid unskilled/low-skilled employees a decent amount of money? I really don't think there was.

I don't think its as simple as ''employers pay less because the government tops up salaries''. I think they'd pay less anyway, regardless of tax credits.

What we need are more full time jobs, and cheap wrap around childcare.

TalkinPeace2 Fri 26-Oct-12 17:47:14

I would not want a full time job.
Part time jobs are good for lots of people.
The problem is that interns and workfare and tax credits have allowed employers to abdicate the 'living wage' part of the deal to the taxpayer

funded out of tax and NI - so its all just circular.

amicissimma Fri 26-Oct-12 17:59:45

'Tax Credits' really annoy me.

Lower rate tax was 10%. Then Gordon Brown had the bright idea of increasing it to 20% and allowing some people (approved by the government - the 'deserving poor'?) to claim some tax back. So if you are 'allowed' some of your tax back you have to fill in forms, deal with any mistakes the relevant office might make, keep them aware of any changes in your circumstances, pay back if they make a mistake and pay you too much, etc.

If you simply paid 10% on the first x% of your income it would self-adjust.

Then people feel they are getting 'benefits' when all they are doing is paying a more reasonable amount of tax in a very inefficient, roundabout way.

I think you can only say that they are subsidising the employer if you think that paying less tax (less than what?) is subsidising the employer.

TalkinPeace2 Fri 26-Oct-12 18:02:45

Gordon Brown brought in the 10% band too.
He was an UTTER ARSE

Meglet Fri 26-Oct-12 18:09:49

Tax credits isn't about getting some of your tax back though. I get far more in childcare tax credits than I pay tax.

MixedBerries Fri 26-Oct-12 19:41:24

I do agree to some extent, OP. It's bonkers that we can have two parents working full time who still can't afford childcare, rent/mortgage, bills, food and so on. I think the cost of housing and energy prices are to blame for that.

But on the other hand, I myself receive tax credits to top up DH's and my income as DH is self-employed. Before the recession, our income was enough to live on. Now that everyone is short of money, DH's business has taken much less revenue than usual. He works in construction/restoration and at the moment people can't afford to construct or restore. It's not worth anyone's time or money him winding up the business as things will get better eventually. Also, we live in a very rural area so there aren't any jobs for him to go to even if he wanted to quit self-employment. We'd be in the same situation. Tax credits ensure we can feed DS and pay bills. That's about all.

I only work part time as the cost of child care is prohibitive. So I think that, actually, the real underlying issue is one of housing costs and energy prices. Selling off the council houses and not replacing them was a bad idea. We need more affordable housing.

All I know is that something is very wrong when you can have two people, degree educated, with a small child who can''t pay to live in this country by working. I don't think cutting benefits is any answer. I really think the cost of living is to blame. Housing particularly.

crazygracieuk Sun 28-Oct-12 10:22:21

The fast rises in food prices are also worrying. I thought we had butter mountains and other forms of excess food waste in the West?

Bonsoir Sun 28-Oct-12 10:24:02

No, it would not be better to increase the minimum wage. It's the tax system that needs overhauling, together with public spending.

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