LABOUR’S former chancellor Alistair Darling called for a reform of tax credits yesterday to stop bosses paying low wages which are then topped up by welfare.
Mr Darling, who served as a minister in the Treasury and for social security while tax credits were being introduced in the early 2000s, admitted that there were problems with the system.
He called for a “careful” reform to ensure that those who rely on working or child tax credits are not put into financial jeopardy in the likelihood that their wages do not catch up fast enough.
This comes after Chancellor George Osborne indicated that a cut in tax credits for people on low incomes could be announced in the emergency Budget on Wednesday — despite refusing to give a straight answer on whether the top rate of tax for earners of at least £150,000 would be reduced to 40 per cent.
Mr Darling told Sky News’ Murnaghan programme: “The risk is if employers say well the state is going to top up your wages, therefore I don’t have to pay as much, that is a problem and it needs to be addressed.”
He added: “A lot of people on tax credits are not well off by any stretch of the imagination and if you suddenly remove the tax credits they are getting now that will put them in a very difficult financial situation because it would take years possibly for the wage levels to adjust.”
Shadow chancellor Chris Leslie said that Mr Osborne should encourage bosses to pay the living wage before even considering slashing benefits for those who need them.
The Labour frontbencher told the programme: “If we can finally persuade George Osborne to U-turn and back some incentives for a living wage, that I think would be very welcome.”