Banbury Constituency Labour Party

Cost of tax credits under the Coalition spirals and Labour promises to halve the number of people on low pay by 2025

Independent logoBy Andrew Grice, Political Editor, 12 December 2014

Rachel Reeves MP

Rachel Reeves MP

Rachel Reeves, the shadow Work and Pensions Secretary, said: “Taxpayers have been hit by a bill for an extra £900m in wage top-ups in the past year because so many of the new jobs being created are low-paid.”

The figures appeared in the small print of the report by the Office for Budget Responsibility (OBR), the tax and spending watchdog, which accompanied last week’s Autumn Statement by George Osborne.

The annual cost of tax credits has risen to £30bn, which the OBR report said is because most people who have moved into work since 2010 took lower-paid jobs.

Since then, the number of people working in jobs paid less than £20,000 (in 2014 prices) has increased by 1.5m, while the number of people working in jobs paid above this level has decreased by 800,000. The increase in low-paid jobs is pushing up the tax credit bill: since December last year, the OBR has found that the DWP will have to spend £900m more than planned on tax credits.

Rachel Reeves, the shadow Work and Pensions Secretary, said: “These shocking new figures from the Autumn Statement show the huge increase in low-wage jobs is costing taxpayers an extra £900m in tax credits alone this year. Low pay and high rent levels are also driving up the number of working people claiming housing benefit, costing taxpayers billions of pounds. It’s more evidence of Tory welfare waste which Britain can’t afford.”

Ms Reeves said: “We will halve the number of people on low pay by 2025, raising the minimum wage to £8 an hour in the next parliament, providing incentives for employers to pay a living wage and creating more high quality apprenticeships.”

According to Labour, the number of workers paid less the Living Wage rose from 3.4m in 2010 to 4.9m this year. It said the Government has spent £1.4bn more than planned since 2010 on housing benefit for people in work due to low pay and inadequate housing supply.

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