George Osborne is under mounting pressure from within his own party to rethink controversial plans to cut tax credits for working families.
Former Cabinet minister Andrew Mitchell said the plans to cut £4.4bn from the welfare bill by reducing tax credit payments to more than three million families may be “tweaked” and said he expected the Chancellor would keep an “open mind” on the issue.
Many Conservative MPs are concerned that the cuts will hurt the party’s claim to support the working poor. Labour has branded the cuts a “work penalty” and compared their likely political impact to the poll tax.
Mr Mitchell said that the “very tough measure” was necessary but pointed out that Mr Osborne still had time to make changes in next month’s spending review.
Critics say the cuts, which come into effect in April, could leave some of Britain’s poorest families £1,300 worse off annually.
Seema Malhotra, Labour’s shadow chief secretary to the Treasury, urged Tory MPs concerned about the impact on families to join Labour in opposing the reforms during a Commons debate on the issue on Tuesday.
“I hope that they will because they will have had representations from thousands of families in their constituencies,” she told the BBC’s Andrew Marr programme, adding that the cuts represented a “turning point in people’s trust in George Osborne”.
However, Labour’s own position on tax credits had to be clarified by Shadow Chancellor John McDonnell after both Ms Malhotra and Shadow International Development Secretary Diane Abbott refused to confirm whether a Labour government would reverse the changes.
Mr McDonnell, who last week confessed to an “embarrassing” U-turn on Labour’s support for George Osborne’s fiscal charter, announced: “We are calling on Osborne to reverse his decision to cut tax credits. If he doesn't reverse these cuts, we're making it clear that we will.”
Ministers are understood to be unwilling to shift their position on the cuts, the impact of which say will be balanced by the rise in the National Living Wage.
Greg Hands, chief secretary to Treasury, said Labour needed to explain how they would afford to restore tax credit payments to their previous level.
“John McDonnel says he would reverse the changes, with no explanation of where the £4.4bn cost would come from,” he said. “Labour’s economic policy lurches further form chaos to incredibility.”
Two Conservative MPs, David Davis and Stephen McPartland, voted against the motion to reform tax credits, which passed last month and London Mayor Boris Johnson has also spoken out about the possible impact of the cuts on low income families, admitting that the party needed to “work on” the plans and “mitigate and palliate” their impact.
