Managing Your Cash Flow

George Osborne rejects Johnson's call for tax credit cut review – and gives reason why

2 min read

20 October 2015

After London mayor Boris Johnson urged chancellor George Osborne to soften the effects of tax credit cuts on the working poor, Osborne rebelled by publishing a report claiming that Britain's tax credit bill would have risen without the reforms set out in the Summer Budget.

Johnson recently noted that, “somehow or other we’ve got to reform this system.” As such, he maintained the chancellor was “completely right” to reform the tax credit system. But this hasn’t stopped him from saying he had “no doubt” that officials are looking at cuts in an attempt to “help people get through this”

“Believe me, we’ve all been talking about it,” Johnson claimed. “This is something that is under intensive review and consultation at the moment. I have no doubt that people are working very, very hard right now to try to make sure that as we reform the tax credit system, we do so in such a way as not to bear down too unfairly on hard-working people on low incomes in London and elsewhere.

“I’m sure that, irrespective of the politics of it, nobody wants to do something that is not fair to working people.”

Osborne, he said, should be able to make sure that such people are protected. He added: “Let’s see what they come up with.”

However, at a backbenchers’ meeting Osborne has insisted the changes have to go ahead and warned that if he had not acted then £15bn worth of spending cuts would have to be found elsewhere. 

In a Treasury analysis released to coincide with the meeting, the government said that had it not taken action, spending on tax credits would have risen to £40bn by 2016-17 – a £10bn rise from 2010-11 and £15bn lower than now forecast as a result of the cuts being introduced by the Budget.

The Treasury also highlighted that if the £15bn worth of welfare cuts were not made, the government would have to lose the equivalent of 200,000 nurses and 70,000 doctors; or 325,000 teachers, or more than the entire Home Office budget.

Osborne also said the £15bn was the equivalent of more than has been spent since increasing the personal allowance to date, or £500 a year extra in income tax for every taxpayer.