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IEA - The focus of welfare reform must be broader for substantial savings

Mark Littlewood calls for politicians to be bold, but fair when it comes to welfare reform

Commenting on David Cameron’s speech on welfare reform, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“With the government still borrowing £75 billion each year, and an ageing population only set to increase pressure on the public purse as pensions and healthcare spending grow, making savings in the welfare budget is a responsible and economically sound decision.

 “The composition of the cuts, however, looks set to be extremely unfair on the working-age population. Pensioners – through policies such as the triple-lock on pensions and generous universal benefits - have largely been protected from austerity. It’s time for that burden to be shared.

“The government is certainly right to consider fundamental tax credit reform. Whilst important for getting cash to relatively poor families, tax credits discourage people from earning more money by creating high effective marginal tax rates, leading to bunching around part-time work hours. They could be reformed in a way which encourages full-time work. But simply salami slicing the value of tax credits will hit certain households hard without creating this positive dynamic.”

Notes to editors:

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The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.

 

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