The tax credits reforms should be postponed for a year and a half, Parliament's Work and Pensions committee has said. Chancellor George Osborne is urged to allow more debate on the proposed tax credit cuts before they are implemented.
The cross-party committee told Osborne there is no "magic bullet" to protect workers on low salaries. Chair Frank Field said that it would be best to wait for the full implementation of the living wage plans in 2020 before introducing the cuts in tax credits.
The controversial tax credit cuts, the details of which are set to be announced in the autumn budget statement on 25 November, have caused political turmoil in both Houses of Parliament. The House of Lords previously voted to delay the proposals until the Conservative government comes up with an alternative to aid low-paid workers.
"No one has been able to provide the Committee with a satisfactory series of mitigating policies to combat the impact of cuts in tax credits next year," Field said. "My advice to the Chancellor would be to pause and use the next 18 months to bring forward a major overhaul to abolish tax credits as we know them. A new system could come in fully by 2020 when the Chancellor's National Living Wage will be paying a wage of £16,000 per year."
After being elected in 2005, the last Labour government introduced a series of benefits aimed at helping the lower end of working families. Working Tax Credits and Child Tax Credits were supposed to help workers and families, and the Conservative party promised in its 2015 manifesto that it would not cut the tax credits.
The new proposal means that the threshold for Working Tax Credits has been lowered from £6,420 a year to £3,850. The comments of the work and pensions committee are a new slap in the face for Osborne, as the committee has a Conservative majority.
The tax credit cuts have also been slammed by Conservative MPs in the House of Commons, causing a rift in the party.