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A Budget That Leaves Working People Worse Off

10/07/2015 12:59 BST | Updated 10/07/2016 10:59 BST

This week the Chancellor delivered his first Budget of this Parliament and despite the rhetoric it is a Budget that will leave working people worse off.

When you begin to separate the Chancellor's claims from their harsh reality, it is clear that this Budget penalises people in work and fails the test of building a more productive economy.

Three million working families will bear the brunt of the Chancellor's £4.5billion cuts to tax credits.

These changes to tax credits - which he failed to outline prior to the election - penalise the very people in work who are trying to do the right thing by earning a wage to make ends meet.

They will argue that they have introduced a "living wage" to off-set these cuts.

But, firstly, this is not a living wage. This is a rebadging exercise of a higher National Minimum Wage, which we of course welcome. In fact we called for it and the Tories vigorously opposed it.

We also can't forget that the new minimum wage rate of £7.20, when it's introduced, will be lower than the current Living Wage of £7.85.

Secondly, now that the Government have cut billions from tax credits, the Living Wage will need to be significantly higher to make up for the loss of income.

The whole point of the Living Wage is that it is set assuming full take up of tax credits.

Take for example a single parent with two children, who works 16 hours a week on the National Minimum Wage; whilst they would gain £400 from the increase to the National Minimum Wage, they would lose twice that - £860 from George Osborne's cuts to tax credits.

And don't just take my word for it. The Institute of Fiscal Studies (IFS) has today revealed that the overall changes to the minimum wage and tax credits will leave working people worse off and it is "arithmetically impossible" for the Chancellor to claim otherwise.

Furthermore, the OBR has revised productivity down next year and for three years after that.

And the OBR has said the Chancellor will miss his target to increase exports to £1trillion by 2020 by £367billion.

Every Budget is about choices.

This should have been a Budget to bring the deficit down and help people into work (and better work) by creating the high-paid and high-skilled jobs needed to boost productivity.

Instead, this is a Budget that penalises those already in work. It is people on low and middle incomes that will pay the price for the Chancellor's choices.

Shabana Mahmood is Labour MP for Birmingham Ladywood and shadow chief secretary to the Treasury