Ken Clarke tells Osborne: Get your tin hat on over tax credits

Former Conservative Chancellor Ken Clarke has advised George Osborne to "get your tin hat on" and press ahead with tax credit cuts.

He conceded it would be "unpopular" in the short term but said reform of the "unsustainable" system was essential.

Labour says millions will be worse off after the cuts, while some Tory MPs are said to be uneasy about the policy.

But Mr Clarke recommended: "Get on with it. Stop looking at opinion polls and listening to nervous backbenchers."

'Subsidising low pay'

Under the government's plans, the earnings level above which tax credits are withdrawn will be lowered from £6,420 to £3,850, and the rate at which the benefit is lost as pay rises will be sped up. The changes come into effect at the end of the year.

Ministers say the changes, estimated to save £4.4bn, are part of wider plans to raise pay and incentivise work, and they argue that the impact of the cuts will be mitigated by the new National Living Wage and higher tax thresholds.

But Labour claims three million families face losing an average of £1,000 a year.

Appearing on BBC One's Andrew Marr programme, Mr Clarke defended the reforms, arguing that it was not right for taxpayers to continue to "subsidise low pay".

The government has committed to reduce welfare spending by £12bn by 2018

"It's bold but I think it's necessary, and it will actually move us away from the very low pay levels that for some curious reason the government has been subsidising ever since the tax credit system was brought in," he said.

"My advice to George is put your tin hat on and get on with it.

"Don't put it off because in the short term it is going to be unpopular."

'Arithmetically impossible'

Mr Clarke conceded the policy would have unpredictable effects, but he said Mr Osborne was not "crossing his fingers", arguing that reforming the system now is "a judgement".

"If we are wrong, then of course we will have to pay the price because it won't work. But meanwhile, get on with it," he added.

Shadow business secretary Angela Eagle told BBC Radio 5 live's Pienaar's Politics that Labour would campaign to stop the cuts, arguing that working people would be hit hardest.

The policy to cut tax credits, announced in Chancellor George Osborne's post-election Budget, was approved by Parliament in September by 35 votes - despite opposition from Labour, Lib Dem and SNP MPs.

The Institute for Fiscal Studies has warned it is "arithmetically impossible" for nobody to lose out under the changes.