I don't really get the logic of the tax credits and sometimes wonder if the market should regulate itself rather than have government interference.
What is the point in taxing one person to use that money to subsidise another persons income simply to work for a employer paying a poor wage?
How are you ever going to break that cycle as there is no incentive for the employer ever to increase the wages he pays (and thereby increase his costs/reduce his profits).
If on the other hand tax credits are not paid and people will not work for the wage on offer, then the employer WILL have to increase the wages he pays otherwise the work does not get done.
But wait, that is far to simple.
If local people wont work for those wages, then others might. It may be a regional thing - Norman Tebbits 'get on your bike, or EU wide, the east Europeans coming for better paid jobs than they have at home.
So the Government then gets higher unemployment (and thus still paying benefits) at home, whilst having increased immigration into the country.
The employer still is paying low wages (maximising his profits), people (the Poles, etc) are in jobs and thus paying tax into the system and those who would only work for tax credits are still on roughly the same benefits but this time not working at all.
Everybody sorts of wins, the employers cost has not gone up, the new foreign workforce is paying into the economy via taxation and spending wages in this country and those who perhaps didn't want to work in the first place aren't and still receiving money to stay at home.
Ok, immigration is an issue but no more than it is already.
The thing is though the government says it wants better control of immigration and reduces government spending on welfare - neither of which it will if it didn't try to do something or other about tax credits.
All in all it is a bit of a mess with no clear way out imo.