Making work seem to pay?: the big illusion

The UK's Coalition government is planning what is presented as a 'radical' overhaul of the tax and benefits system through the introduction of a Universal Tax Credit. Though elements of the proposal are innovative, the proposal builds in part on Tax Credit schemes introduced under the previous New Labour government and on a distinctive strand of labour market policy that has been emerging for some time in several other countries. The intention of refundable tax credit schemes is to compensate for low wages and to 'make work pay' albeit in circumstances in which labour markets remain deliberately minimally regulated and are becoming increasingly flexible and polarised. This paper draws on recent ESRC funded research which used in-depth interviews to investigate the experiences of recipients of the Working Tax Credit (WTC), introduced by New Labour in 2003. The research has explored the motivations of the recipients and their understandings of the WTC. The narratives disclosed by the research are complex and contradictory and suggest considerable confusion among recipients as to the purposes of tax credits. While there was significant popular support for the WTC, there is also an undercurrent of competing moral rationalities and resentments. Acceptance of the idea that the subvention of low wages by the state amounts to 'making work pay' is far from universal and may prove in the longer term to be precarious. The paper considers the implications of these findings for the implementation of the proposed Universal Tax Credit in the UK and refundable tax credit schemes more generally.