But in the long term it reduces incentives to work and to save. Higher net incomes for low-paid workers may make work more attractive, but the linking of tax credits to pay packets may create problems for irregular workers. Redistribution by stealth involves more means testing and reduced incentives, particularly at lower income levels. Thus, paradoxically and potentially problematically, while wishing to encourage independence and self-help, the effect of policy is in many ways to create disincentives that discourage, not encourage, those close to the poverty level. For the future, the scope for further redistribution by stealth will be limited.
Further redistribution is needed if the momentum of reducing poverty is to be maintained.
It is hard to see how that could be achieved without higher tax rates. Most of those now dependent on the social security system will continue to be so. Overblown New Deal rhetoric will not magic most pensioners and disabled people from welfare to work. For most of those in poverty, what is most crucial is the level of income support. The minimum income provided for most of those who do not have employment is far below the poverty level.