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The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate the hon. Member for Glasgow Central (Alison Thewliss) on securing the debate. She is right to point out that she has been determined in her pursuit of this policy. She has certainly taken every opportunity to raise the matter with Ministers. I wish, though, to put on the record my support for my noble Friend Lord Freud, who has worked tirelessly on this matter. I entirely reject the hon. Lady’s portrayal of him, and believe that she has deliberately given an inaccurate and misleading account of a private meeting.
This debate explores the limitation of tax credits to two children, which was legislated for under the Welfare Reform and Work Act 2016. I know that the hon. Lady has a strong interest in this topic, and that it is something she has raised in the past. I welcome the opportunity to set out the purpose of the policy. In so doing, I hope that I can allay many of her concerns and particularly underline that we are absolutely committed to ensuring fairness for all families.
The welfare reforms that the Government have introduced are about much more than simply money. Our reforms seek to bring about a positive change in our nation. They are about putting welfare spending on a sustainable footing, but it is important to do that in a way that protects the most vulnerable. As the Prime Minister herself has said, we will fight against the injustices we see in our society.
The current benefits structure, which adjusts automatically to family size, is unsustainable, and it is not fair to the taxpayer or to families who support themselves solely through work and necessarily make difficult choices. That is why we have announced that, from 6 April 2017, families with third and subsequent children born after that date will no longer be able to claim additional support through child tax credit and universal credit. The policy will also apply to future new universal credit claims from families with more than two children.
Dan Jarvis
Is the Minister prepared to commit today to publishing an analysis of the likely impact of the policy on child poverty levels?
Caroline Nokes
I shall address the impacts of the policy later in my speech.
The Government believe that the policy strikes the right balance between protecting the vulnerable, such as by retaining extra support for families with disabled children, and encouraging families who receive tax credits to make the same financial decisions about the number of children they can afford to support as those families who support themselves solely through work do. Parents will continue to receive help with the cost of raising children through the payment of child benefit, which will continue to be paid regardless of family size.
Alison Thewliss
Does the Minister accept that there is a fundamental contradiction in the Government’s saying that they will pay child benefit for as many children as are in a family but not tax credits?
Caroline Nokes
No, I do not accept that there is a contradiction. Later in my speech I hope to be able to set out why we have been so specific when it comes to child tax credits.
The separate disability element of child tax credit will remain payable for all disabled children. I should also be clear that those families already receiving child tax credit for children born before 6 April 2017 will continue to receive it. It is important that I pick up on the hon. Lady’s comments about the 63% of families with three or more children who receive tax credits and are in work, whom she said would be affected. She said that it would be pulling the rug out from underneath them, but that is far from the case, because the families she identified—the 63%—already have those children. We are not talking about retrospectively applying the policy; it is for children born after 6 April next year.
The reforms to tax credits cannot be considered in isolation. The Government are committed to making life easier for working families. We want to support parents claiming benefits to get into and stay in work after having a child. From September next year, the Government are extending free childcare entitlement from 15 hours to 30 hours a week for working parents of three and four-year-olds. Alongside the introduction of tax-free childcare, that support gives parents more freedom when making decisions about whether and, indeed, when to return to work.
Alison Thewliss
Does the Minister accept that there is a further inconsistency? Tax-free childcare is not limited to the first two children within a family; it is for all children within a family, unlike this limitation that she is seeking to impose.
Caroline Nokes
The hon. Lady may not like the response that I keep giving but I will continue to give it. The reality is that the Government want working families and those in receipt of working tax credits to be on the same footing and to make the same difficult decisions. I have no doubt that there will be people in this Chamber who have made difficult decisions about how many children that they wish to have and can afford to have. This issue is about fairness for all families.
Of course, as the hon. Lady will be aware, roll-out of universal credit, the Government’s flagship welfare reform, is continuing. Universal credit is already transforming lives across the country, with those in universal credit moving into work significantly faster and staying in work longer than under the old system. We are now expanding universal credit to all claimants across the country, so that everyone has the chance to benefit from the dignity of a job, the pride of a pay packet and the security that comes from being able to support their family.
The evidence shows us that universal credit is working. As I say, people move into work faster than before. For every 100 people who find work under the old jobseeker’s allowance system, 113 universal credit claimants have found a job. People on universal credit spend more time than before looking for a job—in fact, around 50% more time—and they are actively looking to increase their hours and their earnings.
More than a quarter of a million people are now receiving universal credit, with some 12,500 new claims every week. We have already launched universal credit full service in Musselburgh and Inverness, and next month we are rolling it out to Kirkintilloch, Port Glasgow and Greenock. I have had the pleasure of visiting both live service and full service jobcentres in Barnsbury and Newcastle. I was impressed by what I saw, including the commitment of the work coaches, and indeed their sensitivity and ability to respond to the different circumstances and the different needs of individual claimants.
Caroline Nokes
The hon. Lady shakes her head, but I extend to her an invitation, which I am sure she has already received from others, to visit a local jobcentre, to see for herself how our reforms are working in action.
We also recognise that some claimants are not able to make the same choices about the number of children in their family as others. The Government have been clear that there will be exemptions for certain groups, and it is worth outlining these groups in some detail. Exemptions apply to third or subsequent children who are part of a multiple birth, where there were previously fewer than two children in the household; to children living long-term with friends or family and who are at risk of entering the care system; or to those children born as a result of rape.
Caroline Nokes
I would give way to the hon. Gentleman but there are many really important points that I would like to get through in the time allocated to me, and I have already taken a number of interventions from the hon. Member for Glasgow Central and one intervention from the hon. Member for Barnsley Central (Dan Jarvis).
Today, I am pleased to be able to inform hon. Members that, as part of the Children and Social Work Bill, the Government have given further consideration to the position of children who are being adopted from local authority care, and we will extend the announced exemption to all third or subsequent children in these circumstances. This change will support families who care for our most vulnerable children, and they will be provided for, along with the other exemptions, in regulations.
Of course, we are aware that these exemptions are sensitive and complicated, and we want to make sure that we get this process right. That is why we are consulting with a number of stakeholders from charities, women’s representative organisations and indeed religious groups.
The Government recognise that women who have a child born as a result of rape face extremely difficult circumstances. That is why we are considering very carefully the best possible way to deliver this exemption. I want to be very clear that we are not looking to rely on or to pre-empt decisions within the criminal justice system. Instead, we are looking to ensure that claimants receive the help they need at the time they need it, using criteria that are straightforward to apply and not overly intrusive, while providing the right assurance to Government that the additional support is going to those for whom it is intended.
Our current thinking is that a third-party evidence model offers the most promising approach to strike the balance we need to achieve. This is a model where a woman can request the exemption by engaging with a professional third party, such as a healthcare professional or a social worker. This approach would not be new for the benefit system. For example, within universal credit we use a similar model for the relaxation of the requirements to be available for work in cases of domestic violence, where the evidence required is the reporting of abuse to a third party acting in an official capacity, and that model was developed with input from stakeholders. We recognise the sensitivity of this exemption and the need to get advice from experts, so we have sought views from stakeholder groups involved in supporting victims of rape to help us to develop this exemption.
The hon. Member for Glasgow Central raised a large number of issues, and I will set out the Government’s vision for a sustainable welfare system that supports working families and encourages them to make similar decisions to those made by people who support themselves fully through work. I will also respond to the intervention from the hon. Member for Barnsley Central regarding the impacts of the policy of limiting support to two children in tax credit and universal credit, while meeting our obligations as set out in the public sector equality duty. The Government have set out our assessments of the impacts of the policy as part of the Welfare Reform and Work Act 2016, on 20 July 2015, in a published impact assessment.
The Government are cutting income tax for more than 30 million people this year and we took 4 million of the lowest paid out of income tax completely during the last Parliament. By 2018, a typical basic-rate taxpayer will pay more than £1,000 less in income tax than they did in 2010. Universal credit now provides for 85% of childcare costs for families with two children; this could be worth £13,000 a year.
The number of people in work is at a record high. With the national living wage, we have given a pay rise to 1 million of the lowest paid, and we have overhauled the welfare system so that it pays to work rather than to claim benefits. The number of workless households has fallen by nearly 200,000 in the past year and now stands at 3.1 million, which is the lowest figure since records began. The number of children living in workless households has fallen by 557,000 since 2010, and there are now 100,000 fewer children in relative low income compared to the number in 2010. In the hon. Lady’s own constituency of Glasgow Central, the employment rate has increased by 2.9 percentage points since 2010, to 62.9% in March 2016. This reflects the fact that there are now 2,000 more people in work in her constituency than there were in 2010. The Government are committed to ensuring that those in work are paid a fair wage and have opportunities to progress and to achieve their potential.
The Smith Commission agreement was very clear that universal credit should remain a reserved UK Government benefit, so that there is a clear and consistent offer of vital support to people in England, Scotland and Wales. Where the UK Government decide to make changes to reserved benefits, such as eligibility criteria, or to how payments for dependent children are calculated, those changes will apply equally across England, Scotland and Wales.
However, the Scotland Act 2016 gives the Scottish Parliament and Scottish Ministers significant new welfare powers. Not only can they now work with us to change certain defined elements of universal credit, such as the way that the housing cost calculation is made, but they will also get responsibility for a range of existing UK Government benefits, which were worth £2.7 billion in Scotland in 2014-15.
Crucially, the Scottish Government also now have new, wide-ranging powers to pay cash top-ups to anyone receiving a reserved benefit, or to introduce brand new benefits in devolved areas. This means that the Scottish Government can tailor the welfare system in Scotland, to meet both their own political aims and local needs.
In conclusion, I would like to reassure hon. Members that the Government are committed to achieving these welfare reforms. Putting welfare spending on a sustainable footing, and in a way that protects the most vulnerable, is vital as we progress to a society that will give working families more control over their lives. It will also ensures fairness for all families—both those who are paying for, and those who are receiving support from, the welfare system.
The hon. Member for Glasgow Central is right to raise the issue about the rape exemption; she has made her point and she has made it repeatedly to different Ministers. However, the Department for Work and Pensions is determined to address this issue with fairness and sensitivity, to make sure that women have the opportunity to report in a safe environment to trusted professionals. It is critically important that we extend that opportunity to them and that we do not remove the exemption, because I think that would be a very dangerous and unfair thing to do.
However, it is important that we instil within the benefits system a fairness for all families, for those who make choices about how many children they can afford to have, and that will apply to those who are working and supporting themselves solely through work, as well as to those who are in receipt of tax credit. Our priority remains to help working parents by providing them with the support they need to get on in life, and in doing so we will make life easier for all families.
Question put and agreed to.