Tax Credits

Baroness Keeley Excerpts

Tuesday 20th October 2015 Commons Chamber

[Seema Malhotra]

Perhaps the hon. Gentleman needs to talk to the Prime Minister about why he said on “Question Time” during the election that he would not cut tax credits. That is a conversation for him to have with the Prime Minister.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

The hon. Member for Croydon South (Chris Philp) talks about the Conservative manifesto, but the manifesto cannot have outlined that 689,000 carers might be affected. Those who care 35 hours a week and then try to work 16 hours on the national minimum wage will be hit. What do Conservative Members have to say about that?

[Seema Malhotra]

My hon. Friend makes her point incredibly well. It is those who are working so hard to support us in every sphere—in our public services and the economy—who will be hit the hardest by this move. I hope that the Government will change their mind today. I will make some more progress before I take further interventions.

The Chancellor says that he wants a low-welfare, low-tax, high-wage economy—this may come as a surprise, but of course we all do—but what he says and what he does are two different things.

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[Alex Cunningham (Stockton North) (Lab)]

This morning on BBC Tees, I debated the issue of tax credits with a Conservative councillor who stood unsuccessfully at the general election. He used an expression that summed up the total lack of understanding among Government Members of how people can be in work but in need of some state support. He referred to people as being “exposed” to the process, as if it was some kind of risk. I understand that that expression might be used by a City person in relation to investments or by a chief executive about a project that his company plans to undertake. In both cases, I am sure that they would develop a plan to mitigate the risk of failure. The millions of people who will be affected by the tax credit cuts are not exposed to a risk that they have the power to mitigate. Rather, they are having cuts to their income imposed on them and there is little, if anything, that most of them can do about it.

[Barbara Keeley]

One group that will be hit is family carers who receive carer’s allowance and work 16 hours on the minimum wage to supplement their benefit of £62. There are 689,000 carers in that position. Carers UK says that all carers who claim carer’s allowance and working tax credit will lose out under the tax credit proposals. I know that my hon. Friend cares about these things, but it seems that Government Members do not.

[Alex Cunningham]

I am grateful to my hon. Friend for that intervention. She does tremendous work in respect of carers and I understand exactly what she is saying.

My hon. Friend will be interested in the case of my constituent Linda Harper, whose medical needs mean that she requires help and support in some areas of her life. Despite needing the unpaid care of her husband, who also has a job, Linda’s determination recently saw her battle against her condition to open her own craft store in the local town centre. Although the business does not yet turn a profit, she is succeeding in building a customer base and is contributing to the community by running classes, teaching others the skills of her craft and hosting social groups that add value to the lives of those who participate.

Linda represents the attitudes that the Conservative Government claim they want to promote. She is hard working, persevering and enterprising. Let us not forget that the Conservative manifesto at the general election promised to improve the lives of

“the millions who work hard, raise their families, care for those who need help, who do the right thing”.

Yet, when the Government’s changes come into effect, Linda estimates that she stands to lose £2,000 a year. Paying her mortgage and putting food on the table will become significantly harder and the viability of her businesses will be severely challenged.

The Government say that their demand for employers to pay people more and their tax cuts will help to restore the money that people lose from their tax credits. That is absolute nonsense. I put the following questions to the Minister. What will happen to public sector workers and self-employed people on low incomes? How can the employees of local authorities, health trusts and other public sector employers make up their income by increasing pay when the Government have said that they cannot give increases beyond 1%? How will a person who relies on tax credits and who earns less than £10,000 a year benefit from an increase in the tax threshold? How will a self-employed person with earnings of £6,000 a year give themselves a pay rise to fill the gap in their income caused by the loss of tax credits? How will a small business fulfil the Government’s promise of higher wages when it is already struggling to survive? The answers are simple: public sector workers will continue to see drastic cuts to their incomes and standard of living; self-employed individuals will be left to their own devices; and small businesses will pay people off because they cannot afford to keep them.

I am alarmed to hear that, despite the reservations of many Conservative Members, the Prime Minister and the Chancellor have no intention of halting these cuts. Perhaps the 70 or so Conservative Members whose majorities are smaller than the number of people in their constituencies who claim tax credits will have more to say about that in future. Several million people hope so.

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[Jeremy Lefroy (Stafford) (Con)]

Many of those who have spoken, and indeed the Chancellor himself, are quite right to say that we have to view all the measures put forward as a package—not just the effects of the tax credit changes, but the many other measures that have been spoken about. I would like to make three points: on timing, predictability and the concept of scarcity.

On timing, the measures will come in at different times. It is vital that their timing should be synchronised. It is not there at the moment and I therefore ask that the timing of the introduction of the various changes to tax credits be looked at. I fully agree that we need reductions in the tax credit bills, but it is the timing that will bring great problems to many families.

On predictability, families want to know what their income is going to be. They want a reasonable measure of forewarning, so they can talk and negotiate with their employers, and plan their future. If their income is going to be reduced, they need time to do that.

[Barbara Keeley]

The hon. Gentleman is making a good point about timing. I raised a point earlier about carers. Carers who work 16 hours a week on the minimum wage will lose their tax credits. They cannot change that, they cannot plan for that and they cannot find any way out of that. What does the hon. Gentleman think about that in relation to the 689,000 carers?

[Jeremy Lefroy]

The hon. Lady must have read my notes, because I was going to come to that and say precisely that this is the other major issue. Those on fixed incomes do not have the ability to go out and work the two or three extra hours a week to cover the cost of the changes to tax credits. Full-time carers are not the only example, but they are the most obvious. I entirely agree with her.

Scarcity might seem a rather arcane concept to introduce, but studies have shown that for those who find sudden scarcity imposed on them economically, the costs are very great. The inflation rate for people on lower rates of pay is considerably higher than for those on higher rates of pay. If they suddenly receive a lower income—perhaps a cut of 10% or more—their costs will actually rise, because they will be unable to make the decisions to buy in bulk or in advance that they were otherwise able to make.

Finally, I am not one of those who does not want to eliminate the deficit. I absolutely do. If we have a change in timing—as I urge the Government to consider, including in relation to carers—we will need to find extra sources of revenue and we will have to take that on the chin. In particular, I have written to the Treasury to ask it to consider various income tax and corporation tax reliefs.

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[Barbara Keeley (Worsley and Eccles South) (Lab)]

In my constituency, there are around 8,000 families with children claiming tax credits, 5,000 working families, and almost 10,000 children. We know from the Library briefing that they will lose more than £100 a month, but some families will lose more. One of my constituents, a mother with a disabled child, has worked out that her family will lose £200 a month from the tax credit cuts. Instead of just sitting there, perhaps Government Members can tell me how, if they back these changes, such families will manage? I do not think that they will manage. Another constituent, a single mother, told me that she uses tax credits to pay for school uniform, food and travel expenses. Those are the things that will suffer.

Earlier, I mentioned the impact that these tax credit cuts will have on the incomes of many thousands of unpaid carers who juggle care and work, particularly those who claim carer’s allowance and working tax credits. Carers UK told me that all carers who are claiming carer’s allowance and working tax credits will lose under the current proposals, even taking into account the introduction of the so-called national living wage.

Tax credit cuts will make it more difficult for working carers to balance work and care and that will hit their standard of living. They do not deserve that. Last week the Minister for Community and Social Care told me that he did not think that carers’ invaluable contribution to society had ever been better recognised. Is that hit to the income and living standard of working carers what he means by recognition? I hope the Minister will tell us when he responds what consideration the Government will now give to protecting working carers on low incomes from these unfair, savage tax credit cuts. Those cuts will hit families with disabled children. They will hit carers and millions of working people. I urge Government Members, the few who have managed to stay for this debate, to rethink this deeply unfair policy change.