Tax Credits Up-rating Regulations 2011

Lord Davies of Oldham Excerpts

Wednesday 23rd March 2011 Grand Committee

[Lord Davies of Oldham]

My Lords, I had thought that the problems with these statutory instruments would be that our contributions might be not so much after the Lord Mayor’s Show as coincident with it, as the Budget Statement was made today. The other place and all the media are concentrating on the 2011 Budget while here we are, engaging in a debate on instruments that relate to last year’s decisions. I therefore assumed that the Minister would stay fairly close to the technicalities of the instruments and that we were unlikely to engage in a substantial debate on the economy, but no such luck.

The Minister, not content with successive Thursday debates that string out ahead ad infinitum and in which he will regale the House with his perspective on the economy, has taken this rather modest measure as another opportunity to inveigh on those issues which, I suppose, pass for coalition home truths about the situation that we are in. Well, if we must engage so be it. I had not really come prepared for this but I have one or two obvious rejoinders to the noble Lord’s position ready to hand. I am not quite sure why he is not prepared to engage in the debate on how far and how fast, regarding deficit reduction. He presents the issues in terms of the inevitable: that slash and burn is the only response regarding support and the public contribution. Of course, that is because the British economy is very close to the Greek, the Irish and the Portuguese economy—teetering on the brink of utter collapse, with stupendous interest rates and the collapse of the known world. That is specific and special pleading.

The noble Lord rarely addresses an economy that is marginally more significant than the German or Irish economies by looking at the United States. If he looks at its response to this issue, the question is whether destroying so much of the support given at present will grievously affect demand. He is therefore stuck with the fact that the one word he did not mention at all is that which presently revolves around every conceivable contribution in the other place: namely, growth. The decline in growth predicted by the OECD is now confirmed by the figures that the Chancellor made in his Statement today. What does the noble Lord think that lower growth represents? It means more people unable to sustain themselves. I heard him lament the fact of working-age poverty. What on earth does he think will happen to that as unemployment rates in this country begin rapidly to increase?

We have not yet seen the burden of the cuts but, my goodness me, it is quite clear that the nation is already alert. It is not as if this date, 23 March, is not insignificant in the nation’s awareness of the implication of cuts. In three days, on 26 March, a very substantial proportion of our people will indicate that a Government who go too far, who reduce potential for growth and who massively increase unemployment and promote poverty can ill afford to parade the idea that there is no other way, when in fact other Governments—whose economies are at least as significant as ours—are pursuing very different strategies indeed. However, I did not come here for peroration. I came just to look at the gentle terms of this instrument. I thought it somewhat otiose to engage today in a debate on government policy when our youngers—and, if not our betters, perhaps our more committed—at the other end are involved in that exercise, debating the 2011 Budget while we are dealing with instruments that derive from last year’s Budget.

Within the terms of the instrument, I accept some aspects of the Government’s attention to the problems that beset the less well-off in our society. I appreciate the fact that there is an above-indexation increase in the child tax credit of £180 for next year and a little less the year after for those of very limited means. I respect the fact that there is some attention to the particular problems of those who are least well off in our society. I do not accept the Government’s position, supported by the noble Lord, Lord Newby, on child tax credits. I shall make the obvious point on the eradication of child poverty: it is a massive target. We all know the projection on how long it takes and how much it costs but, despite this gesture, the Minister never makes the slightest reference to the tremendous onslaught on child poverty which was the product of policies pursued over the past decade through many strategies, the effectiveness of which he is proposing to reduce. To make the most obvious point, what we now have enshrined in stone for the future under this Administration is one criterion and one index for how much uprating will occur. This is an uprating measure. The RPI, currently at 4.6 per cent, is buried and the CPI is now confirmed as the rate that will obtain across the benefits. It is now 3.1 per cent, or two-thirds of the RPI inflation rate, which many households would regard as a far more accurate definition of the challenges that they face in making ends meet.

I appreciate other aspects of the measure. I heard the noble Lord, Lord Newby, say that people should not expect to get tax credits if their income is over a certain amount. He can make that case if he wishes. He knows the outcry that has occurred as a result of the change from £50,000 to £40,000 in the threshold for credits. He knows very well that ordinary working families, on whatever income, budget according to their expected income and how they run their life. Significant government changes in this area cause distress. The noble Lord, Lord Newby, may regard that distress as synthetic. We shall see the response the nation makes to that significant change in tax credits.

The guardian’s allowance uprating is a minor aspect that reflects the fact that a very small number of beneficiaries are covered by these orders in Great Britain and Northern Ireland. We should notice what indexation means at a certain level: just minuscule increases per week are represented by these figures. I am all too well aware that there are limitations on the public purse and that generosity from the Government—“tax giveaways”, the Chancellor said this morning—were not the order of the day. We understand that, and it is bound to be the case, but that should not alter the fact that we should appreciate that a failure by Government to take proper concern for welfare support could be a very grievous failure indeed. We are moving into a position where, without the slightest doubt, a greater number of our people will be plunged into hardship. The Government’s response, as evidenced by these statutory instruments, shows that the Government put deficit reduction as their supreme objective, at whatever cost to our community.