Tax Credits

Debate between Lord Field of Birkenhead and David Morris

Thursday 29th October 2015 Commons Chamber

[Frank Field]

I could not agree more, in that we have not had a Chancellor who has decided that it is misplaced for taxpayers to play the role in the welfare system that wages should play in our economy. That leads welfare reform into new areas about how to raise productivity, particularly among those who are lowest paid. We should not simply accept and welcome the Chancellor’s proposals for a national living wage but think about how we take it on from there. My hon. Friend is absolutely right.

My first suggestion to those on the Treasury Bench stems from the fact of the Government’s introducing a national living wage. When the people who designed tax credits got to work, nobody thought that any Government would bring forward that proposal. They therefore incorporated two aspects into the tax credits system. The first was about how to subsidise, and make up to a more decent level, poverty wages. The second was that given the life cycle and where life’s journey takes us, there are periods when people have children and their budget is stretched, and the tax credits system should play a role in that. I ask those on the Treasury Bench, when they are thinking about what they do in only a few weeks’ time in the autumn statement, to consider whether we should now grow up and accept that we are going to have a national living wage, and that the tax credits system should not only subsidise low wages but take some of the responsibility for the costs of children. I think there would be a great deal more support in the country if tax credits were about supporting children rather than the need to subsidise poverty wages.

[David Morris (Morecambe and Lunesdale) (Con)]

Will my right hon. Friend, as I would call him outside this Chamber, make it clear that this is about tax credits and not child tax credits, as they are two different benefits?

[Frank Field]

There are two benefits—child tax credit and child benefit. The Prime Minister seems to misunderstand the difference between the two, because he said during the election that child tax credits would not be touched, but given that under this formula we are changing the clawback—or, as my hon. Friend the Member for Nottingham North (Mr Allen) would say, the amount of money people lose—by changing the threshold at which people begin to take back tax credits, and the rate at which tax credit income changes, we are affecting the value of child tax credit. There are questions about the sense of having two benefits serving the same purpose.

My second proposal is one that I guess many Tory MPs have made privately to the Government. I cannot imagine that Government Whips are different from Opposition Whips. If we had been in government making this proposal, our Whips would have been very busy last weekend phoning hon. Members to ask what they would tolerate as a minimum for reform. I would have thought that one very clear message coming back would be that bringing in these reforms next April is not acceptable

The third and more radical proposal, which again unites Back Benchers on both sides of the House, is that the changes to tax credits should apply only to new claimants. One of the problems of our popularity in shovelling around taxpayers’ money without realising that the music might stop some day and people might think the bill was not actually affordable is that in the meantime our constituents have responded to the very clear messages—in the form of incentives in the tax credits system—about what we wish them to do. In talking both publicly and privately with Conservative Members and certainly with Labour Members, I have noticed a sense that it is one thing to say there is a new contract for people who are not claiming tax credits now, but it is a totally different ball game to say to the others, “You’ve responded and you’ve done all we expected you to do, but, by Jove, we are going to clobber you now for doing so.”