Finance (No. 4) Bill

Lord Jackson of Peterborough Excerpts

Thursday 19th April 2012 Commons Chamber

[Mr Chope]

The hon. Gentleman is absolutely right. Even during the International Monetary Fund crisis in the mid-1970s, things never got so tough that the Government of the day felt the need to interfere with child benefit. It was a reflection of the fact that families with children had higher costs than those without.

The proposals will create all sorts of perverse incentives, and the people who want to try to avoid the measures will have a field day. This has been well covered by the Treasury Select Committee’s recent report, as well as by the Chartered Institute of Taxation and other expert bodies. The fundamental issue is the proposals’ lack of fairness, as between one family and another.

[Mr Stewart Jackson (Peterborough) (Con)]

The Centre for Social Justice says that the Government’s policy

“could threaten a new wave of family instability and breakdown”,

and that it

“flies in the face of their commitment to ‘shared parenting’.”

Does my hon. Friend find it incongruous that that policy is being pursued at the same time as the Government are failing to honour their commitment to introduce marriage or family tax breaks in this or future Budgets?

[Mr Chope]

My hon. Friend makes a really good point, which was also covered in the recent Adjournment debate on this subject, which received what I can describe only as a rather woolly response from the Exchequer Secretary to the Treasury, my hon. Friend the Member for South West Hertfordshire (Mr Gauke). He said that, basically, something was going to happen in this Parliament but the Government were not quite sure what or when. That was not good enough. We need an opportunity to look at the whole issue of transferrable tax allowances, and allowances in the tax and benefit system that recognise the family and marriage.

Returning to the issue of fairness, two people on £50,000 a year with children will not have to pay the high income child benefit charge, whereas a family with children with one person earning over £60,000 will have to pay it.

--- Later in debate ---

[Cathy Jamieson]

With respect to the hon. Gentleman—he said he had some sympathy with my points, so I do not want to be entirely negative in response—we will not solve the complexities of the taxation system by adding even more complexities that are unfair to families and will affect children negatively.

Let me put one final issue on the record. People who are not in work and who receive child benefit for a child under 12 receive national insurance credits to enable them to build up entitlement to state pensions. The Government’s original announcement led to concerns about the impact on future pension entitlements of women, in particular, if families stopped claiming child benefit. The Government said from the outset that no one would miss out on national insurance credits as a result of the child benefit changes, but it is unclear how they proposed to ensure that. Under the latest proposals, people who are entitled to child benefit and families affected by this charge may elect not to receive it, but a claim for child benefit will still need to be made in order to receive national insurance credits. Information published by HMRC confirms that.

I am extremely conscious of the time so I will not say anything more, other than that I think that everybody should listen carefully to the debate and to the points that have been made. When Members consider how to vote, they should consider both the principles involved of support for families with children as well as the layers of complexity and confusion there will be if the proposal goes through.

[Mr Stewart Jackson]

I had not intended to speak in this debate so I shall keep my remarks brief. I do not have at my fingertips the comprehensive figures that my hon. Friend the Member for Christchurch (Mr Chope) gave; he made some cogent and powerful points. From my point of view it is always a very risky endeavour when a political idea is fleshed out to become a fiscal policy of any Government. The remarks made just after the general election at the Conservative party conference were really an aspiration that is now being turned into a policy. I believe that this policy is a fiscal time bomb that will blow up in the faces of this Government. I also believe that what we are doing—[Interruption.]

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. The hon. Gentleman is speaking.

[Mr Jackson]

I defer to the parliamentary private secretary to the Financial Secretary, my hon. Friend the Member for Reading West (Alok Sharma). [Interruption.] At least he is at the moment.

The hon. Member for Denton and Reddish (Andrew Gwynne) made a very important point about crossing the Rubicon of undermining the universality of child benefit. The same point was made earlier by my hon. Friend the Member for Christchurch. Some time ago, the Child Poverty Action Group said this about child benefit:

“A benefit which goes to virtually all children is of course expensive. But it can also be argued that it is more likely that such a benefit will have ‘substantial and wide-ranging support’, and may be difficult to abolish; provision for the poorest children only, whilst cheaper, is often more precarious.”

Specifically, intergenerational redistribution and the value placed on children are universal values that we are seeking to undermine.

[Harriett Baldwin]

What would my hon. Friend say, though, about the example of two wealthy Americans who have four children born in this country who receive child benefit tax-free from the UK Treasury, but have to pay tax on it to the internal revenue service?

[Mr Jackson]

My hon. Friend makes a valid point and I accept her argument, but we need to look at this proposal within the context of the wider proposals in the Budget. We are rightly reducing the top rate of tax and corporation tax, so for those in the upper 20% income range we have introduced fiscal policies through which we seek to support entrepreneurship and business, supporting those higher-rate earners. We are also proud to be taking a substantial number of poorly paid working people out of tax. My concern is that we are not extending those same tax breaks to the squeezed middle and it is a very important message that we are sending. I accept that the Chancellor has tackled the specific issue of the cliff-edge effect, but he has not done enough to secure my vote in terms of the discrepancy regarding the one taxpayer in a two-person household.

[Mark Reckless]

A rather larger category than that mentioned by my hon. Friend the Member for West Worcestershire (Harriett Baldwin) is the very minimum of £62 million a year—and I suspect much more—that is paid to children who are resident elsewhere in the European Union where costs are much cheaper, many of whom have never even visited the UK.

[Mr Jackson]

My hon. Friend makes an extremely apposite point. If we really are all in this together, it beggars belief for my constituents and his that we are talking about looking after the interests of people on low or median incomes but are remitting abroad, within the European Union, anything between £40 million and £75 million in various benefits for people and families who do not even live in this country.

It would not be fair not to mention that the Chancellor has sought to ameliorate the concerns that various Members across the House have expressed about this policy and I give him due credit for that. Unfortunately, however, I think this policy will go badly wrong and will have a specific impact on aspirational, ambitious families and will breach the basic tenet of universality in child benefit. For that reason, I cannot and will not vote for it.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. I must call the Minister at 5.48.