Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015

Debate between Lord Richard and Lord Sentamu

Monday 26th October 2015 Lords Chamber

[Lord Richard]

I hear what the noble Baroness says but, as far as the financial privilege of the House of Commons is concerned, if this House decides to vote for my noble friend Lady Hollis’s amendment—as I hope it will—it would not kill the statutory instrument. It would not mean that it was dead. It would mean that its implementation was delayed. According to the clerks—and I understand it is broadly accepted by most people—that is not a fatal attack upon these regulations. If the House were to do that, we would get the best of both worlds. I am not in favour of voting for the Liberal Democrat amendment because I do not, on the whole, think that voting for fatal amendments on statutory instruments is a good thing for this House to do, and I do not think I have ever done it. However, an amendment to postpone the statutory instrument until the other House has a chance to look at the evidence that has now arisen makes a great deal of sense. I hope that, when it comes to a vote, that is what will happen.

[The Archbishop of York]

My Lords, I want to a repeat a few words of the noble Lord, Lord Richard. I, too, have been listening to this debate, and I listened to the argument made by the noble and learned Lord, Lord Mackay. He persuaded me that the amendment moved by the noble Baroness, Lady Manzoor, to decline to approve the regulations is fatal and perilously would raise all kinds of constitutional matters.

The amendments moved by the noble Baronesses, Lady Meacher and Lady Hollis, simply decline to consider the draft regulations. They do not say that the regulations will not be approved. In fact, they tie our hands because when the regulations are produced, we will have no choice but then to approve them. If the Chancellor is being very mindful, as we have been hearing from the Lord Privy Seal, and is willing to negotiate and to listen to our advice, well, we are giving him our advice, so why does he not take it? I think that the amendments moved by the noble Baronesses, Lady Meacher and Lady Hollis, are not fatal. They are simply delaying, and we can do something about it.

My right reverend friend called on the Government to further consult on the draft regulations and revisit their impact. It is a question of trust. If you are legislators and do not have the facts before you before you finally approve these draft regulations, you are abrogating your legislative responsibilities. If you are a revising and scrutinising Chamber, surely you must do it. If you do not, who else is going to do it? They may even be glad that some people are planning; it will become very clear that some were probably not all that important. The noble Baroness, Lady Hollis of Heigham, in her moving speech, outlined clearly the unintended consequences of this hasty way of reducing and cutting tax credits because the people who are going to suffer most are those who up to now have been relying on them. They are in work, and they are managing to get their things in order, and then suddenly the Government say they are going to take it away. That is not good. The Chancellor of the Exchequer is more likely to meet his target reduction of the budget deficit of up to £4.2 billion a year by introducing the real living wage first, which I trust will be calibrated soon by the Living Wage Foundation.

What is my basis for saying this? Two years ago, I chaired the Living Wage Commission which brought together people from business, the trade unions, industry and civil society to look at how we could inspire and create a brilliant way of dealing with this difficulty. How can we tackle the blight of low pay? We looked closely and objectively at the case for the living wage, and we were sure about what should be done. Let me give the House the evidence. It is in the report. The evidence pointed to the living wage being good for employees, good for business, good for the economy, good for society and good for low-paid people. Employers who have already adopted a living wage policy have lifted thousands of people out of working poverty. They are not claiming tax credits because they have been lifted out. The Exchequer could gain up to £4.2 billion a year in increased tax revenues and reduced expenditure on tax credits. That is a much neater way of doing it. Businesses are reporting increases in productivity and improved morale. The truth is that you and I lose out on poverty wages. Billions of pounds are being spent every year on topping up the incomes of low-paid workers at a time when private finances are very tight. Demand is sucked out of the economy by the lack of spending power of a fifth of our workforce—about 5 million people—and where inequality grows, all of us end up diminished.

Economics was not always divorced from moral and ethical considerations. Adam Smith, the father of modern economics, had been professor of moral philosophy at the University of Glasgow before he wrote The Wealth of Nations. To him and later classical economists such as Ricardo, Mill and Henry George, ethical considerations were of prime importance. Economic justice on a global scale is the only way we are going to deal with this. The issue we are facing here is not just economics divorced from morals and ethics. The decisions we take will affect a lot of men and women throughout the country who want to get out of poverty and out of depending on tax credits, and we should consider them properly and fairly.

Britain has struggled through very challenging times. I hope that the work being done by government, business and the people of the United Kingdom will enable us to take a huge step forward. The minimum wage, when introduced, went some way, but it did not go far enough. Let me give some recent research which seems to suggest that the legislature has considered the possibility of delaying in order that further facts may be brought out. What are they? There has been a rise in demand for unsecured credit, with many people reporting an increase in their need to borrow. This is likely only to get worse in the winter months. Do you want people who have hitherto been dependent on work and tax credits to be driven to the loan sharks of this country? That would be quite unhelpful. What about UNICEF saying that a quarter of children in Britain are living in poverty? Britain is at risk of becoming a place where the haves and the have nots live in parallel worlds, where the common good, or the big society, has been a pious platitude rather than genuine. I want to listen more, and I hope the decision to delay the draft regulations until further facts ties our hands and allows the Chancellor, who is willing to listen to our advice, to come back with all that information. We are almost saying that we will pass it, we will agree with it.

Finally, a wonderful report by the Joseph Rowntree Foundation, Will the 2015 Summer Budget Improve Living Standards in 2020?, states that over seven years there has been a decline in living standards. It is pausing for the moment, but many low-income households are still much worse off than in 2008, leaving them struggling to make ends meet and reliant on benefits to top up their finances. Today, we want to say to hard-pressed families on poverty wages that the Government are serious about deficit reduction, but they want to do it in an orderly fashion that will not leave men and women in the hands of loan sharks.