Tax Credits (Working Families)

Debate between Shabana Mahmood and Caroline Lucas

Tuesday 7th July 2015 Commons Chamber

[Shabana Mahmood]

My hon. Friend makes her point powerfully, but it is not that Government Members do not understand—I think they know full well the impact of their decisions; they simply want to pretend it is not going to be as bad as everybody knows it will be.

A Resolution Foundation study of these proposals just a couple of weeks ago suggests that

“over two-thirds of the families affected would be in-work”,

that

“almost two-thirds of the cut would be borne by the poorest 30 per cent of households; and”

that

“almost none of the cut would fall upon the richest 40 per cent of households”.

On what basis, then, can the Tories claim to be the party of working people? These are the working people the Government are choosing to hit and hurt. If the Government are happy to make these choices, they should at least admit that, rather than hiding behind the rhetoric of being the party of working people, as if somehow that will get them through the next five years.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Lady is making a powerful case. Like many others, I have been inundated by constituents who are really frightened by the impact of these cuts. One wrote to me saying:

“Child Tax Credit allows people to get over difficult times which happen despite working hard, and cuts will end up forcing more people into poverty”.

Does the hon. Lady agree that these cuts will be counter-productive as well as deeply cruel?

[Shabana Mahmood]

The hon. Lady makes a powerful point, and I absolutely agree with her. Of course, it was the support available via tax credits that meant that in the recession some people could remain in work even when their employers had to cut back on their hours as a result of the global financial crisis. That is an important point.

The Government’s critique of tax credits over the last couple of weeks has implied that this is a flawed regime that does not work and simply subsidises so-called poverty pay, but a simple examination of the facts shows that the case undermining tax credits is weak. If the Government were serious about tackling the reasons why people have to rely on tax credits, they would come forward tomorrow not with planned cuts or immediate cuts to tax credits, but with longer-term measures to tackle the underlying factors of low pay, high housing costs and insecure employment.

There are 4.6 million households in the UK claiming tax credits. Four million of the families claiming them have children and 2.7 million of those families are in work. There are 5 million children in working families receiving tax credits, and over 70% of all of those, with or without children, claiming tax credits are in work. They were introduced in 2003 to tackle poverty and make work pay. Much of the debate at the time was focused on helping single parents to get into work. We know that the lone parent employment rate rose by 28% between 1997 and 2010, and by a staggering 43% between 1997 and 2014.