Finance Bill (First sitting)

Debate between Barbara Keeley and Nick Thomas-Symonds

Thursday 17th September 2015 Public Bill Committees

[Barbara Keeley]

There is a great deal of looking back, but let us look at what is happening this year and what will happen in the years following this Budget. The Office for Budget Responsibility forecasts net taxes to rise by more than £47 billion over the next four years, with much of the money coming from increases in dividend tax, insurance premium tax, vehicle excise duty and cuts in pension tax relief. Of course, welfare cuts will also raise almost £35 billion. It is one thing saying that families will benefit from the tax lock, but all of those measures will hit many families and individuals in the UK hard.

The combination of changes needs to be seen in the context of the cut to tax credits that Government Members voted through this week, which are likely to leave millions of families worse off. I was asked the other day, “What else would you do?” It is our contention that the welfare reform we need is to things such as overpayments and the error and fraud in the welfare system, because things are not properly checked at the point of application. Error and fraud cost £3 billion a year. The cut to tax credits will hit working people on middle and lower incomes, which undermines the Government’s argument that this is a Budget for working people.

[Nick Thomas-Symonds]

On that point, the Chancellor of the Exchequer made much in the last Parliament of a distinction between those who are in work and those who are not. By this attack on those who are in work, does he not find himself on the wrong side of his own dividing line?

[Barbara Keeley]

Absolutely so. A great deal is said at the moment about working people, working families and who supports them. Paul Johnson, director of the IFS, has said:

“Significant allowances were an integral part of the design of universal credit, intended to give claimants an incentive to move into work.”

That is an important point. On tax credit cuts, he adds:

“This reform will cost about 3 million families an average of £1,000 a year each. It will reduce the incentive for the first earner in the family to enter work.”