Tax Credits (Working Families)

Caroline Lucas Excerpts

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.

--- Later in debate ---

[Mr Gauke]

He did it very skilfully, but unsuccessfully, I fear. If we want to help small businesses, we need to put in place a pro-enterprise environment and if he wants to see a Government who have done that, he should look at the record of the Government over the past five years.

[Caroline Lucas]

The Minister is talking about borrowing, but does he recognise that further cuts to Government spending are leading to a rapid rise in household borrowing? Official forecasts project that household debt will surpass the record pre-crisis levels of 2008 before the end of the decade. Does he not recognise that that instability, which his policies are creating, is likely to lead to yet another financial crash as he is simply moving debt from the public sphere to the private sphere, and making it very unstable?

[Mr Gauke]

I do not accept that argument. On the question of the fear of further crises and so on, we need to ensure that the public finances are on a sound footing, recognising that there will be times at which there will be turbulence in the economy. This is one of the differences we had at the general election. The Government recognise that we have to be serious about getting debt down, which is why we believe that there should be a surplus in normal years. If the Opposition are coming to that view, I welcome it, but their refusal to consider a role for the welfare budget in making a contribution towards reducing the deficit suggests that their heart is not in it.