Budget Resolutions and Economic Situation

Carolyn Harris Excerpts

Tuesday 14th July 2015 Commons Chamber

[Carolyn Harris (Swansea East) (Lab)]

Over the past few days there has been a great deal of debate and analysis of the Budget. Some who would not necessarily be expected to do so have praised proposals to increase the minimum wage and to increase the personal allowance. However, it is extremely important that we do not lose sight of the fact that, despite those measures, as the Institute for Fiscal Studies confirmed, the Budget is regressive. Contrary to the Chancellor’s rhetoric, it is those with the least broad shoulders who must carry the burden of reducing the deficit.

Cuts to tax credits will have a significantly detrimental impact on families on very low incomes. Neither the increase in the minimum wage nor the increase in the personal allowance will make up for these losses. The changes mean that working parents eligible for child tax credit will lose more support more quickly than previously, from the moment they move into work or their salary starts to increase. Many parents will be worse off when the full impact of the Budget is taken into account. Barnardo’s has calculated that a single parent with two children working full-time on the minimum wage will lose £1,200 a year from April 2016, even when the increase in the minimum wage is accounted for.

It gets worse: from April 2017 some of the very poorest families—those with more than two children—will face further reductions in income. They will not be able to get financial assistance through tax credits or universal credit to account for the costs of having a third child, or any child beyond that. We are talking about a significant amount of money for families on very low incomes—about £2,700 a year, or £53 per child per week. New claimants of universal credit will also be affected by this change. A family who already have three or more children and are currently earning above the earnings threshold but lose their job or find themselves unable to work due to ill health will, after April 2017, be able to claim support for only two of their children. As a result, there is no escaping the fact that, from April 2017, families with more than two children will be more likely to live in poverty. Children with more than one sibling are already 40% more likely to be in poverty than their peers.

To illustrate that point, let me give just one example from a Barnardo’s children’s centre. Sarah is a working mother of three whose husband, John, looks after the children, one of whom is not yet of school age. John asked the centre for some nappies. When a project worker visited their home, she noticed that the only food in the cupboard was biscuits and crisps. Sarah and John said that their finances had become unmanageable after their house was deemed too big for their family and they were hit by the bedroom tax. That pushed them over the edge. Now the parents are skipping meals so that the children can eat, and they are too proud to ask for help.

Cutting tax credits will hit some of the poorest and most vulnerable the hardest. The Government keep telling us that it is about making work pay and incentivising those on out-of-work benefits to move back into work. We know that more than six in 10 children are currently living in poverty, with at least one parent in work. It is absolutely absurd that in 2015, and in the fifth largest economy in the world, parents are having to decide who can eat and whether they can afford to put the heating on.

I will finish with two questions for the Government. First, how do they intend to monitor the impact of the cuts to tax credits, and of the Budget as a whole, on child poverty? Secondly, given that they have said that the income measure of child poverty is to be scrapped, to ensure transparency and fairness in relation to measures announced in the Budget and in legislation such as the Welfare Reform and Work Bill, how will they continue to monitor levels of child poverty?