Tax Credits
Debate between Clive Efford and Chris Philp(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Clive Efford (Eltham) (Lab)
What a mean confidence trick the Chancellor carried out in the Budget. Some 3,600 households in my constituency will be affected, including 6,600 children. The Chancellor said:
“Britain deserves a pay rise and Britain is getting a pay rise.”—[Official Report, 8 July 2015; Vol. 598, c. 337.]
He also said that those on the national minimum wage can expect a cash increase and full-time workers can expect their incomes to go up by £5,000 a year. But we now know that the whole package is far from compensated for by the increase in the national minimum wage. People on the national minimum wage will not just be worse off next year, but the year after that, the year after that and the year after that—every year until 2021. The Library’s document tells us that on average they will worse off by £8,945 over the next five years.
Conservative Members cheered the Chancellor to the rafters. Did they understand that the overall package would result in the poorest workers among us having their incomes cut? The Secretary of State for Work and Pensions punched the air. Did he not understand that the overall package would result in a cut in the incomes of people on the national minimum wage? Was he being mean or is he just too stupid to be doing his job?
The Chancellor said in his 2010 Budget:
“I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents. The British public are going to hear them straight from me”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]
What happened in the latest Budget then? The Conservatives say that theirs is the party of working people. Here are some working people: a cleaner with one child will be £31.72 a week worse off. An assistant cook will be £32.49 a week worse off, a teaching assistant £32.49 and a health care assistant £35.36—
Clive Efford
No, I have heard the hon. Gentleman so many times. He has to stop reading out the Whips’ handouts: it does not add to the debate.
A nurse with three children will be worse off by £35.91—from the party that claims to be the party of the workers. I have a whole list of worker after worker, all of them worse off as a result of the changes to tax credits.
Conservative Members may have been convinced by the Chancellor that he will make some changes. We have heard them argue that this change is necessary and that we have to make it. Perhaps they think that they have been given a promise that something will be done and some changes made for the people on this list, but I am sick and tired of hearing Tories tell us that we have to make changes. The changes will not hit them: they will hit the poorest income earners in their constituencies. Let the Tories vote for this change tonight. People will not forget that. We will remember that the Tories voted to reduce incomes for families with children. They trooped through the Lobby, claiming to be the party of the workers but voting to reduce their incomes. People will not forget that.
Budget Resolutions and Economic Situation
Debate between Clive Efford and Chris Philp
Clive Efford (Eltham) (Lab)
I pay tribute to the hon. Members for Coatbridge, Chryston and Bellshill (Philip Boswell) and for Louth and Horncastle (Victoria Atkins), who made their maiden speeches earlier this afternoon. I hope that they enjoy their time here representing their constituents.
The Budget was heralded as the first blue Budget for 18 years, but it certainly was not worth waiting for. Like my hon. Friend the Member for Islington North (Jeremy Corbyn), I heard echoes of previous Tory Budgets under Margaret Thatcher and John Major, particularly in relation to housing and the social rented sector. There was a certain irony in the big crescendo being about the national minimum wage. Those of us who were here in the first Labour Parliament will remember that we had to sit all night to force through the national minimum wage. The Tories fought against it tooth and nail, yet here we are with the Tories claiming to be the guardians and supporters of the national minimum wage. How right can we be? We were told that it was going to cost jobs and wreck the economy. None of that came about and the Chancellor is now increasing it substantially, which I welcome. I will come back to that.
My concern about the Budget, and the reason I wanted to speak today, relates to the proposed changes to welfare, particularly in relation to housing and the benefit cap. They will have a major impact because of the cost of housing in London. Only a few days ago, it was announced that there should be a higher income cap for people in social housing, who would then be forced to pay a market rent. I am concerned that what we are seeing, much as the Chancellor tried to portray this as a one nation Budget, is a division opening up between those who have property and those who do not. That causes me a great deal of concern.
There was very little, in what the Chancellor said, for the next generation. I am living in a house that, in the past 14 years, has more than doubled in value. I have not earned any of that money. Housing costs are leaving the next generation behind. What chances are we creating for the next generation? My right hon. Friend the Member for Wentworth and Dearne (John Healey) spoke very early in the debate. He undertook an excellent piece of work, which I encouraged the Labour Front-Bench team to adopt before the general election, outlining the “benefits to bricks” argument. If we invest in social housing at 50% or lower of market rents, the taxpayer actually saves money. We can chart the ballooning of the housing benefit budget right back to Sir George Young. When he was Housing Minister he said let housing benefit take the strain. Since then, we have seen a mushrooming in the cost to the taxpayer of paying for people to live in private rented accommodation.
At the time of the 2010 election, economic growth was 1.7%, owing largely to the action of the Labour Government to address the deficit and economic downturn that resulted from the international banking crisis—I wish they had had so much power that they could have created an international banking crisis, because then we might have changed much more, other than what we did do, such as introducing the national minimum wage.
When they came to power, however, the last Government removed all the stimulus from the economy, much of which involved housing. In spite of the depth of the downturn, we had managed to keep the number of repossessions resulting from the downturn lower than in the 1992 recession. We also created the home start scheme to support and keep going construction schemes that were faltering because the banks were not providing credit—we supported the supply of housing—but the last Government scrapped those schemes.
Incidentally, the last Government also scrapped the biggest council house building programme in 20 years. We can calculate the savings that that programme made to housing benefit. The Conservatives will claim credit for building more council housing than the last Labour Government—
Clive Efford
Oh God; it’ll be a good one, I know.
I admit that we did not build enough houses. I was here, firmly on the Back Benches, when we were in government, and the lack of house building, particularly social rented housing, was one of the big issues that I argued for, but right at the end we did invest a lot of money in building social housing, and the last Government scrapped it. The only social housing they have built and claimed credit for in the past five years was funded by my right hon. Friend the Member for Wentworth and Dearne when he was Housing Minister. I know that because I was his Parliamentary Private Secretary.
Clive Efford
That is absolutely right; it gets the supply side going as well.
The OBR figures in this booklet show that house prices are due to rise by 34.1% by 2021, so a considerable increase in house prices is still being predicted, but people’s ability to buy housing will only fall further behind. The Resolution Foundation states that 2.2 million households on medium incomes spend one third or more of their disposable income on housing, leaving an average of about £135 a week for other things. If they even attempt to buy their own home, they do not have enough income. The National Housing Federation’s report, “Broken Market, Broken Dreams”, states that the average first-time buyer needs a £30,000 deposit—10 times the amount needed in the 1980s—and to borrow 3.7 times their annual income now compared with just 1.7 times their income in 1979.
Two thirds of home buyers now use the bank of mum and dad. They are getting support from the baby boomer generation—I am one of them: those born between 1946 and 1964. Our generation are sitting on the best pensions any generation has had, the windfall from our house prices and the greatest ever increase in the quality of life—and what has the Budget done? It has protected pensions for that group, who are already wealthy, and allowed them even greater opportunities to pass on their housing to their children, further opening up the divide between those who have houses and those who do not. That is completely and utterly unfair.
Let me turn to the benefit cap. I do not support reducing the benefit cap from £26,000. I will look carefully at the impact assessment that the Government produce to show us that it is justifiable in London—we are going to see a proposal for a £23,000 benefit cap in London. I want to see how that will impact on people in central London, because we are seeing a combination of the cap and the highest-value social housing having to be sold off, as my hon. Friend the Member for Islington North (Jeremy Corbyn) said. We are seeing housing association properties forced to be sold off, and we know that for every 10 houses that are sold, we get only one house to replace them—that is the woefully inadequate record that we have seen in the past.
The expensive houses are going to be in central London. They are the ones that are going to be sold. Even in my constituency—which is an inner-London constituency, albeit towards the outer part of that area, so we do not have the sort of high-value properties we see in places such as Camden, Islington, Kensington and Chelsea, and Hammersmith and Fulham—there will still be high-value houses that must be sold. That will reduce the availability of affordable rented accommodation for people in London. What will happen to those communities? Where will those people go? Where are the opportunities for the next generation? What this Budget is doing is removing whole sections of our communities that perform lower-paid jobs and live in social rented accommodation in large parts of London. Those communities are just being wiped out, and this Budget has moved that forwards in ways that Margaret Thatcher could not even dream about.
I want to turn to the national minimum wage. Based on what I heard from the Chancellor, I think that he has redefined the living wage and claimed it for himself. He has put the minimum wage up to £9, when the living wage is actually £9.15 and £7.85 outside London, not £7.20. Therefore, he has rewritten the living wage to start with, but also the living wage is calculated by including the rate of tax credits, which have just been massively reduced, so if I am not wrong, it will not be a living wage and we have had a little con trick. It was the big end for the Chancellor—“We’ve got a new living wage”—but we have not got a new living wage; we have got a Tory living wage. Again, it will impact on those with high housing costs, particularly in London.
Chris Philp
The hon. Gentleman is very kind indeed. I find it slightly difficult to believe that he is complaining about such a massive increase in the minimum wage when it is set at 60% of median earnings, which is the level suggested by the Resolution Foundation.
Clive Efford
Other benefits such as tax credits are taken into consideration in calculating the minimum wage. That is how we arrive at the living wage, so we cannot cut tax credits and, using the previous living wage, say that it is the living wage. It has to be completely recalculated.
Back in 2012, the London School of Economics did a study of the impact of the £26,000 benefit cap and concluded that, after all other bills were paid, households with children in some of the less desirable parts of London would be left to bring them up on 62p a day. I read an article the other day about Ban Ki-moon launching the new millennium development goals. He said that expenditure of $1.25 a day is not enough and that the target should be increased. Sixty-two pence a day is about half that. What we are saying therefore is that families with children in a capital as wealthy as London should have that much income to provide for them and to live on.
This Budget is not fair; it is completely unfair. It is very divisive between those who have and those who have not, in terms of property. As for the increase in the minimum wage, welcome though it is, it is not a living wage, and we must continue to campaign for an improvement in that regard.
Chris Philp
I thank the hon. Gentleman for his intervention. The number of children in relative poverty—this was before the definition was changed—was reduced by 300,000 over the course of the last Parliament. As I mentioned in response to the previous intervention, although families on low incomes will receive less in tax credits than they currently do, that will be more than made up for by the increase in the minimum wage, and it will, therefore, be fair to people on low incomes. I do not think that the issues the hon. Gentleman just raised will come to pass in the way he described, although I am sure that further analysis will be done on this topic.
Ultimately, tax credits are a subsidy paid to employers who underpay their staff, and Members on both sides of the House will deplore employers who pay their staff less than is required to live on. A combination of reducing tax credits while increasing the minimum wage will end this abuse by some employers who do not pay their staff properly. A reform such as this is long overdue. For far too long, the general taxpayer has been subsidising employers who underpay their staff, and I am delighted that today’s Budget has taken a step towards ending that.
We have heard a great deal from Opposition Members about productivity, and it is right to say that productivity in this country needs to improve. I am delighted that somebody as distinguished as Jim O’Neill will be leading on that. I say to Labour Members who have raised this issue that the biggest fall in productivity in recent history—2.6% in a single year—occurred in 2009, on the Labour Government’s watch. They should therefore be a little careful when they seek to lay the blame for the productivity level on Conservative Members.
One contributory factor to low productivity is low wages, which are fuelled by tax credits: if employers can pay their staff very low wages, there is very little incentive to invest in IT, training, equipment or machinery because they can simply hire very low-paid staff. One side-effect of today’s increase in the minimum wage may be to increase productivity, because companies will be paying higher wages and so will be further incentivised to make sure that their workers, who will be costing them more, really are productive.
A second reason behind the relatively flat productivity figures is the relative decline of the oil and gas sector and the financial services sector after the recession. Both sectors had very high productivity, so if their participation in the economy is reduced, there will naturally be a bit of a drag on productivity. I am sure that the productivity plan, which will be published shortly, will go a long way towards addressing many of the issues.
The Chancellor mentioned aggressive claims management companies, which I do not think anyone has picked up on so far. He said that those companies are targeting people who have been involved in accidents and inducing them to make fraudulent claims. I had that experience a year ago, when my wife and I—I do not wish to pin the blame on either of us—had a small bump on the motorway. [Hon. Members: “Ah!”] It was nothing too serious. But in the year after that, my wife and I were inundated with phone calls on an almost weekly basis. Goodness knows how these people got our phone numbers. The insurance company or the accident pick-up company must have given them to this ambulance-chasing law firm. The firm phoned us up on a weekly basis, trying to persuade us to pretend that we had some sort of injury, such as whiplash or backache. No matter how many times we told them that we had no injury of any sort, they continued to try to persuade us fraudulently and falsely to claim that we were injured, which we obviously did not do. Some people may be tempted, and that would be outright fraud. Anything the Chancellor can do to stop this outrageous abuse is very welcome. Personally, I advocate an outright ban on payment protection insurance—PPI—or personal injury cold calls because people are being induced to make fraudulent claims, which act as a drag on the entire economy. I welcome the fact that the Chancellor made reference to this in his Budget statement.
Finally, I wish to touch briefly on housing. The timing is appropriate as the Minister of State for Housing and Planning is now in his place. I congratulate the Government and him on the national planning policy framework, which was launched in the previous Parliament, under which housing starts have significantly increased. In fact, the number of housing starts per year is around 50% higher than it was in 2009 and 2010. The Government can be very proud of the action they have taken so far to encourage house building. In my borough of Croydon, the number of housing starts increased fourfold in 2014 compared with 2013—they went up from 500 a year to about 2,000 a year. The Government have a good track record of making progress in this area. I have every confidence that the housing Bill, to be introduced in Parliament in October by the Minister of State, will put in place further measures that will increase house building even further. As we increase supply, affordability will improve as well.
On the subject of council housing, to which a previous speaker referred, we should note that over five years the coalition Government started more council houses than Labour did in the previous 13 years put together. That is a record of which the Government can be proud.
Chris Philp
As the hon. Gentleman gave way to me, I shall do the same for him.
Clive Efford
The hon. Gentleman just cannot get away with what he said. That money was left over from the Labour Government. The house building programme that we started was scrapped by the Conservative Government when they took office. More houses could have been built if they had not done that.
Chris Philp
As Labour’s outgoing Chief Secretary to the Treasury pointed out in his very helpful note, there really was not much money left when the Labour Government quit office. Council house building continues to this day. Even the hon. Gentleman cannot claim that council house starts today can in any way be attributed to a Government who left office five years ago. This Government have a very fine record on house building, and I know that they will continue with it in the future.
At its heart, this Budget does something profound and important: it shifts the balance in this country’s economy from welfare to work. The only real way to fight poverty and to create prosperity is through hard work and earning a living, not through state handouts. This Budget tips the balance back in favour of hard work and away from state handouts, and I heartily support it.