Oral Answers to Questions
Damian Hinds Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Neil Carmichael (Stroud) (Con)
12. What steps he is taking to tackle the productivity gap.
The Exchequer Secretary to the Treasury (Damian Hinds)
My hon. Friend is absolutely right to highlight the importance of increased productivity, which, along with growing employment, will drive growth, raise living standards and ensure a better quality of life for our citizens. Our productivity plan set out a range of reforms designed to make sure that the UK remains a dynamic, open and enterprising economy, supported by long-term public and private investment in infrastructure, skills and science.
Neil Carmichael
Does the Minister agree that the recent report by the Governor of the Bank of England highlighting Britain’s membership of the European Union in positive and authoritative terms suggests that if we make sure that we do get productivity right and do protect our financial services, the prospects for our economy will be very good, both dynamically and in terms of growth?
Damian Hinds
As my right hon. Friend the Chancellor has noted, the best outcome for the UK economy is that we achieve major economic reform of the EU. We want the UK to play a leading role in creating a dynamic, competitive and outward-focused Europe, delivering prosperity and security for every country in the EU, particularly by accelerating the integration of the single market.
Derek Twigg (Halton) (Lab)
One important factor in increasing productivity is ensuring that companies are able to invest in new plant and machinery. Is the Minister convinced that banks are doing all they can to lend to companies to ensure that they can make such investment to improve productivity?
Damian Hinds
The hon. Gentleman is right to identify the importance of private investment. It is one reason why we have brought in the highest ever permanent level of the annual investment allowance, and of course banks play a crucial role in identifying those opportunities.
Suella Fernandes (Fareham) (Con)
Does the Minister agree that raising productivity is the route to raising living standards for everybody, and that this Government’s commitment to cutting corporation tax, our historically high investment in infrastructure and the planning reforms will all contribute to achieving that aim?
Damian Hinds
I agree with all that. It is rising productivity that underpins rising real wages and therefore improving living standards.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Mr Speaker,
“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”
The Chancellor may recognise his own words from his Mansion House speech in July. Why was he so damning of his own record?
Damian Hinds
My right hon. Friend the Chancellor has been absolutely consistent in identifying the need to rebalance the economy and export more. I am afraid that this country’s productivity gap has existed for a very long time—I am not even going to try to pin the blame entirely on the previous Labour Government; it has existed for longer than that. We need to fill that gap and address the shortcomings that our economy has had over a long period. The productivity plan that this Government are bringing in is doing just that.
Seema Malhotra
I thank the Minister for his answer. The Chartered Institute of Personnel and Development has said that his productivity plan is “fatally undermined” by insufficient measures to improve the skills of the workforce. Could that be just one reason why the UK’s productivity gap compared with other G7 countries has widened to the largest on record since 1991?
Damian Hinds
The hon. Lady is right to identify the importance of skills, and that is why human development is absolutely at the heart of the productivity plan. The apprenticeship levy is a really important structural reform to help the delivery of 3 million apprenticeships. Then there is the network of institutes of technology and all the excellent work being done in the Department for Education, working on basic skills, including English and maths, which we know are vital and of such high value in the marketplace to both employers and employees.
Caroline Ansell (Eastbourne) (Con)
13. What plans he has to raise the personal allowance during this Parliament.
Welfare Reform and Work Bill
Damian Hinds Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Owen Smith
My hon. Friend is completely correct, but this cut does not affect only those who are renting and suffering from sky-high, exorbitant increases in private rent; it also affects owner-occupiers. The Government purport to speak for owner-occupiers, but those people will be proportionately harder hit by this measure than many others. Reduced eligibility for tax credits will mean that some people will receive more in housing benefit—there is an offsetting increase in housing benefit costs as a result of the decrease in eligibility for working tax credits, but owner-occupiers will not get that increase.
Earlier someone mentioned the impact of these cuts on our economy, and the self-employed will also be hard hit by these changes. Around 60% of small businesses, some 5.2 million across the country, are sole traders, and according to the Royal Society of Arts, 90% of the increase in jobs—the “jobs miracle” that the Government like to talk about—have been in self-employment in recent years.
Owen Smith
Well that may or may not be true, but it is a very large proportion. Without doubt there has been a welcome increase in employment and self-employment, but my point is that 60% of self-employed sole traders are currently eligible for tax credits.
Tom Brake
Indeed, and changes were made to tax credits to take that into account. However, tax credits are now needed to support people who are in low-paid work and will not suddenly see their salaries rise dramatically to compensate them for the loss of those tax credits. The cuts are regressive and should be opposed by the House. I hope that that will happen in the vote that is about to take place on new clause 1.
Damian Hinds
I start by welcoming the hon. Member for Airdrie and Shotts (Neil Gray) to his new position and I wish the hon. Member for Livingston (Hannah Bardell) well in her new role.
These amendments intend to prevent the Government from making future changes to control welfare spending and we cannot support them. The Government’s approach is clear: our mission is to get wages up, taxes down and welfare under control. New clause 1 seeks to revoke the 2015 tax credits regulations and new clause 8 seeks to delay the introduction of the regulations unless and until the Government put in place a scheme of transitional protection for existing tax credit claimants for a minimum of three years. The House will recall that the Government tabled the regulations for a vote on the Floor of the House on 15 September, rather than their being scrutinised upstairs in Committee, to allow wider discussion on the regulations and to allow all hon. Members the opportunity to debate and vote on the issue. This House voted in favour of the regulations.
The House further discussed the regulations in the Opposition day debate on Tuesday 20 October and again voted in favour of them. However, as the House will also be aware, last night unelected Labour and Liberal Democrat Lords voted against tax credit regulations, raising constitutional issues that the Prime Minister will address.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Is the constitutional issue that politicians should not lie to people in their manifestos?
Damian Hinds
I can only guess that the hon. Lady is making a strange reference to the Conservative manifesto. We were very clear in our manifesto that we are still only halfway through the job of getting the deficit down to zero. It stands at £3,300 for every household in the United Kingdom and we said very clearly during the election campaign that, as part of that, we needed to make £12 billion of welfare savings. What was not in our manifesto was the national living wage.
The Chancellor has said that he has listened to concerns from colleagues in this House and will come forward with proposals in the autumn statement to achieve the goal of reforming tax credits, saving the money needed to secure our economy while helping with the transition through the changes. I do not believe that the new clauses are therefore appropriate for inclusion in the Bill.
I now turn to amendments 49 to 52, which intend to prevent the freeze for four years of working age benefits, child benefit and tax credits. The freeze of the main rates of the majority of working age benefits, child benefit and tax credits will, in total, contribute some £3.5 billion of savings by 2019-20, and will help us to achieve our objective of deficit elimination. It will put welfare on a fairer and more sustainable footing so that we can continue our investment in our national health service and our schools, even as we get the national finances back into balance.
As my hon. Friend the Member for Fareham (Suella Fernandes) pointed out, there is an imbalance in a system that has seen a rise in average earnings of 12% since 2008, and in working age benefits, such as jobseekers’ allowance, of 21%. The individual element of child tax credit has risen by 33%. The freeze will help reverse that trend, helping earnings to grow faster than benefits, which will strengthen the incentives to work, and deliver the savings necessary to bring down the overall welfare bill. None the less, the Government will continue to offer protections to the most vulnerable. We know the best way to support people is to help them move closer to the labour market, but of course we realise that that is not possible for everyone. That is why we have made many important exemptions to the four-year freeze. We have exempted pensioner-related benefits, personal independence payment, disability allowance and attendance allowance relating to the additional cost of disability as well as statutory payments, carers’ allowance, the support group component of the employment and support allowance and disability elements in tax credits.
Simon Hoare (North Dorset) (Con)
The list that the Minister has just given to the House underscores entirely the compassionate, one nation Conservative approach that we are taking to these issues in sharp contradistinction to the Opposition parties, which seek to lecture but which have no remedy.
Neil Coyle
Will the Minister be absolutely clear that the half a million disabled people receiving ESA in the work-related activity group will not be protected under the measures that he has just outlined?
Damian Hinds
People who are in the work-related activity group are, by definition, people who are to be helped to move closer to the labour market. What I have said in the list of exemptions that I have read out is that the amounts that are specific to the additional costs of disability are protected, which is something that we discussed in Committee.
Damian Hinds
If the hon. Gentleman will forgive me, I will not give way, because it is 3.2 pm and I need to stop by 3.5 pm.
Amendments 53 and 55 seek to remove clauses 11 and 12 from the Bill, and amendment 54 seeks to retain the payment of the family element of child tax credit for all persons who are responsible for a child or a qualifying young person born before 6 April 2022.
The Government want to ensure that the system is fair both to those who pay for it and to those who benefit from it. Currently, the benefit system adjusts automatically to family size, but many families who are only in receipt of income from work would not see their budgets flex in the same way when they have more children. The Government want to encourage those families who are in receipt of benefits to make the same financial choice about the number of children they have as those families who are supporting themselves solely through income from work.
Damian Hinds
If the hon. Gentleman will forgive me, I will not give way.
That is why the Government have proposed changes to child tax credit and to the child element of universal credit, as set out in clauses 11 and 12 respectively. The Government will look at the important issues around exemptions through secondary legislation, which is a better way of dealing with these matters. Indeed, we discussed when that could be done in Committee with proper reflection and working together with stakeholders and experts.
I also wish to make it clear that the changes will not affect families already receiving the child and family elements before 6 April 2017 and who remain on benefit after that date, including such families who subsequently leave universal credit for a period of less than six months, and families who make a new claim to universal credit and who have been in receipt of tax credits for more than two children or qualifying young persons in the past six months. In addition, the Government will continue to support larger families through child benefit, which is paid for all qualifying children in a household, and paid at a higher rate for the first child.
In conclusion, the amendments oppose our clear mandate to find £12 billion of welfare savings and to restore fairness to the system by ensuring that work always pays. In making these changes, we have balanced the vital task of bringing spending under control while ensuring that the support is there for those who need it most. I therefore urge hon. Members to withdraw their new clause.
Question put, That the clause be read a Second time.
Tax Credits
Damian Hinds Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Damian Hinds)
Protecting working people’s economic security is, and always has been, a priority for this Government. We are passionate about that, because we believe in people being allowed to meet their potential and fulfil their aspirations from wherever they come in life. Our mission is to get wages up, tax down, and welfare under control. The reforms to tax credits must be understood as part of a wider package of reforms that includes an increase to the personal allowance, increased childcare provision for working families, and of course the national living wage.
Next April the legal minimum pay for a full-time worker will be £1,300 higher than it was the year before. We have done that at a time when businesses have created record numbers of jobs—1,000 a day and 2 million in total, and the highest rates that we have ever reached. Coupled with strongly rising wages, more hours on offer and low inflation, our policy is delivering security and prosperity for working households up and down the country. That is what the country deserves and that is what we are doing.
Helen Goodman (Bishop Auckland) (Lab)
Is the Minister aware of the fact that average incomes will reach their pre-recession point only in 2017, after seven years of this vile Tory Government?
Damian Hinds
As a matter of fact, living standards have this year reached beyond their pre-crisis point, or indeed any prior year.
We can make lasting economic reforms only because we have taken the tough decisions to get this country back on its feet after the financial crisis that crashed into Labour’s structural deficit, which was among the highest in the developed world. Some choose to indulge in a game of “What if we had unlimited money?” We face facts. In 2010, the Government inherited a deficit of £153 billion. That is almost £6,000 for every household in the country. Our budget deficit was 10.2% of GDP. For every £4 the Government were spending, £1 was borrowed. That could not be allowed to go on, because when Governments lose control of the national finances, those who lose the most are generally those who have the least.
Sir Edward Leigh (Gainsborough) (Con)
The Minister is making some excellent points and I fully support his desire to reduce the deficit and reform tax credit. This is a listening Government, so I just wonder whether, in the coming weeks as we consider the impact of the reform and in terms of compassion, it might be worth looking at tweaking the child tax credit—or the marriage allowance, which is very low—to try to soften the blow. I do not expect the Minister to answer now, but that is surely worth considering.
Damian Hinds
As I will come on to outline, the Government are doing a number of things that have some offset against what is happening on tax credits.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does the Minister not agree that the Opposition have completely ignored the background, which is that at the moment wages are rising at a rate of 3.5%? We are seeing wages rising. The policy is working and it would be wrong in those circumstances to continue to subsidise and act as a drag on wages by using tax credits in the way they have been used.
Damian Hinds
As a result of this Government’s strong economic management, we are indeed seeing strong wage growth coupled with strong employment growth. This is the right time to make lasting economic reform.
On the deficit, much progress has been made, but this year we are still having to borrow £3,300 for every household in the land. To tackle a deficit of that proportion requires all income groups to share the burden. I agree with the hon. Member for Feltham and Heston (Seema Malhotra) that it is right that those with the broadest shoulders should bear the most.
Dr Liam Fox (North Somerset) (Con)
To put this issue into context, will my hon. Friend confirm that the average taxpayer is paying £1,900 extra in tax this year just for the cost of Government debt interest? Is not the only way to reduce this debt tax on ordinary taxpayers to get rid of the deficit and pay down the debt, something which the Labour party seems incapable of grasping?
Damian Hinds
It is indeed an extraordinary amount. For every month we fail to deal with the deficit, not only would we be racking up more debts for all our children but we would be incurring greater interest charges in the here and now, which means money not spent on other essential services.
Lady Hermon (North Down) (Ind)
I am grateful to the Minister for giving way, although I am not quite sure he will be so grateful when he hears my question. I have to admit—in fact, I am embarrassed to say—that I voted with the Government on the cut to tax credits. I did so on the clear basis and understanding that there would be mitigation in the Chancellor’s autumn statement of the worst effects of the cuts to tax credits. The Minister cannot imagine my anger as I listened to his party’s conference, and the Prime Minister and the Chancellor ruled out any such mitigation. I will be voting with the Opposition this evening, unless the Minister tells this House today what mitigation the Chancellor will guarantee in his autumn statement. I give the Minister the opportunity to persuade me to change my mind.
Damian Hinds
The hon. Lady, who is a veteran and very experienced in the House, will know I cannot pre-empt anything in the Chancellor’s autumn statement on this or on any other subject. She was right to vote with the Government on the statutory instrument. As I will be outlining in my remarks today, this is a reform package of measures for working people. It is the right thing to do for the future of those families and the future of our country.
Frank Field (Birkenhead) (Lab)
Nobody expects the Minister to be able to provide an answer on what will be in the autumn—or November—statement, but can he confirm that the figures that the Prime Minister uses to say that eight out of 10 people will be better off as a result of the Government measures include all of us and large numbers of other people, while the two out of 10 who will not be better off are all those claiming tax credits? Will he confirm that when we go into the next general election all the current 3.2 million tax credit claimants will not be better off as a result of the measures he has announced?
Damian Hinds
I hesitate to use a double negative, but I cannot say they will not be better off. Many, many people will be better off. On the specific point of the eight in 10, that refers first to financial year 2017-18, and, as the right hon. Gentleman will know, to all working families. Obviously, the precise impact of the different measures—tax credits, national living wage, income tax personal allowance, childcare, social rents and all the other different elements—will vary with precise circumstances, but many, many families will be considerably better off. The hon. Member for Feltham and Heston herself was good enough to cite one such example of one particular type of family being £2,440 better off by 2020.
Several hon. Members rose—
Damian Hinds
I must make some progress.
The tax credit reforms are an important part of fiscal rebalancing, but they are only one part. On the same day that the tax credits lower threshold and higher taper rate take effect, we are reforming dividend tax and pensions relief for those on high incomes, and initiating a further clampdown on tax avoidance. Those are three measures among a set that also includes: the end of permanent non-dom status, restrictions on landlords’ tax relief and the continuation of a top rate of tax that is higher than it was in 4,718 of the 4,753 days the Labour party was in office. If we look at how the burden of deficit reduction is spread through society, the simple fact is this: the distribution of spending among income groups is constant between 2010 and 2017, while the burden of tax has shifted towards the best-off.
Graham Evans
Does my hon. Friend agree with the former Labour Chancellor of the Exchequer, Alistair Darling, who said that subsidising lower wages in the way that tax credits do was never, ever the intention?
Damian Hinds
My hon. Friend brings me on, quite handily, to my very next point. When tax credits first came in, their aim was entirely noble, but they quickly soared out of control. The total cost more than trebled between 1999 and 2010, ending up costing £30 billion in 2010. Scandalously, while spending spiralled under the previous Government, in-work poverty actually rose by 20%. Now, we can kick a problem down the road or we can do something about it. We chose to do something about it. Our reforms do not abolish tax credit or anything close.
Owen Smith (Pontypridd) (Lab)
Will the Minister confirm that the average tax credit bill to the Exchequer under Labour was £22 billion, whereas under the Conservative party, it has been £30 billion? So it has gone up on this Government’s watch.
Damian Hinds
I heard the hon. Gentleman make this extraordinary point on “Newsnight” last night. He talks about an average. If we have an upwards curve, and we draw a line through it, of course it is going to be lower in the middle than at the end. The point is the bill kept on rising—
Damian Hinds
Will the hon. Gentleman let me answer? The point is it kept on rising, with particular spikes just before 2003 and 2010.
Chris Philp
Does the Minister share my astonishment that despite being asked four or five times, his opposite number failed to say how the Opposition would fund this £4 billion? Does that not demonstrate that Labour cannot be trusted with our public finances?
Damian Hinds
I am afraid I could not put it better than my hon. Friend, and I will not try.
Under these reforms, fully half of families will still be eligible for tax credits, and the total cost will come down only to what it was as recently as 2008. They will focus support on the lowest incomes, while taking those on higher incomes off tax credits altogether.
Catherine West
How would the Minister, on behalf of a party that says it is on the side of working families, explain this change to the 2.7 million children affected? It is a disgrace.
Damian Hinds
Today’s bills will be paid at some point. We believe that the challenges for this generation should be dealt with by this generation, and we believe we need to get our finances under control and eliminate the deficit, and not just pass on the problem to our children and grandchildren.
Dawn Butler (Brent Central) (Lab)
Does the Minister think that the 1% pay cap on public sector workers contradicts the Government’s policy for a high-wage economy?
Damian Hinds
I do not deny that pay restraint in the public sector is difficult, but that 1% restraint has also protected 200,000 jobs in the public sector, which is an important aim. In addition, since 2007-08, pay in the public sector has risen faster than in the private.
Several hon. Members rose—
Damian Hinds
I keep saying I must make some progress. For the moment, I think I must mean it.
These reforms of tax credits go hand in hand with the new settlement for working Britain that my right hon. Friend the Chancellor set out in the last Budget. At the same time, we are introducing radical measures to put more cash where it belongs—in the pockets of hard-working people. Our increases to the tax-free personal allowance mean that a typical basic rate taxpayer—
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The Minister has just said he intends to make progress. Many people wish to make speeches today. If they continue to jump up and interrupt him and still wish to make a speech later, they will be disappointed.
Damian Hinds
I am grateful, Madam Deputy Speaker.
Our increases to the tax-free personal allowance mean that a typical basic rate taxpayer has seen their income tax bill cut by £825 since 2010. We are adding a further £80 next year and a further £40 the year after.
Kwasi Kwarteng
Will the Minister explain to the House how increasing the personal allowance has helped the very people the Labour party is claiming will be affected by this cut?
Damian Hinds
We believe in taking people out of tax, where possible, and enabling them to keep more of the money they have earned.
Naz Shah (Bradford West) (Lab)
In my constituency, more than 31,000 children will be affected by these tax credit changes. How many more children will the Minister’s cuts push into poverty?
Damian Hinds
We are making these necessary changes for the future of all sorts of families, but more than anybody for the sake of our children. The hon. Lady will know that the best way to address poverty is through work, and that is what we have been doing. She will also know the statistics—that where a child is in poverty and a parent moves into work, in 75% of cases they move out of poverty as a result, and that where a parent moves from part-time to full-time work, 75% of children also move out of poverty.
From next April, we will have the national living wage, which by 2020, when it will be worth more than £9 an hour, will mean over £5,000 more in gross full-time pay for someone on the minimum wage today.
Helen Whately (Faversham and Mid Kent) (Con)
Does my hon. Friend share my frustration that the Labour party does not seem to understand that tax credits involve the taxpayer subsidising businesses paying low wages, which has to change?
Damian Hinds
As always, my hon. Friend is correct, and she brings me on to my next point. Already, more than 200 firms, including some of our biggest employers, have announced they intend to pay staff at or above the national living wage before it comes into effect, which has helped to push private sector wage growth to 4.4%, according to latest figures, at a time of low or no inflation.
Then there are the wider things we have done on living costs. We have frozen council tax and fuel duty. On childcare, we have already introduced 15 hours for the 40% most disadvantaged two-year-olds, which is just through its first full year of operation and still ramping up. From 2017, there will be 30 hours for working families with three and four-year-olds, and just the additional 15 hours will be worth £2,500 per child per year.
Andrew Gwynne
The Minister can cut the waffle. To many of my constituents, this is a matter of trust. Why does he think the Prime Minister, on 30 April, toured the television studios and told an audience at “Question Time” that he would not cut tax credits? It was seven days before the general election. Does he think that had anything to do with it?
Damian Hinds
The statutory instrument does not affect the level of child tax credits. The hon. Gentleman, being a keen student of these matters, will know about the taper for tax credit awards and the stacking effect of the different elements, but the child tax credit, as the Prime Minister said, is not being changed.
Several hon. Members rose—
Damian Hinds
I am conscious of time and know that many people want to speak.
Perhaps most important is the wider effect of the national living wage. The independent Office for Budget Responsibility estimates that as the national living wage imposes upward pressure further up the scale, 6 million people will get a pay rise. That effect starts now, but it will continue rising right up to the end of the decade. We are not just talking about a lower welfare, lower tax, higher wage economy; we are seeing it happen.
Owen Smith
The Minister has made the point repeatedly that the new national minimum wage is meant to offset the reduction in tax credits. What proportion of those on tax credits are currently on the national minimum wage? I suspect I will not get the answer, so I will tell him. It is 25%.
Damian Hinds
The hon. Gentleman’s intervention is timely. Had he been listening—that might sound as I did not mean it to sound—he would have heard me talk about the wider effects of the national living wage. It affects not just people on the national minimum wage, but a much wider distribution. Most economists estimate that it would extend about 25% up the income scale.
Damian Hinds
It does answer the question. The hon. Gentleman was suggesting that this proportion would not benefit from a national living wage, which is incorrect. A lot of people who are not on today’s minimum wage will also benefit to a sum of about—[Interruption.] I am asked how many—the estimate is that about 6 million people will benefit directly or indirectly.
Mr Chuka Umunna (Streatham) (Lab)
Let me ask the Minister about the subsidy point. We can all agree on the context that we need to reconfigure our labour market. Almost 6 million people are not earning a wage that they can live on. Ultimately, yes, a subsidy going to employers is not desirable, but surely the issue here is the order in which we transform our economy. The fact is that through a properly prosecuted industrial strategy—something that we have obviously not seen in our steel industry—it is possible to reconfigure the labour market. That should come first—before taking away the tax credits and support from people who are not earning enough. Ultimately, that is the difference between the two sides.
Damian Hinds
The harsh reality that we face is that we have a budget deficit equivalent to £3,300 for every household in the country. We need to take firm action on that now. It is right, as I said earlier, that the burden is spread right throughout society, but it is also right to shift the burden towards the upper end, which is what has happened with the tax burden.
Andrew Percy (Brigg and Goole) (Con)
The Minister will know that many Conservative Members, including me, are concerned about these changes. I will not, however, vote with the Opposition because of the nature of the vote and its non-binding effect. However, further to the reference point—[Interruption.] If a few more Labour Members had turned up at the original vote, we might have won. Let me take the Minister back to the point made by the hon. Member for North Down (Lady Hermon). Will he confirm that the autumn statement offers the opportunity for the Government to mitigate some of these effects, whether it be through a change to the order or through other tax changes? Can he confirm to me and many others on the Government side who are concerned that the Treasury is looking at other things that can be done to help this group of people?
Damian Hinds
There are a number of mitigating elements involved in the package. We have been talking about the national living wage, and there are major—[Interruption.] These things are all new. There are major extensions to childcare provision. We have reductions in social rents, and increases in the income tax personal allowance.
Several hon. Members rose—
Damian Hinds
Before I conclude—I am very conscious of the time—I want to address a couple of points about poverty. The best route out of poverty is employment. We have created the conditions for the private sector to create record numbers of jobs—over 2 million since 2010. The best way to target in-work poverty is, first, by helping people move up the hours scale and, secondly, by increasing wages. We are seeing wages rise strongly, and we are seeing living standards rising by 3.1%, year on year.
Several hon. Members rose—
Damian Hinds
I am not giving way again, as many people want to speak and I am coming towards the end of my remarks.
The number of people in in-work poverty is 200,000 lower than it was at its peak in 2008-09. Let me remind Members of the surest way to create poverty and to dash the aspirations of working families up and down the country. It is to lose control of the public finances. We are making sure that that never happens again. We are driving down the deficit; we have set out the path towards surplus; and through our Charter for Budget Responsibility, we are making sure that we insulate ourselves against any future shocks the world economy might throw at us. We do all this while delivering a new settlement for working Britain—one where decent wages are not subsidised by the public purse, but met by employers; one that says to employers, “You can have very competitive tax, but you must pay your people properly”; one that allows hard-working people to keep more of the money they earn; and one that offers a way out of reliance on benefits and top-ups through work that pays.
Those have not been easy decisions to make, but we face a £3,300 per household deficit, and if we reduce the level of state support people are inevitably affected. But tough decisions become necessary decisions when we are working towards the most important and the most progressive goal of all—economic security for working Britain in an uncertain world. Our new settlement for working Britain is an integral part of that. We will continue down the path of economic security, stability and opportunity for working Britain.
Welfare Reform and Work Bill (Seventh sitting)
Damian Hinds Excerpts(8 years, 8 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Damian Hinds (East Hampshire) (Con)
The amendment seeks to delay the Government’s proposed changes to the family element of child tax credit until April 2022. The Government were elected on a mandate to reduce the deficit and restore order to our public finances. As part of the plan to get us into surplus and to continue the progress made in the previous Parliament, the Government have committed to making a further £12 billion of welfare savings.
To set the scene, the most recent statistics show that, in 2011, the level of UK expenditure on family benefits was the second highest out of the 34 countries in the OECD and almost double the average. Child tax credits are there, of course, to provide support to low-income families to help them with the costs of raising children.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister clarify those figures? Are they in terms of percentage of spend to GDP or absolute figures?
Damian Hinds
The OECD has done a survey based on percentage of spend to GDP. The hon. Lady has not asked this question but let me clarify further: it takes together family benefits, cash benefits, tax breaks and childcare. Of course, the mix is different in different countries. Nordic countries tend to spend more on direct childcare and Anglophone countries tend to spend less on that but put more into tax breaks. Our country has tended to spend a little bit more on cash benefits and on childcare.
As I said, child tax credits are there to provide support to low-income families to help them with the cost of raising children, but the system has grown unsustainably—a family with three children that earns up to almost £40,000 could still be eligible for some support. The previous Labour Government let public spending on tax credits rocket out of control so that, in 2010, nine out of 10 families with children were eligible for tax credits. That was not targeted support for low-income families.
Emily Thornberry
Does the Minister agree that we have in this country a unique system that in fact helped us to weather the international storm caused, not by Gordon Brown being at Lehman Brothers throwing dollar bills out the back window, but by an international financial crisis, and that we did not have higher levels of unemployment because measures such as in-work benefits meant that people could continue to work and employers did not feel the need to continue put up wages because they felt that it was easier to continue to employ people? Does he agree that in-work benefits have resulted in people remaining in work?
Damian Hinds
The hon. Lady tempts me into a wider debate about the deficit, which would be interesting to get into, particularly with some of the news this morning about her own party’s interesting deliberations on how the deficit should be dealt with. I do not think that anybody denies that there was an international financial crisis in 2007-08, but it is also true—I doubt that many people will deny it, though she may be one who does—that it came on top of a structural budget deficit that was out of control because we had spent too much and borrowed too much, even in the good years.
The Chair
It is interesting, but it is not strictly to do with amendment 44. I am sure the Minister is about to return directly to it.
Damian Hinds
I fell into the temptation of the wider debate, but I will now get away from it. However, the existence of the structural deficit and the continuing problems that we find ourselves in post 2007-08 are why we need to get our public finances back into order.
Nobody would deny the existence of automatic stabilisers, as the hon. Lady mentioned, but we need a welfare system, a benefits system and general public finances that are sustainable and fair to all people—those who pay in and those who are beneficiaries. Despite reforms in the previous Parliament reducing the number of families eligible for tax credits to six out of 10, the current level of spending on tax credits is unsustainable.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Will the Minister give way?
The Chair
Order. Interventions should be brief. I sounds like the hon. Gentleman perhaps missed his opportunity to make a speech in this debate. He has made his point, and I am sure that the Minister will give way for a further intervention if he wishes.
Damian Hinds
Thank you, Mr Streeter.
Let me be clear, lest there be any doubt, that this is not about limiting the number of children that people have. It is about financial support in the form of child tax credit. Child benefit, for example, will continue to go up in line with the number of children. The hon. Gentleman says, and he is right, that individual families are not responsible for the financial mess that our country found itself in as a result of the unholy combination of the financial crisis and the previous Labour Government. That is correct, but we do have a shared future, and it is the responsibility of a Government, on behalf of all their citizens, particularly the most disadvantaged and vulnerable, to make sure that we have sound finances, that we can continue to afford to pay for our public services, that we can continue to afford to invest in our national health service and that we can give people the support that they need.
Damian Hinds
I think I will have to move on a little.
Last year the Government spent almost £30 billion on tax credits—more than three and a half times what we spent on military personnel. That level of spending on tax credits is unfair on those who foot the bill, who are, of course, other taxpayers. That is why the Government took steps in the summer Budget to put tax credit spending on a more—[Interruption.] Does the hon. Member for Birmingham, Yardley want to intervene?
Jess Phillips (Birmingham, Yardley) (Lab)
Yes, I do; I just want to point out that people who are on tax credits are in work. They are taxpayers, and they are therefore paying that bill. The Minister should not pitch two sets of people against each other. He should recognise that people who get tax credits work.
Damian Hinds
I do not know whether the hon. Lady deliberately did not hear me say that. I did say that people who pay the tax credit uplift are other taxpayers. That is true. That is not pitching one person against another, it is just a statement of the reality, a statement of how the system works. That is why the Government took steps—[Interruption.] Does the hon. Lady want to intervene again? She keeps on speaking.
Jess Phillips
I am more than happy to do so. The Minister is being extremely divisive. What he actually said was that the person footing the bill was basically someone else. The Government are basically trying to make some people feel that they are being robbed for the sake of the poor. When I lived on tax credits, I worked probably about a 14-hour day. I will not have it said of people such as me and my hon. Friends that we were beholden to someone else. We were taxpayers.
Damian Hinds
I do not recall referring to the hon. Lady’s specific case or the case of anybody else on the Opposition Benches. Nor did I say that anybody should feel bad for supporting others, but there is a case for balance. It is just a statement of fact that, in any tax and benefits system, benefits paid to one group or person have to be paid for by others, and we have to make sure that that system is fair.
As the hon. Lady will recall, we had a great reforming Budget with a set of measures to move us from a low-wage, high-tax, high-welfare society to a lower-tax, higher-wage, less welfare-reliant society, including measures such as the national living wage, with which we seek permanently to reform the structure of the economy and the way the system works.
Damian Hinds
I will give way one last time to the hon. Lady, and then I must progress.
Hannah Bardell
On the point that the hon. Member for Islington South and Finsbury made about families in work who are on tax credits, the Institute for Fiscal Studies—which the Government have quoted on a number of occasions—has said that the increase in the minimum wage, which is not a true living wage, will not compensate for the cuts that are coming to tax credits, which will hit the poorest hardest and is a regressive policy. What does the Minister say to the IFS?
Damian Hinds
I say that these are major structural changes. I think you would admonish me, Mr Streeter, if I went too far down this road, because we had this debate on the Floor of the House and there will be other opportunities to discuss the matter.
We are talking about helping people through the national living wage and increases in the income tax personal allowance, but also through measures such as childcare support and, most important of all, the general strength of the economy. We see real wages rising very strongly at the moment, and we have very low inflation and very strong economic growth. Those are the things that most help families with their budgets and living standards.
In the summer Budget, the Government took steps to put tax credit spending on a more sustainable path, including by limiting the individual element of child tax credit to two children and by removing the family element of child tax credit for those who are not responsible for a child or qualifying young person before 6 April 2017. The average family size in this country has decreased over recent decades. The average number of dependent children in families in the UK in 2012 was 1.7.
Damian Hinds
I will not, if the hon. Lady will forgive me.
The Government believe that it is fair and proportionate to limit support through tax credits and universal credit to two children per family. The measures in clause 11 will ensure that there is greater fairness between those receiving benefits and those paying for them, and will ensure that, in the future, families in receipt of benefits face the same sorts of financial decisions when they consider having children as those supporting themselves solely through work. The Government decided to implement the measures from April 2017 to give families time to make decisions about having more children. That provides sufficient time for those considering whether to have more children to make plans, while at the same time putting tax credits on a more sustainable footing.
The hon. Member for Livingston quite rightly raised some of the difficult issues. We have already been clear about multiple births, and there will be more detail forthcoming on that. We will also have a chance discuss that in debates on further amendments. The Government have been absolutely clear that if parents have twins or triplets and previously there were fewer than two children in the household, that will be treated as a single birth. In the most difficult circumstance—a child conceived as a result of rape—it is right that the Government take a careful and sensitive approach to working out how best to deal with those circumstances and support women through that situation in relation to the tax credit system. There will be more detail in due course.
Hannah Bardell
Should the Government not have thought that through before they put the policy in place?
Damian Hinds
It is not at all uncommon for a Government to say that particular aspects of the implementation of a policy are delicate and sensitive and require careful thought with external stakeholders who are experts in the field. That is what will happen in this case. I do not feel the need to defend that. It is the right thing to do because there are people who have expertise, and it is absolutely right that they should have the opportunity to be consulted.
Damian Hinds
I will not, if the hon. Gentleman will forgive me.
The Government will continue to support larger families through child benefit, which is paid for all qualifying children in a household. There are 15 hours of childcare available to the 40% least advantaged families. Families will continue to receive 15 hours a week of free childcare for all three and four-year-olds, and the Government have announced that from September 2017 that will be extended to 30 hours for parents who are in work. I therefore urge the hon. Member for Livingston to withdraw the amendment.
Hannah Bardell
I will be brief, because I and my colleagues covered the points in our initial remarks. From what the Minister has said, it is clear that there was no consultation and consideration on the most serious parts of the Bill, including the issue of the third child and the matter of rape. We have no details, and many organisations have said that those provisions were a great surprise to them.
I cannot believe that a Government would be so insensitive as to put a clause such as this one in a Bill. On the day of the Budget, when the policy was announced and we saw it in black and white, it seemed like an afterthought. To treat people as an afterthought—particularly women who are vulnerable and who have been raped—is nothing short of a disgrace.
The IFS has been very clear that the Budget and these policies will hit the poorest in society hardest. In Scotland, the Daily Record recently reported that the
“poorest households could be more than £500 a year worse off in 2020 as a result of changes made in Chancellor George Osborne’s budget...800,000 households north of the border will have less cash as a result”,
and that the
“IPPR Scotland think-tank found there would be more winners than losers, with some 1.3 million households expected to be better off. But while the richest 20 per cent of households will gain £110 a year by...2020/21, the impact of tax and benefit changes on the poorest 20 per cent of households will see them lose an average of £520 a year.”
Getting our finances into a surplus cannot come at the cost of people’s lives, including children’s lives, and at the cost of making the poorest even poorer.
Question put, That the amendment be made.
Emily Thornberry
I should like to speak to new clauses 5 and 6 in particular, which are grouped with the amendments. New clause 5 would prevent the Secretary of State from limiting entitlement to housing benefit based on family size, and new clause 6 would do a similar job with universal credit. There is no mention in the Bill of limiting housing benefit on the basis of family size. That is odd. It is a radical proposal, it is pernicious, it needs scrutinising and it is not there, but we are told that it is coming. The Red Book mentions that there will be a limit on tax credits to a maximum of two children and then states, on page 38:
“An equivalent change will be made in Housing Benefit to ensure consistency between both benefits.”
It is coming—it is linked with the limits on tax credits—but the Government have not yet told us about it. We therefore want to pre-empt that and have a discussion now, putting in our new clauses.
Another removal of money from poor families is the getting rid of what is called the family premium. The premium is an acceptance that families are expensive and that a working family ought to have more of its income disregarded when assessing entitlement to housing benefit. On getting rid of the family premium, Shelter has said:
“Exploiting the complexity of housing benefit and tinkering with means tests and tapers is a clever ruse to extract savings from housing benefit in a technical way that doesn’t attract attention in the way that big, visible cuts like the bedroom tax did.”
Well, we have noticed.
If the Government get their way, they will be abolishing the family premium for housing benefit. That means that families—working families—will have £17.45 a week in earnings held against them when a decision is being made on whether they can get help with their housing costs. I do not know what the Government intend. Do they think that families are not expensive these days? Do they believe that the contribution of working families to the Osborne economic miracle by way of the cuts to tax credits is not enough, so the family premium ought to be cut as well? I would be grateful if the Minister enlightened us.
May I go back to limiting housing benefit to two children and how that will work? As I have said, the Government have stated their intention. I have a few questions because I do not understand it. Perhaps no such provision is included in the Bill because the policy has not been thought through yet. We might be being helpful to the Government if we raise some of the likely problems if they place a two-child limit on housing benefit. For example, will local authorities presented with a homeless family with four children be obliged to house them in housing that means that they are not statutorily overcrowded? If so, and the family is not working and the property is a local authority one, will anyone pay the rent? Will the Government pay rent only for two bedrooms and the other two bedrooms will not be paid? Or will the family be expected to pay the rent out of the child benefit?
The Minister repeated today that child benefit is not affected by the reforms, because the Government want to ensure a fair start in life for children in all families. That is certainly part of the Tory script at the moment, but it is not true—we have a script alert here for my hon. Friends. The irony is that there is an enormous difference between the level of support provided through child benefit, which is subject to a four-year freeze, and that provided by tax credits. For a third child, a family can claim £712.40 a year, compared with £2,780 in tax credits.
The Government say of such families, “Don’t worry, they are still getting child benefit. They’ll be fine.” They will not be fine. In particular, families will not be fine if there are no tax credits for the third child and housing benefit is being taken away. The Government are therefore presumably expecting parents to pay for their rent out of—I do not know—jobseeker’s allowance, child benefit or something. How will that work? Will people simply have to end up living in cars, because that must be what the Government’s policy is about?
How will the Government assess whether they are giving housing benefit to a family with only two children, as opposed to three? Would they expect families possibly to split up, so that two children live with a parent at one address and two with another parent at another address? Housing benefit for four children could be paid in that way. Or would that be wrong? Given that there is a housing crisis in London, I cannot see how that would work because there is not enough accommodation for all the families as it is. In my constituency, I have 19,000 families waiting for accommodation. If the Government are to restrict housing benefit for larger families, where will they go? I would be interested to hear from the Minister as to what might happen.
The Government have not put that measure in the Bill, which may be because they have not really worked out what they mean, how it will work and what the impact will be on homelessness and the number of people living in cars. If they have not worked that out, perhaps that is a good reason for them not putting it in the Bill yet. I applaud them for that. Of course, there is another possibility: they want to slip the provision into a statutory instrument. If they put it into a statutory instrument, they do not need to have any impact assessment—heaven forbid they have an equality impact assessment! We know they will not have an assessment, so we will not know how much money, if any, will be saved, who will be affected, how much more homelessness or how much more child poverty it will cause. That is why we want to have a debate now, so that the Government are given the opportunity to tell us their thoughts and enlighten us, and so that we can explain to them why that is one of the more horrible aspects of their so-called welfare reform and something that will have a devastating effect.
I should bring up another point—I forgot to raise it earlier and I apologise for the illogical order, but it is important. The Government have said that they will abolish the family premium a full year before the introduction of restrictions to child tax credit. I wonder why. Will the Minister say why they are doing that? They will restrict child tax credit but will take away the family premium a year early. The Government say that the measure will apply to new claims but have not made clear what it will mean in practice. For example, would a family moving into a new area, perhaps as a result of the Government’s welfare reforms, be treated as making a new claim if an existing housing benefit was simply transferred from one local authority to another? Will the Minister help us with that? The proposals to restrict entitlement to housing benefit are not included in the Bill and, as I have said, we have not had any details on how the restriction will work in practice. The Minister has quite a lot of explaining to do.
Entitlement to housing benefit is currently calculated on the basis of the number of rooms a family needs, as we know. Children under 10 are expected to share a room, for example, with a single mother. A single mother with four young children would be entitled to claim housing benefit for a three-bedroom property. Are the Government proposing that she should be entitled only to a two-bedroom property? Indeed, are the Government expecting to change the law on overcrowding in order to accommodate those larger families who do not have the money to pay rent on a decent-sized property? It would be very helpful to hear from the Government on those points.
Damian Hinds
The amendments serve a similar purpose: to increase, or indeed remove, the limit on the number of children or qualifying young people in respect of which a person is entitled to the individual element of child tax credit or the child element of universal credit, and to prevent limits being placed on the number of children for the purposes of calculating housing benefit or the housing costs element of universal credit.
I thank hon. Members for tabling the amendments. Despite the progress we have made towards reducing the deficit since 2010, we still ran a budget deficit of 4.9% last year and are expected to have the second highest deficit in the G7 in 2015. That is why it is important, indeed imperative, to get welfare spending under control, to help us get into surplus so that we can continue to increase our investment in our NHS, schools and pensions. As I have already mentioned, tax credit expenditure more than trebled in real terms between 1999 and 2010 and cost the taxpayer just under £30 billion last year.
Emily Thornberry
I wondered how much money the Government might save if they did not introduce their changes to inheritance tax?
Damian Hinds
Today’s debate is not about inheritance tax. If the hon. Lady is making a point about fairness in the tax system, that would be a fair question to ask. In fact, if we look at the overall package of what the Government have done in tax and spending since 2010, we see that the distribution of spending between different income groups and society has stayed pretty much the same.
Damian Hinds
Yes, indeed it has, and the incidence of taxation has shifted up the income scale so that the top fifth is now paying proportionately more than they were, and the top 1% who were paying 25% of income tax in 2010—[Interruption.] The Opposition can shake their heads all they like and say it is not proportionate, but it is proportionate. That is exactly the point. The top 1% who were already paying 25% income tax in 2010 are paying—
The Chair
Order. I think this could go on for a while, but I am afraid that it is not directly relevant to the amendment and the Minister’s response to the amendment. I should not have allowed the intervention to take the Minister down a different path. Let us continue with amendment 45.
Damian Hinds
The fault was all mine, Mr Streeter. I do not blame the hon. Lady and I apologise for my part in it. The last thing I was going to say was 27.5%.
The level of spending we have reached on tax credits—£30 billion—is unsustainable and carries a risk to our public services. That is why the Government have taken steps to ensure that the system is fair to those who pay for it as well as those who benefit from it. That is why the Government are limiting support to two children in child tax credit and universal credit from April 2017.
Amendments 45 to 48 and 50 to 54 would increase or remove the limit on the number of children or qualifying young people in respect of whom a person is entitled to the individual element of child tax credit or the child element of universal credit. If that policy were to protect six children in each household in terms of the payments or remove the limit completely, as suggested by SNP Members, there would be negligible savings from the measure and it would undermine our commitment to deficit reduction. It would also continue the unfairness that an out of work family with six children could receive over £17,000 per year in child tax credit in addition to other benefits if they are not subject to the benefit cap, while many working families would not see their budgets rise by anything like that when they have more children.
Damian Hinds
I am going to press on for the moment. The average number of children in families in the UK in 2012 was 1.7. The Government therefore think it is fair and proportionate to limit support through tax credits and universal credit to the payments for two children. To give families time to prepare, the change will not come into effect until April 2017. In child tax credit, the change will affect families who have a third or subsequent child born on or after 6 April 2017 only. In universal credit, the change applies to any third or subsequent children born, or joining the household, on or after 6 April 2017 and to families making a completely new claim to universal credit after that date.
Jess Phillips
I want some clarity on whether the measure relates to children born after that date or a new claim for a child after that date. What if my children were born in 2005 and 2010 and I do not currently need tax credits—who knows what the future will hold?—but need to claim them later? What if I need to go back on to tax credits after having a third child? Would my children count because they were born before or is it the claim that counts?
Damian Hinds
I believe we will have an opportunity at a subsequent stage to debate that point in detail in relation to a subsequent amendment, but I do not want to keep the hon. Lady waiting. To be clear in simple terms, the tax credit system is for new births after April 2017; universal credit is for new births and for new claims. Of course, universal credit is replacing the tax credit system. When we talk about new claims, that is with a gap of six months. It may apply to someone who has never been in that system before or in the predecessor tax credit system, or who has been out of both systems for a period of six months.
Damian Hinds
I do not want to pre-empt the more interesting discussion we may have later, but on the grounds that the intervention is relevant, as always, I give way.
Neil Coyle
As universal credit is rolled out, will the Minister provide families with a time machine so that they can go back and not have children?
Damian Hinds
I fear that that is another invitation to err from the path of the rightful debate.
On new clause 5, the intention seems to be to amend section 130A of the Social Security Contributions and Benefits Act 1992 to prevent the Secretary of State from making changes to housing benefit that would restrict the number of children who can be included in the housing benefit assessment. Housing benefit and the housing element in universal credit take into account the number of children for whom the claimant is responsible. There is no maximum number attached to that, and the Bill does not introduce one.
The only related changes to housing benefit, which will follow in regulations, are to ensure that a claimant’s housing benefit award is no higher than it would have been if the tax credit changes were not introduced. Obviously, without those changes, the tax credit change would have the unintended effect of awarding claimants with more than two children a higher amount of housing benefit, which would reduce the savings from the tax credit change.
Let me be absolutely clear, because the hon. Member for Islington South and Finsbury raised some very reasonable questions, which we need to address directly. As she knows, housing benefit is made up of a number of elements. That includes taking into account the number of children in calculating the family’s income. The family premium she mentioned is part of that calculation. The changes will affect the calculation of family income, but not the number of rooms allocated, which is a separate issue.
Emily Thornberry
I do not think that I have quite understood—it is my being slow, and I know he is trying to be helpful. The number of rooms allocated will be down to whether the local authority has accommodation available or access to private sector accommodation. It will also be a matter of need. However, the local authority will not be able to rent a larger property to a larger family if there is not enough housing benefit to cover that. What I really did not understand—I am so sorry, and I may understand it when it read it—is whether the Government will restrict housing benefit to larger families and say, “You may be a six-person family, but we are not going to give you enough money to rent a four-bedroom property”?
Damian Hinds
The change in the regulations will ensure that, for families with more than two children, housing benefit does not rise to offset the notional loss in tax credit or universal credit, because the amount saved in tax credit would then reappear in housing benefit.
Let me move on to new clause 6, which is related. The housing cost element in universal credit is an additional amount paid to a claimant to cover the costs of the accommodation they occupy as their home. The new clause seeks to amend section 11 of the Welfare Reform Act 2012 by making it clear that the Secretary of State will have no power to make regulations limiting the amount of the housing costs element based on the number of children living in the home.
In calculating the amount of a renter’s housing element under the universal credit regulations, a determination is, as the hon. Member for Islington South and Finsbury said, made as to the category of accommodation it is reasonable for the renter to occupy, having regard to the number of people in the household. Claimants in rented accommodation are currently entitled to one bedroom for each qualifying young person for whom they are responsible; one bedroom for two children who are under 10 years old; one bedroom for two children of the same sex; and one bedroom for any other child. Additional rooms are available in certain other circumstances. The Bill does not make changes to matters such as the number of rooms the claimant’s family is allowed as part of the local housing allowance or removal of the spare room subsidy.
It is right that families on benefits should in future face the same financial considerations when deciding whether to have more children as families who support themselves solely through work. I therefore urge hon. Members not to press the provisions.
Naz Shah (Bradford West) (Lab)
It is a great honour to serve under your chairmanship, Mr Streeter. I might just need the time machine we heard about. I have three children, but if I was not in a job in five years’ time, after the next election, my youngest child would not qualify for a bedroom. Which one would the Minister like me to put into care?
Damian Hinds
In future, a different system will be in operation. It limits the cash support through the tax credit system to two children. It will continue to include child benefit, and it will also include enhanced child care. For example, we will be moving to 30 hours of free childcare for all three and four-year-olds and there will be further improvements in universal credit.
Damian Hinds
I think the hon. Lady’s point was about her child. I do not think she meant it as a direct question. [Interruption.] I am trying to explain that there will be a limit to the amount of financial support coming through the tax credit system according to the number of children, but there will be other elements still in place, and enhanced elements in relation to childcare. There will also be a further increase in the income tax personal allowance and a major structural reform in the labour market so that the tax credit system does not top up low wages. People will be paid properly for the job that they do via the national living wage, and we estimate that 65% of people who benefit from the national living wage will be women.
Corri Wilson
In tabling our amendments, the SNP seeks to lessen hardship in families. We want families, no matter how many children they have, to be able to access the child tax credit and child element of universal credit to allow children to have the best possible start. Life is complex and not quite as black and white as the Bill suggests. When my children were at school, I was a single parent and I worked full time. I wanted to work, but, without the tax credits, I could not have afforded to. Please do not cut this lifeline for people in a similar position today. We will press amendments 45 and 50 to a vote.
Question put, That the amendment be made.
Emily Thornberry
The Minister says from a sedentary position that, in the 21st century, we should not pay attention to the Catholic view of contraception and decisions made within Catholic families. I am surprised. I say no more.
As I was saying, the Government have not provided details about what might be considered exceptional circumstances, so new clause 16 has suggested a few examples, such as multiple births, adoptions or kinship care arrangements. I recommend to the Minister an article in The Guardian today, written by Patrick Butler, about kinship adoption and related difficulties. One difficulty, among the many difficulties that people who put themselves forward to adopt children face, will be a potential cut in tax credits. If someone adopts a child who has a little brother, and the little brother then needs to go up for adoption, will that person say, “No, I can’t do it, because I can’t get the tax credits”? Are they really going to say that? Is that right? No, it is not, so will the Minister please do something about that, and will Government Members pay attention to our arguments and vote with us on new clause 16? It is entirely sensible and fleshes out the exceptional circumstances, which we think are glaring.
Those exceptional circumstances are: multiple births, adoptions, kinship care arrangements, relationship breakdowns, including, but not limited to, cases of domestic violence, and the death of a partner. The Minister says, “We are doing this in order to make sure that people make the correct choices.” I have spoken from my own personal circumstances. Frankly, my example is out of date, but unfortunately, in the last 40 or 50 years, these things have continued. People die unexpectedly and people leave unexpectedly. It is not as though someone can make a “bad choice”—in the Minister’s words—to have a third child and then take it back because their partner has died. That seems exceptionally harsh to us.
The new clause also proposes an exemption for those who become unemployed. The point here is to emphasise that, even if we accept the Government’s suggestion that families should make their family planning decisions based on the Government’s welfare reform legislation—that is a tall order in itself, although I suppose having to sit up and read the Government’s legislation on welfare reform might be some form of contraception—and even if the Government are right that people will realise welfare reform means it will be a bad idea for them to have a third child, people in work will not see that as relevant. They will make decisions because they can afford to have their children, but something may then happen, such as their becoming unemployed, and they will be hit that much harder. Therefore, even if the Government are right, which they are not, that people will make decisions on how big their family should be based on welfare reform, those people who are in work at the moment, making decisions frivolously to have four children, will find themselves in great difficulties if they suddenly become unemployed. That is unfair, as I am sure the Minister will recognise. We need to acknowledge the realities of life, particularly in the 21st century job market. People work in an insecure market. People can lose their jobs. Hopefully, they will get back into work, but it is unrealistic to expect parents to make decisions about their jobs and income with 100% certainty over an 18-year period. It is just not right. There are also abusive relationships. Women should not be expected to make decisions based on the possibility that they might become victims of domestic violence.
The new clause raises the serious issue of a couple’s penalty. Couples with more than two children will be given an incentive to separate just to continue receiving the support that they need to feed their children. That will happen. It is especially ironic that measures of child poverty are being replaced by measures of family breakdown, among other things. The Government are to measure child poverty on the basis of family breakdown, yet their social policy seems to pressure families into a form of breakdown so that they can continue to receive the benefits and tax credits that they need. The Tory party used to be the party of family and marriage. Why is its social policy dividing people? The irony is especially acute given the Secretary of State’s claim at the Conservative party conference that this Government’s reforms are
“all about making families stronger”.
Clearly, they are not.
Damian Hinds
I welcome the hon. Member for Oldham East and Saddleworth to her place in the Committee and, more broadly, to the Opposition Front Bench. She has a hard act to follow in the shape of the hon. Member for Stretford and Urmston, but I know that she will execute her work absolutely admirably in this Committee and beyond. She and the hon. Member for Islington South and Finsbury have spoken powerfully about the challenges faced by the parents of disabled children. I echo them in acknowledging the invaluable work that such parents and families do in difficult circumstances.
The Government are protecting benefits related to the additional costs of disability and care by exempting them from the freeze and from the cap that we discussed on another day. Those benefits include personal independence payments, disability living allowance and the support group component of employment and support allowance. Additionally, we will continue to increase those benefits by inflation. The Government are committed to supporting disabled children. We have reformed the special needs system to support children continuously from birth to the age of 25 and increased our spend on the main disability benefits by more than £2 billion over the course of the last Parliament. Overall, of course, we continue to spend about £50 billion on disability benefits and services each year.
My understanding is that amendments 83 and 84 would have the effect of removing households with one or more children with a disability from the two-child support limit policy in child tax credit and universal credit respectively. Thus, a family with five children, one of whom is disabled, would continue to receive child tax credit or universal credit in respect of all five children, as well as the appropriate disabled child element in child tax credit and the additional amount in universal credit. The Government think it right that, just as families who support themselves solely through work must weigh up financial considerations when deciding to have more children, families in receipt of benefits should face the same sorts of financial consideration. That should apply to all families.
In recognition of the costs of supporting disabled children, we will create a separate disability element of child tax credit that will be payable for all disabled children, regardless of whether they are the third or subsequent children or otherwise. We will continue to pay the relevant additional amount for disabled children in universal credit, regardless of whether those children are the third or subsequent children or otherwise.
The hon. Member for Bermondsey and Old Southwark rightly raised the subject of childcare. He will know that, in the tax-free childcare system that we are introducing, there is, quite rightly, a special addition to recognise the additional costs of childcare that pertain for children with a disability. In the overall offer of 15 hours and 30 hours of childcare there is, as he will know, rightly a statutory duty on local authorities to ensure proper provision for children with disabilities in the nurseries that their families trust.
Neil Coyle
The Minister mentioned universal credit. It sounds like that might be welcome. Will he update us on the roll-out of universal credit and identify where the overlap with the measure will not exist? There is a statutory responsibility on local authorities, but how will the Government ensure that families with disabled children who cannot access appropriate, accessible childcare are not penalised?
Damian Hinds
I do not dispute for a moment what the hon. Gentleman says. I agree with him entirely that we—the Government and Members of Parliament—must be vigilant in ensuring that families, including those with disabled children, have access to good childcare. It is a duty on local authorities but vigilance is always required to ensure that such measures are delivered. The hon. Gentleman asked about the roll-out of universal credit. I am not quite sure of the specific context in relation to the measures—I will just say that it is on track. It will be in every jobcentre by April 2016, with the bulk of migration complete by 2019.
New clause 16 seeks to specify exemptions to our proposals, including a new role for the Social Security Advisory Committee, and to establish an appeals process. The Government have already given a clear commitment that multiple births, for example twins or triplets, will be treated as a single birth with a child element for each sibling where there were previously fewer than two children in the household. We have also set out that there will be protections—we discussed this earlier—for women who have a third child as the result of rape. We will set out exemptions in regulations after discussions with stakeholders and careful consideration. Using regulations to set out exemptions provides the Government with greater flexibility to adjust exemptions in the future without needing to secure primary legislation. That is more appropriate because we may wish to act relatively quickly in the light of operational experience.
The Social Security Advisory Committee, as its name suggests, is a valuable body for advising the Government on our secondary legislation. It does not, however, have the remit to design legislation. That is the proper job of the Government and we consult with the committee as appropriate. Amendments 83 and 84 relate to the proposed exemption of households where any child or qualifying young person is disabled. I have responded on that issue.
Finally, the new clause requires the Secretary of State to set up an appeals structure. Social security and tax credits already have comprehensive appeals arrangements that will apply to any decisions made under the provisions in the Bill or exceptions set out in regulations. The provision is therefore not required. For the reasons I have set out, the new clause is not appropriate for inclusion in the Bill. We have recognised that there will be a need for some exemptions, for example in relation to multiple births, but those are much better dealt with in a considered way in collaboration with stakeholders through secondary legislation. I urge the hon. Member for Islington South and Finsbury to withdraw the amendment.
Emily Thornberry
I am very grateful to the Minister for the answers he has given but the reason for our view that the Social Security Advisory Committee should define the exceptional circumstances is that that decision should not be made by politicians. The Social Security Advisory Committee, which is an expert body on the matter, can look at exceptional circumstances. The Government may have come round to the idea of an exemption for multiple births—we are glad to hear that—but they will not necessarily have thought of all the exceptional circumstances, so an expert body, such as the Social Security Advisory Committee, is important.
We are always concerned about dealing with such matters in secondary legislation because the level of democratic accountability in secondary legislation is not the same as that in primary legislation. If the Bill had been thought through properly, it would not be for the Opposition to table such amendments—the Government would have thought through the most difficult effects of their policy and would have done all they could to counter them. It is our duty in Committee to point out such things. I hope the Government come back with amendments to the primary legislation so that it can be scrutinised properly rather than knocked off into the long grass. It is an important aspect. In such circumstances, we will press the amendment to a vote.
Emily Thornberry
I beg to move amendment 18, in clause 12, page 13, line 23, at end insert—
“unless this would result in an amount no longer being paid in respect of a child or young person who was born before 6 April 2017, in which case a payment shall still be made in respect of this child or young person.”
To ensure that the reduction of the child element of Universal Credit to two children only affect children born after 6 April 2017.
The point of the amendment, which largely echoes points made earlier, is that it is unrealistic and unfair to expect families to make long-term decisions based on the proposals in the Bill. Even if it were not, it would still be unfair to include families with children born before the policy was even announced, which is what the clause does. As far as I understand the clause—I would love to stand corrected if I have misinterpreted it—proposed new subsection (1A) in clause 12(2) makes it clear that, regardless of when a child was born, when universal credit is brought in people will be penalised. It is as if the policy is being sold as, “Let’s get people to make responsible decisions” and “This policy will make all the difference in terms of the decisions that people make”, but when universal credit finally comes over the sunlit mountains and changes our world it will not matter at what stage people have decided to have their children—“We will penalise you anyway.”
I do not want to reiterate the points that have already been made about the assumption that people will make decisions about their next 18 years based on Tory party policy, or how likely they are to know whether their partner is going to die or be abusive towards them in later years, but a particularly troublesome area of the Bill is that it would force women to stay with abusive partners. On the other hand, there is an equally perverse couples penalty that will provide a strong financial incentive for couples with more than two children to separate. The clause is particularly vicious in that it goes in the opposite direction from the Conservative party rhetoric that is used to justify this unfair piece of legislation, so that is why we tabled the amendment.
Damian Hinds
The amendment would see the policy that limits support to two children applied only to children born after April 2017, rather than also applying to entirely new claims for universal credit. The part of clause 12 that the amendment would change is primarily about fairness to the taxpayer and ensuring that where people can provide for themselves, they do so. We estimate that the amendment would increase universal credit expenditure by £245 million in 2019-20. We have committed to protecting universal credit claimants at the point of change and new claimants who have been in receipt of universal credit or tax credits in the previous six months. The policy will therefore apply only to claimants who have been supporting themselves entirely outside the benefits and tax credits system for more than six months and who will therefore not see a cash loss.
We also need to remember that child benefit will remain in payment for all eligible children, continuing to provide support beyond the child element of universal credit.
Emily Thornberry
Can I just rewind a little? New claims for universal credit will be affected by the two-child policy. When universal credit comes in, people will need to make a claim for it. If someone is on benefits or tax credits when universal credit is brought in, will there be a seamless transition whereby they will not be seen as a new claimant and not be adversely affected?
Damian Hinds
It is an untold pleasure to put the hon. Lady’s mind at rest. We are referring to entirely new claims and not to an existing recipient of tax credits for a third or subsequent child under either universal credit or the predecessor tax credits system. There is also the six-month window, so the Bill strikes the right balance between those needing support and the taxpayer.
Emily Thornberry
Why, then, is there a discrepancy between clause proposed new subsection (3A) in clause 11(4) and proposed new subsection (1A) in clause 12(2)? Clause 11(4) spells out that a qualifying young person is born on or after 6 April 2017, but clause 12 does not state a date of birth. That is the reason for the misunderstanding. I am glad to hear what the Minister says here in Committee, because that has some legal standing, but it would have been easier if it had been in the Bill.
Damian Hinds
I will have to ask for the hon. Lady’s forbearance and forgiveness for my lack of photographic memory of proposed new subsection (3A). However, I can reassure her that the point is about new claims or those with a gap of more than six months since receipt of either universal credit or the predecessor tax credits system. The Bill strikes the right balance between the support that people need and the taxpayer. I therefore urge the hon. Lady to withdraw the amendment.
Emily Thornberry
In those circumstances, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question put, That the clause stand part of the Bill.
Tax Credits
Damian Hinds Excerpts(8 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Damian Hinds)
I beg to move,
That the draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015, which were laid before this House on 7 September, be approved.
I confirm, as required, that the provisions before the House today are compatible with the European convention on human rights.
The aspects of tax credits we are voting on today are amendable by statutory instruments, as laid down in primary legislation in 2002 by the then Labour Government. These and other aspects of welfare reform have of course been debated at length in the Budget debate, as well as in departmental questions and elsewhere. The underlying issues will also be debated in the Welfare Reform and Work Bill. In a response to a request from the right hon. Member for Birkenhead (Frank Field), the Government have brought the vote on the statutory instrument measures to the Floor of the House to allow all hon. Members the opportunity to vote.
Damian Hinds
Allow me to make a wee bit of progress.
Reforming tax credits and other benefits forms the first of five pillars of the Government’s approach to supporting working Britain. The second is the increase in the personal tax allowance; the third is the national living wage, the fourth is the major extensions to child care provision; and fifth is the overall sound economic management that is delivering growth in the number and quality of jobs, earnings and living standards.
Stephen Timms (East Ham) (Lab)
A couple with two children, in which one works as a senior schools admission official earning £26,000 a year, will be more than £2,500 worse off next year because of the measure the Minister is proposing. Does he recognise that it will wreck the solvency of that working family? What does he think they should do?
Damian Hinds
It is important we see these changes in the overall context. I outlined some of the additional elements that are relevant. I certainly accept that they do not all come into play at exactly the same time, but in the course of time they do and by 2017-18 eight out of 10 households will be better off.
Lady Hermon
I am most grateful to the Minister for allowing me to intervene at this early stage. A number of my constituents in Northern Ireland feel extremely aggrieved about the change to the income thresholds for eligibility for tax credits. Before I could support the measure, I have to urge the Minister to give some guarantees on how the Government plan to mitigate its worst effects for families throughout the United Kingdom—not just in Northern Ireland.
Damian Hinds
I have been talking about some of the other elements, but these are matters on which the hon. Lady has a long track record of campaigning. Northern Ireland has a particular situation with regard to welfare reform and I hope all parties will come together to get through that. Discretionary payments are designed for housing issues in particular and were increased substantially in the summer Budget. It is possible that local authorities can use some of those funds to help out people who find themselves in particular difficulty, but I am of course very happy to meet her to go through this in more detail.
Mark Spencer (Sherwood) (Con)
How would families in my constituency be affected by a Government who went back to borrow and spend, who wrecked the economy, and who allowed unemployment to rise again? How would that affect the welfare of families working in Sherwood?
Damian Hinds
My hon. Friend is correct that everyone benefits from the economic security that comes from the country living within its means.
Damian Hinds
If Opposition Members will allow, I will take some time to set out the regulations.
The regulations make three changes to the tax credit system. First, they reduce the working tax credit threshold from £6,420 to £3,850 and the child tax credit threshold from £16,105 to £12,125. Secondly, they increase the taper rate from 41% to 48%, meaning that when a claimant’s earnings reach the new tax credit income threshold, their award will be gradually removed by 48p in the pound, rather than the current 41p, ensuring that state taxpayer help is focused on those who need it most. For recipients of housing benefit, the interaction between the two systems of support means the overall change in the withdrawal rate will be 2p, not 7p.
Thirdly, the regulations reduce the income rise disregard from £5,000 to £2,500, taking it back to its level between 2003 and 2006 and matching the rate of the income fall disregard. Following the introduction of real-time information, Her Majesty’s Revenue and Customs has much more up-to-date information on claimants’ earnings, so there is no good reason to have such a high disregard figure. These three changes form part of a wider set of welfare reforms, most of which are currently under consideration in the Welfare Reform and Work Bill.
Helen Goodman (Bishop Auckland) (Lab)
The Institute for Fiscal Studies, following a request from the Treasury Select Committee, sent us a new analysis showing that lone parents earning less than £20,000 will have marginal deduction rates of either over 90%, if they are on the old legacy system, or 75%, if they are on universal credit. How does the Minister square that with his claims at the Dispatch Box?
Damian Hinds
I am afraid that high marginal deduction rates have long been a feature of the social security and welfare system. As many Opposition Members know, universal credit will change that by making a substantive change in the withdrawal rates.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister knows that this is a serious matter, and Members on both sides are concerned about the work incentives and making sure we do not unfairly penalise people who want to get back into work. My hon. Friend the Member for Bishop Auckland (Helen Goodman) was right about the rapid increase in the marginal deduction rate to 93% from next April. He needs to address that specific point. How is it not a penalty to work?
Damian Hinds
For people in receipt of housing benefit, the change in the marginal withdrawal rate will be 2p in the pound. The changes do not reduce the incentive to work, and, as the hon. Gentleman knows, equally important are the incentive, ability and support to work more hours once in work and the fact that there are now more jobs offering more hours. Our reforms to childcare are another key part of our support for people who want to increase their hours.
The context to these changes is that, despite making great progress towards balancing the budget, we still ran a deficit of 4.9% last year and are expected to have the second-highest deficit in the G7 in 2015. We need to eliminate the deficit and start cutting the national debt in order to build up our resilience to global economic shocks.
Mr Alan Mak (Havant) (Con)
Will the Minister confirm that when tax credits were introduced, they cost the Government £1.1 billion a year and this year will cost £30 billion, which is unsustainable, and that these reforms are necessary to balance the country’s books?
Damian Hinds
My hon. Friend is right about the rapid escalation in the cost of tax credits—it trebled in real terms up to 2010—and that we are in the business of getting the country back into balance, because when we lose control of the economy, the people who lose out the most are those on the lowest incomes and in the toughest circumstances.
The burden of eliminating the deficit has meant a bigger tax contribution from those on higher incomes and now calls for further reductions in departmental spending while protecting our national health service. A further £5 billion comes from addressing tax imbalances and £12 billion from the welfare budget. That is the mandate on which we were elected. With near record employment, rising wages and stronger business confidence, now is the time to put the welfare system on a more sustainable, long-term footing, moving our country to a higher wage, lower tax, less welfare-reliant economy.
Alex Cunningham (Stockton North) (Lab)
I am grateful to the Minister. He talks about an environment in which wages are rising. Wages are rising in some areas, but public sector workers have seen a tremendous reduction in their income capacity, and many of them will be affected massively by what the Government want to do. The Government need to think more about public sector workers, whose wages are not going up.
Damian Hinds
The hon. Gentleman is absolutely right to note the hard work done by public sector employees. There are pay restraints going on in the public sector—I do not deny that for a moment—but wages are growing at 2.8% in real terms this year, which is pretty broadly based across the country, while output per head is growing more in the north than the south.
Damian Hinds
Time is short, so I am going to make some more progress.
For too long in this country—[Interruption.]
Damian Hinds
For too long, low pay has been addressed in this country not by genuine reform and driving productivity, but by subsidising it through the tax credit system. In the decade to 2010, tax credit expenditure more than trebled in real terms. The changes introduced in this order will build on the last Parliament’s reforms and return real-terms tax credit spending to its 2007-08 levels—a decade into the Labour party’s tenure in government. It is not a stand-alone measure, but part of what my right hon. Friend the Chancellor called a “new contract” with working Britain. It says to businesses, “You will have to pay higher wages, but you will get lower business taxes and a stable economy”; it says to people, “You can get higher pay and lower tax, but with less benefit top-up”; and it says to the country, “We are going to spend less and live within our means”. These regulations are an important part of that, and I commend them to the House.
Damian Hinds
With the leave of the House, I will respond briefly to some of the points made, particularly by the right hon. Member for Birkenhead (Frank Field). The Government do not recognise the £1,350 figure quoted, because it does not take account of the gains to households from the national living wage; the increased personal allowance; the fact that households in receipt of housing benefit will see some offsetting increase to their entitlement; or the improvements in childcare provision.
The hon. Member for Feltham and Heston (Seema Malhotra), whom I welcome to her place, said the Government had not published a distributional analysis, but we have, and it is available online. It shows that the distribution of public spending across the income quintiles was unchanged between 2010-11 and now and that those at the top of the income distribution are paying more. I urge hon. Members to evaluate these changes in their wider context and our record in government: helping businesses create 2 million extra jobs; lowering income tax for 29 million people; ruling out increases to income tax, VAT and national insurance contributions; extending free and subsidised childcare—we are soon to do much more; and of course ensuring that Britain gets a pay rise with a national living wage.
We must get Britain’s finances on a solid, sustainable footing, because the surest way to make working people worse off, as we sadly saw in the past, is to lose control of the public finances. Welfare spending needs to be reformed—for the benefit of those who pay for it, as well as those who use it. We are doing this as part of a package to move to a less welfare-reliant, lower-tax and higher-wage economy. I commend the regulations to the House.
One and a half hours having elapsed since the commencement of proceedings on the motion, the Speaker put the Question (Standing Order No. 16(1)).
Finance Bill
Damian Hinds Excerpts(8 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Temporary Chair (Mr George Howarth)
With this it will be convenient to discuss new clause 2—Report on the removal of the Climate Change Levy exemption—
“(1) No later than 6 months following the passing of this Act the Chancellor of the Exchequer shall publish a report into the effect of the removal of the Climate Change Levy exemption on renewable energy generators.
(2) That report must include information about:
(a) The effect that the removal of the exemption has had on existing generators
(b) The effect that the removal of the exemption has had on projects which were in the planning process
(c) The cumulative effect on investor confidence in renewable energy of this change in the context of wider government policy on renewable energy; and
(d) The effect of these changes on the United Kingdom’s ability to meet its climate change targets and commitments.”
The Exchequer Secretary to the Treasury (Damian Hinds)
Clause 45 ends the exemption—[Interruption.]
The Temporary Chair
Order. Will Members leaving the Chamber please do so quietly?
Damian Hinds
Thank you, Mr Howarth.
Clause 45 ends the exemption from the climate change levy for renewably sourced electricity. The CCL renewables exemption was misaligned with today’s energy policy and represented an inefficient way of supporting renewable electricity generation. In the past 15 years the UK’s renewable energy policy has fundamentally changed. When the renewable electricity exemption was introduced in 2001, renewable generation made up just 2.5% of the UK’s electricity supply; it now makes up around 20%. Since the exemption was introduced, more effective policies have been put in place which support renewable electricity generation directly.
In contrast, the CCL exemption provided indirect support to renewable generators. Together, policies such as the renewables obligation and feed-in tariff will provide over £5 billion-worth of support to renewable generation in this financial year.
Caroline Lucas (Brighton, Pavilion) (Green)
How can the Minister possibly justify this measure when the Government’s own impact assessment says that as a result of this measure the UK will be producing over 1 million more tonnes of CO2 every single year?
Damian Hinds
I can absolutely say how we justify this measure. As I have stated, there are now more effective and efficient direct methods of encouraging renewable generation than the CCL exemption. We have also seen a sharp decline in CCL revenue over the last Parliament. The forecasts from the independent Office for Budget Responsibility show that, without change, by 2020 virtually no CCL would have been paid on electricity at all. Removing the exemption helps maintain a price signal through the CCL for all business to use energy more efficiently. In addition, last year a third of its value went to renewable projects based overseas—projects which of course do not contribute to our climate change or international development commitments, making this a poor use of taxpayers’ money.
Clause 45 ends the existing exemption for renewable energy from the CCL. It applies to any renewable electricity generated after 31 July 2015, when it is supplied to businesses or the public sector under a renewable source contract. From 1 August we entered into a transitional period in which suppliers may claim a CCL exemption on any renewable electricity generated before that date. The Government are discussing the details of this transitional period with the affected suppliers, to determine an appropriate length for it. We intend to put the final transitional arrangements in place through legislation in the Finance Bill 2016.
Caroline Lucas
Will the Minister tell me what consultation he had with the solar industry in Britain before announcing the ongoing discussions that are now going to happen?
Damian Hinds
It was necessary, because of the imperative to deliver value for money, to move quickly on this change. The Government are committed to supporting the investment and innovation needed to achieve a cost-effective transition to a low-carbon economy while ensuring security of energy supply and avoiding unnecessary burdens on businesses and households. We are making great strides towards achieving those goals, with emissions down 30% since 1990. We will ensure that our policies provide maximum value for money for the taxpayer in delivering environmental benefits without harming the economy.
Several hon. Members have voiced their concern about the impact of the clause, and I want to take a moment to address those concerns. The change will not increase household energy bills, because the climate change levy is not charged on households. Business customers should not lose out from the change either. The business energy market is competitive and wholesale electricity prices will not be increased as a result. Energy-intensive businesses are already exempt from 90% of the costs of the climate change levy for electricity by being in climate change agreements. The change will also not affect renewable generators’ long-term investment plans. Most generators were expecting to receive a negligible value from the exemption by the 2020s.
Of course, the renewables sector will also benefit from Government’s recent cuts to corporation tax, which will save businesses over £10 billion a year, giving the UK the lowest rate of corporation tax in the G20. Lastly, the change will not affect the UK’s ability to meet its climate change goals, as emissions from electricity generation are capped through the EU emissions trading system. Nor will it affect our ability to source at least 30% of electricity demand from renewables by 2020. The Government remain committed to meeting their climate change objectives but we believe we must do so in a cost-effective way.
Christian Matheson (City of Chester) (Lab)
The Minister has outlined the various assessments that the Government have made, but have they assessed the effect of these measures on the industry itself, and on the many companies that have built successful businesses installing and manufacturing these products? Those companies have just had the rug pulled from under their feet by the Government’s measures.
Damian Hinds
It is a bigger rug than that. The climate change levy is only a relatively minor part of the support that was given to the industry, compared with the support given through the renewables obligation and through contracts for difference.
It is essential that we show that our measures to achieve climate change and renewables objectives provide good value for money, in order to retain long-term public support for them. I look forward to hearing hon. Members’ views and I urge them to give their support to the clause.
Caroline Lucas
I am grateful for this opportunity to contribute to the debate on this clause, which I believe should simply have been deleted. Ministers have failed to provide a robust or even remotely convincing justification for removing the renewables exemption to the climate change levy. This would be laughable if it were not so serious. The Chancellor has complained that this is all very fine because the UK now has
“a long-term framework for investment in renewable energy in place”.—[Official Report, 8 July 2015; Vol. 598, c. 331.]
If only that were the case! The reality is becoming increasingly distant from the rhetoric, especially now, after yet another wave of destruction has been unleashed by the Treasury on sensible and popular climate and clean energy policies.
The most outrageous of those policies is the proposal to cut support for rooftop solar by up to 87%. That risks making it impossible for my constituents and many others to afford solar panels for their homes, schools or community centres. Solar power can become subsidy-free, but not if Government cuts to support are wildly disproportionate to the admittedly impressive cost reductions that the industry has managed to achieve. And then there are the 35,000 people who work in the solar industry and who are facing a very uncertain future.
Clause 45 of the Finance Bill is one of several such senseless attacks on sustainable energy and climate policies. It will have negative impacts on existing and potential renewable energy developments, some of which are already being reported to have become unfeasible and which have now been cancelled. It will also have negative impacts on the overall investment climate for everyone from small community groups to multinational businesses, all of which are looking to put their money into clean power. This is the very last thing we need, for our economy, for our jobs and for tackling climate change, and it flies in the face of public opinion. New polling this month found, yet again, overwhelming support for renewables, including onshore wind and solar, with even greater levels of support for community energy generation. Some 78% would support local projects, even within 2 miles of their home. For all those reasons and more it seems intelligent to have an incentive, so that when a business or public sector organisation purchases clean renewable power, rather than dirty polluting power, it pays less tax.
Ministers claim that the change is intended to prevent taxpayers’ money from supporting renewable electricity generated overseas, but in reality ditching the renewable energy exemption is a completely disproportionate measure, which turns a policy designed to encourage low-carbon electricity into little more than an electricity tax for businesses. If a third of benefits do go overseas, that should surely still mean that two thirds support home-grown renewable power generation and jobs here in the UK. If Ministers really want to cut out overseas generators, they should therefore modify the policy to fix the anomaly at that rate. Did anyone ever even consult industry about what level of cut to make? We have already seen by the Minister’s inability to answer my question a few moments ago that there simply was no consultation with the industry in advance. Ditching this exemption completely is, as Friends of the Earth has said, like making people pay an alcohol tax on apple juice. It harms British renewable energy businesses and undermines efforts to tackle climate change. No wonder it has received widespread condemnation, on both environmental and economic grounds.
This is all happening less than three months before the crucial climate talks in Paris. Yet at that time we will hear the spin machine in the Department of Energy and Climate Change going into overdrive, coming out with all kinds of lovely rhetoric which is completely at odds with what the Government are doing on the ground with this measure. It is yet another example of the huge gulf between the rhetoric and the reality of the policy. When it comes to avoiding dangerous climate change, the shift to clean renewable energy is key. Phasing out fossil fuels and phasing in a 100%-clean agenda has to be at the top of the agenda. Yet, once again, the UK is going in the wrong direction, with generous tax breaks and taxpayer-funded propaganda propping up the fossil fuel companies, while the knife is being stuck into our own home-grown renewable energy sector.
Roger Mullin
It is also anti-consumer and anti-environmental. The Government have managed to accomplish a whole series of negatives in one simple move, and it will give me the greatest of pleasure to vote against this proposal.
Damian Hinds
The exemption from the climate change levy has been one part of the support the taxpayer provides to renewable energy; the total package of that support amounts to some £5.1 billon this financial year. The climate change levy exemption was an indirect incentive for renewable energy. There is no denying it has had some success in the past, but by the early 2020s the total amount of renewable energy supplied will be greater than the total demand for electricity from all climate change levy-eligible businesses. The value of the exemption for generators would therefore be negligible by the early 2020s. For that reason, it would not have been a major factor in the long-term decision making of generators.
There were four reasons for removing the exemption.
James Heappey (Wells) (Con)
I thank the Minister for his earlier remarks. Many people in Somerset have expressed their concerns about the direction the Government are taking on this, and my hon. Friend the Member for Somerton and Frome (David Warburton) and I would welcome the opportunity to meet the Minister at a convenient time to raise those concerns, discuss with him the concern in Somerset that this is perhaps a challenge to renewable energy generation in the county and assuage some of those concerns.
Damian Hinds
I hope I can put my hon. Friend’s mind at rest, to some degree, in the course of the next few minutes, but I will of course also be very happy to meet him and colleagues. I am always happy to meet colleagues to discuss these important matters.
There were four important reasons for ending the climate change levy exemption. The first was that it represented poor value for money, with one third of the benefit going to overseas operators—bringing no benefit to UK climate or renewables targets—and of course much of that generation will also have been receiving subsidy and incentive at home. The hon. Member for Wirral South (Alison McGovern) asked where these estimates come from, and I can tell her that they come from evidence provided to the Government by Ofgem—I am sure she will understand that the detail is commercially sensitive. The hon. Member for Brighton, Pavilion (Caroline Lucas) and my hon. Friend the Member for Brigg and Goole (Andrew Percy) pointed out that if one third of the value goes abroad, by definition two thirds stays at home. I cannot deny that that is mathematically correct, but of course that still represents a heavy leakage rate and it is the one third leakage that makes this exemption poor value for money. Just to be clear, EU law would not allow us to restrict the exemption or preferential treatment to the UK only. [Interruption.] I am sorry—I thought the hon. Member for Wirral South was trying to get in, but she wants me to move on to explain the second reason.
As I say, the exemption was an indirect incentive, and more efficient and effective policies have been put in place through the renewables obligation and contracts for difference schemes. They are worth more, they are direct and they are explicitly grandfathered, carrying more investor worth than a tax break. The third reason was the need to protect climate change levy revenue. The independent OBR forecasts show that without a change, climate change levy revenue would fall from £800 million to £200 million by 2020, and removing the exemption is worth some £3.9 billion over the course of this Parliament.
The fourth reason was to retain the incentive for energy efficiency across all energy use, while, as a side effect, simplifying the administration of the climate change levy, which will continue to add about 5% to 7% to business energy bills. Thus, we are encouraging energy efficiency.
Alison McGovern
I did want to intervene in the end. The Minister’s central argument seems to be this: this is not the best way to subsidise and, in any event, plenty of other support is available. Yet feed-in tariffs are under review and the Government are already legislating to undermine renewables obligations. We therefore just do not recognise this picture of “plenty more support available”. Will he confirm that the Government still plan to be the “greenest Government ever”? Is that a characterisation that he still sticks to?
Damian Hinds
In the first part of what the hon. Lady said she was pretty close to the mark. When I say that there is wider support available, I mean that the climate change levy exemption was worth up to £5.54 per megawatt hour, whereas the renewables obligation is worth £40 per megawatt hour, so relatively it is a much more significant financial effect.
New clause 2, which was tabled by the Opposition—[Interruption.] The Front-Bench Members seem unhappy.
Caroline Flint
I thank the hon. Gentleman for giving way. Can he confirm that the Government are currently consulting on scrapping the feed-in tariff and that they are legislating on cutting the renewables obligation on onshore wind? Will he also answer the question that has been raised about whether they looked into isolating the renewable energy that came through interconnectors to deal with the issue around value for money and whether that imported renewable energy was already benefiting from subsidies elsewhere?
Damian Hinds
On the right hon. Lady’s last point, that is not the only inefficiency in this scheme, as I was outlining earlier. She is correct about the consultations that are going on and about us fulfilling our manifesto commitment on onshore wind, but that does not mean that we will not continue to be absolutely committed to our environmental objectives. As I go through my remarks, I will talk some more about how we are on course to fulfil those objectives.
New clause 2 put forward by the Opposition would require the Chancellor, six months after the passing of the Finance Bill, to publish a report detailing the impacts of clause 45. Such a report is not necessary in that timeframe. The Chancellor has already presented a report to the Treasury Committee, which was published on 26 August.
I will take the opportunity to respond to some of the points that were made during the course of this debate. My hon. Friend the Member for Selby and Ainsty (Nigel Adams) spoke about Drax. He will understand that I cannot comment about that particular company because of the current judicial proceedings. He also spoke very passionately about his constituents in Eggborough, as did my hon. Friend the Member for Brigg and Goole. Clearly and obviously, it is a very disappointing decision for everybody connected with Eggborough and for those who now face much uncertainty. There is no easy thing to say to someone in that situation.
Importantly, the value provided by the climate change levy exemption was relatively minor when compared with the other elements of Government support that are available for renewable energy. Most generators were expecting the exemption to have a negligible value for them by 2020, so it would not typically be a large factor in their long-term investment decisions.
Nigel Adams
On that basis, will the Minister at least consider a delay until 2017 if the value is so low by 2020?
Damian Hinds
We are not in a position to be able to change the approach. My hon. Friend asks about the timing. The exemption would have cost around £40 million a month to maintain. Without our change, more than £150 million of support would have gone to overseas renewable generation in 2015-16, and that figure would have risen to £300 million by 2020-21. My hon. Friend asked why not follow the same timings as the exemptions for combined heat and power, but those are on a very different scale and the timing was in the context of the coming of the carbon price floor, which would support CHPs. As I said earlier, more efficient and effective schemes have come about to support renewables through the renewables obligation and contracts for difference.
The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) spoke about the particular impact of the measure in Scotland, but I can confirm that Scotland receives a high level of renewables support from the UK Government. In the first contracts for difference auctions, 11 out of the 25 contracts were awarded to Scottish projects, and 30% of the support provided by the renewables obligation is for schemes in Scotland. That support, as I have said, is much more significant than that offered by the CCL renewables exemption.
The hon. Member for Brighton, Pavilion asked about the Government’s green credentials, a point that came up again in an intervention. I repeat that the Government take our environmental responsibilities extremely seriously and we are absolutely committed to meeting our climate change commitments, but as cost-effectively as possible. We are making good progress, with emissions down 30% since 1990, and we are on track for 30% of electricity supply to be from renewables by 2020. At the same time, we want to help consumers, keep energy bills down and keep British business competitive. It is vital that we take careful account of the costs of our policies so that we are not imposing unnecessary burdens on households and businesses, making household bills unaffordable or putting the UK at a competitive disadvantage.
Caroline Lucas
The Minister has made the case that he wants to be able to reduce householders’ bills, so will he ring-fence the extra revenue generated by applying the climate change levy to renewables and put it into energy efficiency for some of the poorest households in this country?
Damian Hinds
I wish we were living in a world where money that was saved was suddenly free and available to be used to do things. As the hon. Lady knows, the Government have a whole range of programmes to support our objectives to tackle climate change and we will continue to do that.
I stress again that new clause 2 is not necessary. The impact of ending the exemption from the climate change levy for renewable electricity has been published by the Government. Clause 45 will not impact the UK’s ability to meet its climate change goals, will not affect renewable generators’ long-term investment plans and will not increase household energy bills, but it will provide better value for money for UK taxpayers. I commend the clause to the House and urge the Opposition not to press new clause 2.
Question put, That the clause stand part of the Bill.
Oral Answers to Questions
Damian Hinds Excerpts(8 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Teresa Pearce (Erith and Thamesmead) (Lab)
5. What estimate he has made of the number of people who will receive a net reduction in income as a result of the policies on tax credits announced in the summer Budget 2015.
The Exchequer Secretary to the Treasury (Damian Hinds)
The Government want to move from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, less welfare-reliant society. That means more emphasis on support to hard-working families on low incomes by reducing income tax, increasing the personal allowance, increasing wages and topping up low wages through tax credits.
Teresa Pearce
Many large, profit-making employers currently pay low wages and enjoy a state subsidy of their staff costs via the tax credit system. What ideas and options did the Treasury team consider for clawing back that subsidy from the employers before it decided to take it from the low paid?
Damian Hinds
The hon. Lady highlights an important point and agrees, I think, with the analysis of Alistair Darling who said that an unintended consequence of the tax credit system was that it would end up making that subsidy in this way. We are introducing the national living wage. For someone working full-time, that will be worth £5,200 more in cash terms by the end of the Parliament.
David T. C. Davies (Monmouth) (Con)
Does my hon. Friend agree that the number of people losing out will be vastly outweighed by that of those who will benefit from the higher minimum wage, the higher tax threshold, and the incentive to be out there looking for work?
Damian Hinds
I can confirm that, when we take the fiscal measures of the summer Budget altogether, eight out of 10 families will be better off.
Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)
The consequence of this Budget is that 1.8 million women in low-paid work across the UK will lose an average of just over £1,000 a year over the next five years. Cuts to child and working tax credits will hit 2.8 million women in total, two-thirds of those affected. Why is it that this Government’s policies are having a disproportionately negative impact on this country’s women?
Damian Hinds
I can confirm that Scotland has the second lowest rate of female unemployment in the European Union, and the second highest rate of female employment. Women will disproportionately benefit throughout the UK from rises in their personal allowance and the introduction of the national living wage.
Gareth Johnson (Dartford) (Con)
When tax credits were first introduced by Gordon Brown, he said that it would cost £2 billion a year. It is now costing £30 billion, which is twice the Home Office budget. Surely the prudent thing to do is to address that ballooning expenditure, which too often simply subsidises low-paying employers.
Damian Hinds
My hon. Friend is absolutely right to say that the cost of tax credits has ballooned. They had trebled in the 11 years to 2010. To get the country back into the black, it was absolutely necessary to take control of it, but doing so at the same time as taking these other key measures.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
Research from the House of Commons Library shows that the effect of the Chancellor’s decision to increase the tax credit taper from 41% to 48% is that workers earning above the income tax personal allowance threshold will face a marginal effective tax rate of 73% in 2015-16, which increases to a staggering 80% in 2016-17. How does the Minister reconcile the Chancellor’s rhetoric about standing up for workers with the reality of a marginal effective tax rate of 80%, which is a hefty work penalty by any measure?
Damian Hinds
The great reforming summer Budget is an integrated package of measures and people cannot just take one element alone. It includes the new national living wage, the increases in the personal allowance and a lot more support that the hon. Lady did not mention on childcare and on skills building. When all those things are taken together, it is a Budget in which the great majority of people will be better off and more are supported into work.
Shabana Mahmood
High tax rates are normally loathed by Conservative Members, but obviously not when they affect ordinary working people. The Chancellor has been busy trying to suggest that his national living wage will compensate for this work penalty, but he knows that the real living wage is calculated on the basis of a full take-up of tax credits—the very thing he has now cut. Is it not the case that, regardless of the rhetoric, all that this Budget has delivered for ordinary working people in our country is a hefty work penalty and a living wage con?
Damian Hinds
As the hon. Lady knows, the Budget contains a large number of measures to help hard-working families, including the rise in the personal allowance, allowing people to keep more of what they earn. Of course the big reform of universal credit is still to come, and it will further help on incentivising work. Throughout all this it is important to help to support people into work and to see them progressing through the hours, particularly through our increases in childcare support, which are worth thousands of pounds to some families.
Chris Philp (Croydon South) (Con)
Does my hon. Friend agree that working families will be enormously helped by the 30 hours per week of free childcare, which, speaking as a father of two-year-old twins, I particularly appreciate?
Damian Hinds
Indeed, families with twins will get double the benefit, but everybody with children aged three and four will get that particular benefit, which is part of a suite of increases in childcare support, including through universal credit and tax-free childcare.
Ms Margaret Ritchie (South Down) (SDLP)
6. What assessment he has made of the implications for his policy of the European Commission’s decision that part of an exemption from the aggregates levy constituted unlawful state aid; and if he will make a statement.
The Exchequer Secretary to the Treasury (Damian Hinds)
In March, a European Commission state aid investigation into the aggregates levy exemptions found almost all of them to be lawful. The Chancellor announced in his summer Budget that these lawful exemptions will be reinstated from August. However, the Commission decided that part of the exemption for shale aggregates provided unlawful state aid. Her Majesty’s Revenue and Customs is in contact with potentially affected businesses, and we will minimise the impact as far as possible.
Ms Ritchie
I thank the Exchequer Secretary for his answer. He will be aware that shale is fundamental to the quarrying industry in my constituency, so can he explain to the House: what persuasive case was made by the Treasury to the Commission in that regard?
Damian Hinds
I appreciate how important the shale industry is in County Down. Of course we are very disappointed that the Commission made this judgment on part of the shale exemption, having previously found all the exemptions to be legal in 2002. I say to the hon. Lady that if any businesses in her constituency have particular issues to raise, they should talk to HMRC, and it will continue to provide support through the staged payments of other taxes through the time to pay scheme.
David Rutley (Macclesfield) (Con)
7. What fiscal steps he is taking to support businesses.
Victoria Prentis (Banbury) (Con)
12. What assessment he has made of recent trends in the level of employment.
The Exchequer Secretary to the Treasury (Damian Hinds)
Employment stands at 31 million having increased by 265,000 over the past year, driven entirely by more people being in full-time work. We are now moving into the next phase of our recovery, with high-quality employment helping to boost productivity and raise living standards across the country.
Victoria Prentis
The security of a good job and a regular pay packet are of fundamental importance to people in my constituency. Can my hon. Friend assure us that he will keep backing business across the country to create more jobs?
Damian Hinds
I can. The Government’s long-term economic plan is working. Since 2010, we have seen the creation of 1,000 new jobs a day, but the job is not yet done. The Government will continue working through the plan to secure Britain’s economic future.
Andrew Gwynne (Denton and Reddish) (Lab)
The Minister will know that the OBR analysis shows that the number of high-skill jobs in the UK economy is shrinking at a time when the number of low-skill jobs is increasing. Is he proud of that record?
Damian Hinds
There has been a growth in the number of jobs in low and medium-skill sectors, and we should all welcome that. [Interruption.] I am sorry—I meant high and medium-skill sectors. The Government’s focus on the productivity plan is all about making sure that as we move into the next phase we are boosting those highest-value-added sectors.
Simon Hoare (North Dorset) (Con)
22. May I point out to the Minister that jobs in the agricultural, food production and dairy sector are of vital importance to my constituents in North Dorset? Will he ensure that the Treasury team do as much as they possibly can to support those vital sectors?
Damian Hinds
Indeed. The food sector, from farming through to retail and catering, is hugely important, contributing £103 billion to the economy and employing one in eight people. In fact, food and drink manufacturing is the UK’s largest manufacturing sector. We will absolutely continue to keep its importance, in Dorset and more widely, at the front of the plan.
George Kerevan (East Lothian) (SNP)
Perhaps the Minister has forgotten that unemployment in the UK rose in the three months to May—the first rise in two years—but actually fell in Scotland. Will he now go to Scotland to talk to the First Minister about her long-term plan for growth?
Damian Hinds
With the growth and employment levels that we have seen in Scotland, it becomes increasingly difficult every day for Scottish National party Members to continue to peddle their line, although I am sure they will. It is true that in the most recent short-term figures there was a slight adverse movement. As we move closer to full employment, we will not see the same large increases in employment every month, but year on year, as the hon. Gentleman will know, the position has improved.
Geraint Davies (Swansea West) (Lab/Co-op)
13. What assessment he has made of the likelihood of the Government meeting its 2020 export target.
Chris Green (Bolton West) (Con)
15. What comparative assessment he has made of the rates of wage growth and inflation.
The Exchequer Secretary to the Treasury (Damian Hinds)
The hard work on economic recovery is now paying off as people see their pay packets growing faster. The most recent data show real pay growing at 3.2%. Inflation is low: the price of fuels has fallen by 10.5% in the past year and the price of food by 2.2%.
Chris Green
As the MP for Bolton West, I strongly welcome the Government’s northern powerhouse plans to invest in transport infrastructure and in science and skills. What are the Government doing to ensure that Bolton West is increasingly attractive as a place for high-tech business to invest, so bringing in high-skilled jobs and higher wages for my constituents?
Damian Hinds
The Budget contained measures that will boost skills and support high-tech businesses across the north, including in my hon. Friend’s constituency. Greater Manchester local enterprise partnership is invited to bid in the new round of enterprise zones, there will be new regius professorships to support universities and there is an ambitious transport package that will provide much needed infrastructure for the north of England.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
T1. If he will make a statement on his departmental responsibilities.
Finance Bill
Damian Hinds Excerpts(8 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Damian Hinds)
It is a pleasure to close this wide-ranging and lively debate. The right hon. Member for Gordon (Alex Salmond) reminded us, in a timely intervention, that it could have gone to any hour, but in the event it was not to be. We were helped in our timeliness by the Labour party. It has only been a short week so far, but it has not been a great week for Labour unity. Nevertheless, it has discovered a new answer to the question of how not to show disunity, which is preferably not to show up at all.
This Government have set out a bold plan for the next stage of Britain’s economic recovery and this Finance Bill helps us to deliver it. The Bill will help move our economy from a low-wage, high-tax, high-welfare economy to a higher-wage, lower-tax, less welfare-reliant economy. It rewards work and ensures that hard-working families can keep more of the money they earn. It cuts taxes for businesses, helping them to create jobs and deliver the growth we need to secure the future prosperity of our nation. And it tackles avoidance.
Alex Salmond
Let us get to the nub of this. Is it not the case, confirmed by a number of analysts, that in every single constituency in this country, thousands of families with children will be worse off as a result of the Budget? What does he say to those low-paid families who will be substantially worse off as a result of this Budget?
Damian Hinds
What “he” says is that eight out of 10 families will be better off as a result of the blend—the complete set—of measures in the summer Budget.
Sir Edward Leigh
With regard to the point about removing tax credits to families with more than two children, I want to establish a principle which I think is quite important. Perhaps I should declare an interest: I have six children. I apologise for that. I just want to establish that the Government are not following the sort of liberal line that there is an ideal family—that a family of two children is more worthy than one of one or three or four or five. The Government are not approaching the subject from that viewpoint, are they? We can at least establish that principle, can we not?
Damian Hinds
I can confirm that absolutely. We have not managed six in my household but we do have three, and I, like my hon. Friend, do not think there is an ideal number of children to have in a family. I do not think it is for Government to say what that should be. But what we do say is that in making decisions about starting a family and about growing their family, people in different circumstances, whether they are supporting themselves entirely through employment or with the help of benefits, should have to make the same sorts of decisions.
Damian Hinds
I must make progress. I must respond to several points that were raised in the debate.
This Bill takes the next steps towards Britain’s sustained economic security, putting us on the right path towards meeting our ambition to be the most prosperous major economy in the world within a generation. As the hon. Member for Worsley and Eccles South (Barbara Keeley) pointed out, the Bill is not about everything that is in the Budget. The Finance Bill is limited in scope specifically to tax measures intended for general expenditure. The national living wage is not within its scope, but as the direct question came up of how the Government would bring it in, I confirm that we will be making regulations to introduce it for April 2016.
I want to respond to a number of other points. The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) suggested that changes to inheritance tax were only to protect the rich. As a result of rising house prices, inheritance tax increasingly hits people with normal family homes and, without action, the number of estates facing an IHT bill was forecast to double from about 35,000 in 2014-15 to 63,000 in 2021. As he will know, there are provisions such that it is clawed back from the very largest estates so that the wealthiest people do not in fact benefit.
The hon. Gentleman, the hon. Member for Hornsey and Wood Green (Catherine West) and others mentioned the so-called Mayfair loophole and the treatment of carried interest. Carried interest is treated as a capital gain in the UK, as in most other jurisdictions, because it is not exactly the same as a salary; it reflects the return to the manager in terms of some of the investment risk that they have undertaken. That is aligned to the tax treatment applied to other investors.
The hon. Member for Kirkcaldy and Cowdenbeath spoke powerfully about the vital and sometimes dangerous work done by the emergency services in Scotland, as did the hon. Member for Edinburgh East (Tommy Sheppard), and asked about VAT treatment. The discontinuation of local funding for police and fire and rescue services in Scotland was a decision by the Scottish Government, not the UK Government. The Scottish Government were explicitly advised of the VAT consequences of that reorganisation. Because these bodies are no longer funded through local taxation, the rationale for providing exemption under section 33 of the Value Added Tax Act 1994 does not apply.
The hon. Member for East Antrim (Sammy Wilson), apart from his very engaging mini-debate with the hon. Member for Brighton, Pavilion (Caroline Lucas), asked about take-up of the employment allowance in Northern Ireland. It has been taken up by 27,000 businesses—an 84% take-up rate, which is a wee bit below the UK average, but fairly close to it. Of course, we must continue to draw attention to its benefits.
The hon. Member for Hornsey and Wood Green rightly talked about the vital role of childcare in enabling productivity gains. She mentioned particularly the importance of enabling mums to return to the workplace sooner if they so wish. I am sure that she will therefore welcome our increasing the facility for three and four-year-olds to 30 hours.
The hon. Member for East Lothian (George Kerevan) talked about the productivity problem. I am sure he would not suggest that it is a new problem, but if he had, it would have been misleading, as it has been around for a long time. I make no apology for the fact that in 2010, facing the economic crisis that we did, the very top priority of the incoming Government was to keep people in work. The success of that approach has been reflected in the 2 million jobs created over the past five years.
The hon. Members for Foyle (Mark Durkan) and for East Antrim asked about what would happen with vehicle excise duty in Northern Ireland. Devolved Administrations will of course continue to get funding for roads through the Barnett formula, and they could establish a specific fund for their roads if they chose.
We heard a number of other excellent speeches. My hon. Friend the Member for Lewes (Maria Caulfield) reminded us of the context of the deficit. My hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer) said that it was easy to come up with reasons for not doing things now but that now is the right time to get on with these important measures. She and my hon. Friend the Member for Dudley South (Mike Wood) talked about the importance of businesses in creating jobs, and welcomed the apprenticeships levy.
Fairness was at the fore of the debate a number of times. My hon. Friend the Member for Charnwood (Edward Argar) put it very well when he said that we believe in a low-tax economy in which everyone pays their fair share. He is correct that our plans include improved tax recovery. It is partly because of that that we can ensure that everyone, especially the low-paid, can keep more of what they earn, as my hon. Friend the Member for Bexhill and Battle (Huw Merriman) noted.
Indeed, we have always believed that working people should be free to keep more of the money they earn. That is one of the most powerful incentives to aspiration. During the last Parliament, we increased the personal allowance from the £6,475 we inherited to £10,600. Clauses 5 and 6 will increase the personal allowance to £11,000 in 2016-17 and to £11,200 in 2017-18, and increase the higher rate threshold to £43,000 and to £43,600 respectively. As a result, nearly 600,000 more individuals will be taken out of income tax by 2016-17. These are important steps towards the Government’s ambition to increase the personal allowance to £12,500 by the end of the Parliament. We will ensure that, when that is achieved, the personal allowance will be uprated in line with the national minimum wage so that no one working 30 hours on the national minimum wage will pay income tax.
Damian Hinds
I had better continue, as I still have several of points to which I need to respond.
The Finance Bill provides further certainty for the people of this country by legislating for the income tax and VAT elements of the tax lock in clauses 1 and 2, which delivers our manifesto commitment to rule out in law any increases in the main rates of income tax, VAT or national insurance for the duration of this Parliament.
Finally, the Finance Bill recognises and rewards the natural aspiration to own your own home not just as a place to live, but as a piece of security, an asset to invest in through your working life, to take with you into retirement and one day to be able to pass on to your children.
Barbara Keeley
I am glad that the Minister has managed to spare some time out of the 90 or so minutes that remain. I raised the issue of the care cap, to which he has not responded at all. It will cost £1 billion to bring in the nil-rate band on inheritance tax. The Minister talked about childcare, but he has not touched on that particular point. [Interruption.]
Barbara Keeley
Will the Minister respond to the point I raised: is it reasonable to spend £1 billion so that people can pass on the value of their homes while others—people with dementia and other long-term conditions—can lose everything they have and all the value of their home through paying down care costs?
Damian Hinds
The hon. Lady will know that we still intend to bring forward the cap. It has had to be delayed, but we intend to do it during this Parliament. The Budget delivers for all the people of this country, including those who work hard, save hard and want to be able to pass on an asset to their children. In the Bill, we introduce a new £175,000 per person transferable allowance when a person’s home is passed on at death to their children or grandchildren. With the allowance, married couples and civil partners can now pass on an estate worth up to £1 million before having to pay any inheritance tax.
Damian Hinds
I will not give way, if the hon. Gentleman will forgive me.
Productive businesses are the fundamental drivers of national growth. Back in 2010, our corporation tax rate was 28%. Over the course of the last Parliament, we reduced it to its current level of 20%, the joint lowest in the G20. We are reaping the rewards of that, with the UK growing faster than any other G7 economy in 2014. Now we will go further. Clause 7 cuts the rate to 19% in 2017 and to 18% in 2020. The cuts will save businesses a further £6.6 billion by 2021. In addition, clause 8 sets a new permanent level for the annual investment allowance. At £200,000, it is the highest ever permanent level.
We need to invest more in our roads, because their quality has fallen behind as a result of decades of under-investment. That is why we have the reform of vehicle excise duty, which supports the creation of a new roads fund and puts vehicle excise duty revenues on a long-term, sustainable footing.
To respond to the hon. Member for Brighton, Pavilion, the incentives will still be there to purchase lower-carbon vehicles in the first year rates. We know from research that people focus on the first year rate in particular when buying a car. We will do that while dealing with the unfairness that my hon. Friend the Member for Lewes rightly identified, whereby people driving a second-hand car can pay a lot more than those who can afford to buy a new model every couple of years.
It is right that banks make a fair contribution to the public finances that reflects the risk that they pose to the UK economy. That is why we introduced the bank levy in the last Parliament. The additional contribution needs to be balanced with consideration for the UK’s global competitiveness. Therefore, we are legislating for a package of measures that includes making sure that banks cannot profit from the fines they incur and the supplementary rate of tax. I reassure hon. Members about the impact on smaller challenger banks, which we greatly support. The way in which the charge is structured will ensure that they are not adversely or unduly affected.
This is an ambitious Finance Bill for an ambitious nation. It rewards work and investment, provides certainty and security for families and businesses, delivers significant tax reform, helps our economy to be even more competitive internationally, and ensures that the burden of fiscal consolidation is distributed fairly. The Finance Bill marks the next step forward in our long-term economic plan and I commend it to the House.
Question put, That the amendment be made.
Relief Deeds
Damian Hinds Excerpts(8 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Damian Hinds)
At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represent a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.
Since October 2013, the Government have entered into 72 decommissioning relief deeds. Oil & Gas UK estimates that these deeds have so far unlocked more than £3.5 billion of capital, which can now be invested elsewhere.
The Government committed to report to Parliament every year on progress with the deeds. The report for financial year 2014-15 is provided below.
1. The number of decommissioning relief agreements entered into: the Government entered into 16 decommissioning relief agreements in 2014-15.
2. The total number of decommissioning relief agreements in force at the end of that year: 66 decommissioning relief agreements were in force at the end of the year.
3. The number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: no payments were made under any decommissioning relief agreements in 2014-15.
4. The total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: no payments had been made under any decommissioning relief agreement as at the end of the 2014-15 financial year.
5. An estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. The Government will recognise a provision of £230 million in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations. The date of recognition is dependent on the date of default, however our current planning assumptions assume the amount will be included in HM Treasury’s 2015-16 accounts.
[HCWS162]
Rent-to-own Sector
Damian Hinds Excerpts(8 years, 11 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Exchequer Secretary to the Treasury (Damian Hinds)
It is a great pleasure to see you in the Chair, Mr Hollobone; I think it is the first time I have served under your chairmanship in this way.
I start by congratulating my actual and honourable Friend the Member for Blackpool North and Cleveleys (Paul Maynard) on bringing this important subject to Westminster Hall. I also thank Mr Speaker for granting time for the debate. It has been good to hear from all the other contributors to the debate. There was the hon. Member for Ross, Skye and Lochaber (Ian Blackford), representing the SNP, and the hon. Member for Strangford (Jim Shannon)—the renaissance man of the 2010 generation in respect of the breadth of subjects on which he contributes in this place; he should be much congratulated on that.
It is always a joy to hear from the shadow Front Bencher, the hon. Member for Walthamstow (Stella Creasy), and I pay particular tribute to the hon. Member for Makerfield (Yvonne Fovargue), who brings a great deal of personal experience to these subjects from her time with Citizens Advice. She has been a great campaigner on fee charging, debt management companies and other aspects of the broader sector.
My hon. Friend the Member for Blackpool North and Cleveleys spoke powerfully and persuasively about the market—not only through personal stories, anecdotes and his experiences with his constituents, but far more broadly. He raised a number of very important points on disclosure, affordability, comparability, repossession, debt advice and financial management. Others have also touched on those subjects; I hope to cover most of them during my remarks and come to some others at the end.
On my hon. Friend’s point about meetings, the Government are always open to hearing from him and other colleagues who have special knowledge and interest in this area, because we have a shared objective to minimise consumer detriment and generally make the market work better.
The Government are committed to supporting hard-working people to be financially independent and resilient, and to save for unexpected events and for the future. Financial matters, as we all know, can be daunting, and making a poorly informed or sometimes just bad financial decision can have far-reaching consequences over a long period. The Government have taken a number of significant steps to improve the consumer credit market and ensure better outcomes for consumers. As well as fundamental reform of the regulatory framework, there is now, as we have heard, a cap on the cost of payday loans to help protect consumers from harm.
Crucially, the Government are also committed to ensuring that consumers are given the education that they need to make better informed financial decisions. Financial education is now on the national curriculum—something that I know a number of hon. Members campaigned for over an extended period. Pupils now learn about the importance of budgeting, sound management of money, credit and debt, as well as how to understand different financial services and products. It is really important in financial education to understand the principles behind these things and not just the products that might currently be on the market. If we had learned about the financial services products on the market when we were all at school, that would have been of absolutely zero relevance to the world we find ourselves in today: we have to learn about the principles of sound personal financial management and budgeting.
The Government are committed to providing sustainable financial services that give customers greater choice in accessing credit. With greater choice comes greater competition, and from greater competition should come—and generally comes—better outcomes for consumers. For example, the Government have already introduced several initiatives to support the credit union sector, including the credit union expansion project—up to £38 million—and the raising of the maximum interest rate from April 2014, which makes it that bit more possible for the credit union sector to compete in higher-cost, higher-customer-risk markets. That will help to allow consumers access to more alternative forms of consumer credit. For example, a consumer may now use a credit union for a loan to buy a household product, rather than go directly to a rent-to-own store.
That said, as my hon. Friend and, I think, the hon. Member for Walthamstow acknowledged, the rent-to-own sector is an important and legitimate part of the consumer credit landscape, allowing people to purchase essential items that they would otherwise have difficulty in finding the lump sum to buy. However, it is important that consumers who use rent-to-own agreements are protected appropriately from harm and adverse outcomes. There are times when unexpected, one-off expenses mean that consumers require access to credit—that happens throughout the income scale in different ways—either to fund shortfalls in income or to replace essential goods. Rent-to-own agreements allow payments to be spread over a long period, which is valuable for some customers on low incomes who do not have access to more mainstream forms of credit such as credit cards or overdrafts, and who lack the savings to be able to purchase household goods up front.
To help deliver the Government’s vision for a well functioning and sustainable consumer credit market that is able to meet consumers’ needs, the Government have fundamentally reformed regulation of the consumer credit market. That has created a new, more robust regulatory system and transferred regulatory responsibility from the Office of Fair Trading to the Financial Conduct Authority on 1 April last year. The new regime has been designed to strike the right balance between proportionality and consumer protection. The Government have ensured that the FCA has the robust powers that it needs to protect consumers. It will thoroughly assess every firm’s fitness to trade as part of the authorisation process and has put in place binding standards on firms. It proactively monitors the market, focusing on the areas most likely to cause consumer harm, and it has a broad enforcement toolkit to punish breaches of its rules. There is no limit on the fines that it can levy and, crucially, it can force firms to provide redress to consumers.
In the evidence session for the all-party debt and personal finance group’s inquiry into the rent-to-own sector, the FCA expressed concern about firms in the market. It stated—this quote was used earlier—that practices in the sector “rang alarm bells”. For that reason, it has brought forward the authorisation period for these firms to this summer. Rent-to-own firms that wish to obtain authorisation needed to apply by 30 June. That will ensure that any firms that do not reach the rigorous standards required are not able to continue in business and that poor standards start to be driven out of the market.
With regard to the price of credit, the Government believe that consumers should be protected from unfair costs and charges in the market. The Government showed their commitment by legislating to require the FCA to introduce a cap on the cost of payday loans, which came into force on 2 January 2015. The Government were clear that an interest rate cap or a cap that covered only some of the fees and charges that payday lenders may impose would be ineffective; I remember discussing some of the finer points of that sentence at some length with the hon. Member for Walthamstow. The FCA therefore designed a cap to include all fees and charges that may be incurred in relation to a payday loan, including arrangement fees and default penalties.
The Government legislated to give the FCA the power to cap the cost of all forms of credit. They have placed a duty on the FCA to use that power to impose a cap on the cost of payday loans because of the clear evidence of consumer detriment in that sector. The objective was to target payday lenders. However, the FCA retains the power to cap the cost of all forms of credit if it thinks that that is necessary to protect consumers, and it has said that it will keep the issue of capping the cost of credit in other markets under review.
Stella Creasy
Can the Minister set out for us, then, what evidence he would look for in order to introduce a cap on the charges that the rent-to-own sector may impose? I wonder whether he has a note that will help him to explain what levels of detriment, of costs, would have to apply. Some of us may argue that the cap on the payday lending industry is a little high at the moment, but it could be brought down. The Minister makes the point about a test. What tests would he set?
Damian Hinds
The test would be to appoint a regulator that we believe in and give it the tools to be able to make the decisions—give it the enforcement powers and the analytical capability—rather than, as a Government, meddling in the individual decisions on the details of the regulation. Appointing a regulator is historically how we have done things in this country, not just in this market but in others. It does not always please everyone all the time. Sometimes, people may feel that things should move more quickly or more slowly or be somewhat different, but in general it is a good way to protect consumers.
If at some point we think that the regulatory system in toto is not working, we change the regulatory system, but I do not think that it is right for Government necessarily to have a prescriptive answer to every subsection of the market; as the hon. Member for Walthamstow rightly said, this market, in its broader form, has a remarkable ability to shape-shift. If we go very specifically after one part of it and try to change one specific practice, we will find that something else changes somewhere else that we did not know about. That is why it is important to have this broad regulatory framework that includes high-level principles of fairness to the consumer, with the regulator stepping in to license and delicense operators when it feels that that is necessary.
Stella Creasy
Obviously, the Minister will be conscious that doing nothing has consequences, too; we have seen that in relation to all the people we have been talking about today, who have been ripped off by these companies. The Minister will also be aware that, on payday lending, the Government did not accept the argument that he is putting forward—that the Government should not intervene and set a cap—and did recognise the need to set a series of tests. Opposition Members would be incredibly sympathetic if he wanted to break his vow of libertarian conservatism and say, “Actually, there is a need to intervene because we see this predatory behaviour in this industry.” I want to press him. Is he saying that he would be opposed to learning the lessons from payday lending and to the Government’s stepping in and introducing proposals for a cap on the rent-to-own sector, despite the consequences of doing nothing, which we are seeing now?
Damian Hinds
The hon. Lady, although passionate, is not right when she says, “The Government did specifically this.” The Government put a duty on the FCA with regard to that part of the market. They also, at the same time, gave a power to the FCA to do something in parallel, in other parts of the broader consumer credit market, if it deemed that necessary.
Ultimately, individual organisations make their own commercial decisions on prices, interest rates and default fees for their products. However, the Government believe that it is in the interest of lenders to consider the impact on their customers and, of course, to treat them fairly.
On the affordability of credit, rent-to-own firms must fulfil a number of requirements. When the responsibility for regulating consumer credit transferred from the OFT to the FCA, the FCA turned key elements of the OFT’s irresponsible lending guidance into binding rules. Those are enforceable with the full range of FCA enforcement powers. They set out that a firm should assess the customer’s creditworthiness, having particular regard to the potential for the commitments to impact adversely on the consumer’s financial situation and taking into account information that the firm is or ought reasonably to be aware of at the time and the consumer’s ability to make repayments as they fall due. The FCA’s rules are aimed at strengthening consumer protection and are based on the simple principle that money should be lent only to a person who can afford to repay it. Firms are also provided with greater clarity on what is expected of them and the sanctions if they lend irresponsibly.
Rent-to-own firms, like all consumer credit businesses, are required to make affordability checks for consumers taking out an agreement. The FCA makes it clear that a firm should lend responsibly and should take reasonable steps to assess the customer’s ability to make repayments in a sustainable manner, without undue difficulties and without having to borrow further. Ultimately, credit should be extended to a consumer only if they can afford it. The extent and scope of affordability checks are determined by a number of factors, which include, as well as the financial position of the customer, their vulnerability and in particular whether the firm understands that the customer has some form of mental capacity limitation or reasonably suspects that to be so. Some of the casework examples given by my hon. Friend the Member for Blackpool North and Cleveleys throw that requirement into sharp relief. In addition to that, on 23 February 2015 the FCA published a paper on consumer vulnerability and a practitioners’ pack to assist firms in addressing the needs of customers in vulnerable circumstances.
Some concern has been expressed that rent-to-own agreements are not always adequately explained to consumers before they enter into them. That point was made from the Opposition Benches. The FCA requires firms to provide adequate pre-contractual explanations to enable consumers to assess whether the proposed credit agreement suits their needs and financial situation. Consumers can compare the cash price quoted in the pre-contractual information with the price of equivalent goods elsewhere to decide on the best deal. That ensures that consumers have the ability to make the financial decision that best suits their needs.
The Government are aware that consumers are sometimes required to take out insurance and service deals when entering into a rent-to-own agreement and that that could cause consumer detriment. Although there is concern that those deals raise the total cost of an agreement, the Government have ensured that where insurance is required as a condition of credit, the cost of the insurance must be factored into the APR, so that consumers can make a comparison on the basis of total costs and make informed decisions about the agreement that they are entering into. Furthermore, when firms sell insurance products, they must do so in line with the FCA’s requirements about assessing consumers’ eligibility to claim on a product.
The reforms made to consumer regulation by the Government and the FCA have given consumers new protections, and the regulatory framework means that consumers will continue to be protected in the future. It is important that avenues of credit remain open to those who need them, while consumers are protected from harmful practices.
Stella Creasy
I have asked the Minister about the Consumer Rights Act 2015 and the commitments given to hon. Members by BIS Ministers that these practices—the selling of warranties and insurance products—would be covered by consumer rights legislation. The things that he is saying do not quite match what those Ministers said. Can he clarify whether he has spoken to the Ministers in BIS about the Consumer Rights Act and its role in tackling the bundling up and selling of insurance products and warranties, and will he commit to raising that issue with the consumer rights implementation group? If nothing else, he could get that group to look at whether being required to buy an additional product when someone simply wants to buy the original product breaches basic consumer rights.
Damian Hinds
I will have to write to the hon. Lady about the details of the regulation on bundling. In general, price bundling in markets is not illegal, but on the specifics of this market I will have to get back to her.
The Government have set up the Money Advice Service, which provides a single point of debt advice for consumers and allows those who face problems with debt to obtain free and impartial money advice. This year, MAS will spend £47 million on debt advice, delivering through its third sector partners an increase of almost £9 million on the previous year.
It is important to take a joined-up approach to the provision of free debt advice. Following the independent review of MAS, the Government welcomed the creation of a debt advice steering group, which will help to improve the effectiveness and efficiency of free debt advice provision by bringing together senior representatives of the debt advice charities, high street banks, water and energy bodies and devolved organisations.
Yvonne Fovargue
I welcome the fact that there will be a body, but is it not appropriate to get local authorities involved as well, because they quite often fund free debt advice in their areas? I also feel that the Local Government Association needs to be involved in the body.
Damian Hinds
The steering group will be an open forum to involve all relevant and interested parties, and I take on board the point that the hon. Lady makes. I wanted to come back to a point that she raised earlier, which my hon. Friend the Member for Blackpool North and Cleveleys also mentioned: where the consumer stands in relation to part-paid goods. The Consumer Credit Act 1974 states that in a hire purchase agreement, a court order is required to repossess goods if a third of the total cost has been repaid. Furthermore, where 50% of the total price has been repaid, a consumer can return a product without penalty and the agreement will finish.
Stella Creasy
One thing that we see with such companies is that they move the goalposts with consumers. First, they do not tell consumers that a court order is required to repossess goods. Secondly, the amount that constitutes 50% moves, because of some of the charges applied. Will the Minister commit to reviewing that area? As he says, consumer protection exists, but because companies change how they lend to people, consumer rights are not being upheld.
Damian Hinds
The hon. Lady raises an important point. It is one thing to have rights, but another to know what they are. That is not restricted to the rent-to-own sector or to consumer credit, and organisations such as Citizens Advice have an important role to play in making that plain. It is an important part of disclosure for firms to make that known. The regulatory regime and enforcement are designed to provide confidence that that is happening in reality.
That brings me to my more general concluding point. We are in a new era, with a new framework. I pay tribute to Martin Wheatley and the FCA for the speed at which they have introduced a more positive framework. Many of us have taken an interest in consumer credit issues and detriments in the market over several years, and the FCA framework now contains a lot of what people have asked for. In addition, I pay tribute to hon. Members from all parts of the House who have taken a constant interest in the subject and kept it at the forefront of public policy debate.
None of the issues that we have talked about today is new. The leading home credit provider first came into being in Victorian times, catalogue lending has been with us for as long as anybody here can remember and rent-to-own shops existed long before 2010. Moreover, the market can and does change; we talked earlier about its ability to shape-shift. The Government have adopted a proportionate approach to the market. The hon. Lady suggested that I might have felt constrained by being in coalition between 2010 and 2015. I wonder what constrained her, or her colleagues in the Labour party, for the 13 years before 2010, when they did not do all the things that she is now demanding from the Government of today.
More broadly, I think that the approach has to be a judicious combination of financial education, sensible regulation and ensuring that alternatives are available. In all three of those areas during the past five years there has been a significant shift, with the inclusion of financial education on the national curriculum, the new FCA framework, Government support for the credit union sector and the accompanying regulatory change.
Rent-to-own is an important part of the consumer credit market. My hon. Friend the Member for Blackpool North and Cleveleys is absolutely right to keep our focus on it, and we will continue the dialogue.