Oral Answers to Questions

Debate between Damian Hinds and Shabana Mahmood

Tuesday 21st July 2015 Commons Chamber

[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.