Tax Credits

Drew Hendry Excerpts

Thursday 29th October 2015 Commons Chamber

[Mr Davis]

I shall not go too far down that road. Let me simply say that middle-class pensioners are now paying one of the highest effective income tax rates in the country. People who have saved a lot for their pensions and gone above the lifetime allowance must pay 55%. I think we ought to be a bit careful, because if we let the Treasury get at that deferred income, it will take as much as it can.

The third option, which I think is probably the winner—although not by itself; it would have to be modified—is to stage the cuts. I believe that the right hon. Member for Birkenhead lit upon this strategy as well. The cuts would be staged to match movements in the minimum wage and the living wage so that people would not lose.

The Government’s figures for 2020 seem broadly to balance, although they are not perfect. We shall have to work through the mitigation carefully, and that is where the impact statement comes in. Those figures do two things. They protect the working poor, but they also achieve the deficit reduction, which is vital. If we hit the deficit reduction target by 2020—this point was made by my hon. Friend the Member for Stevenage (Stephen McPartland)—each saving of £4 billion a year is not critical. It represents less than 1% of the economy. The really critical issue is how the financial markets see the position. The financial markets do not care about the trajectory from here to 2020; the fact that we get there is good enough. We do not need to worry about the £4 billion a year in between, but we do need to worry about the final outcome. My argument, therefore, is that we should cut the tax credits in step with the minimum wage and the living wage.

The criterion is what is important here. The criterion that the Government must meet is that there should be no losses for the least well off in any of the three intervening years. The poorest, the working poor and their dependants cannot afford to lose one pound. I was never a great fan of the minimum wage, but I was persuaded that it was worthwhile.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Will the right hon. Gentleman give way?

[Mr Davis]

I am afraid not. I have already taken two interventions, and if I take another, I shall lose time.

One of the things that persuaded me that the minimum wage was worth while was the information in social data that it cut crime. We must not lose sight of the social impact of changes such as this: the distress caused to families, the breaking up of families, and the pushing of families towards food banks and, worse, towards loan sharks and petty crime. We have to think about those things, because there is a cost to them as well.

The Institute for Fiscal Studies told the Work and Pensions Committee, which is chaired by the right hon. Member for Birkenhead, that the Government could hit the 2020 target on a staged route. That is what we should aim for. We can achieve the fiscal target, while still remaining faithful to Conservative “one nation” aims. That, after all, has been the leitmotiv of the last few months for us. If we do that, the Chancellor will have good reason to be proud of his achievement.

--- Later in debate ---

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

The hon. Member for East Antrim (Sammy Wilson) was right to talk about the rush to get involved in a policy. It is a pleasure to be in the Chamber today for that rarest of treats, where we all furiously agree on the right thing to do, which is to make a radical change to the approach. It is like seeing people who have been slumbering at the back of the bus awakening to see that the driver is about to drive them straight into a lorry that is coming the other way. The tone of the contributions has been terrific, and it is worth repeating as it is so rare in this environment. I was cynical and sceptical before I was elected, but it is great to be in the Chamber for this debate.

Let us talk about the basics. A lot has been said today that makes sense. We all know that there must be a change, as the policy means that more families will be driven below the poverty line and more children will be in poverty. There is a clear dawning of awareness that the minimum wage—what Government Members are calling the living wage, which it clearly is not—will not bridge the gap. It especially is not going to bridge the gap that will be created for people under the age of 25, who will not have the comfort of getting even the diminished living wage or minimum wage that is coming in, because it will not apply to them.

The right hon. Member for Haltemprice and Howden (Mr Davis) talked about the minimum wage cutting crime, and my hon. Friend the Member for Dumfries and Galloway (Richard Arkless) spoke about the effect of it on changing people’s circumstances. If we create a bigger division in earnings between young people and those over the age of 25, we may well find there is a problem. We should be aware of that. I do not believe that the outcomes that will be created by the Government’s policy have been taken into account by certain Members in this House.

The Office for National Statistics has provided the Scottish Government today with figures that show that in Scotland 250,000 families will lose £1,500 a year right away. As we heard earlier, that rises to £3,000 when the measures are fully implemented. The Centre for Social Justice already puts household debt in the UK at £34 billion. That devastating cocktail is a possible outcome if we do not make a change to the policy.

When families are put under pressure, the effects can be devastating, with overwhelming stress affecting mental health and work performance. We should be aware of the impact on productivity further down the line. The strain on personal relationships resulting from the measure could provide some of the stepping stones for more children going into care and so on. We will see the effects of these measures when they hit people. None of us will have to stare into an empty cupboard. None of us will sit in the cold in our own homes because we have no choice. None of us, as a result of the Government’s measures, will look at a pile of bills, afraid to open them.

My constituency of Inverness, Nairn, Badenoch and Strathspey has a unique problem of being a low-wage, low-unemployment community. Perhaps that is not unique, but it is a particular problem for us. In my constituency, 7,100 children will be pushed further into poverty. Low wages, coupled with the increased cost of living, will push 210,000 children in Scotland into poverty. In the highlands we have had a drain of young people over the decades. We have encouraged people to stay and to have larger families, yet the two-children cap is going to punish highland families disproportionately. I know that will affect other constituencies in exactly the same way, so our big family tradition is being attacked. We heard China mentioned earlier. This is an effect almost amounting to population control for us.

The limit to two children will cost £7.2 million, the removal of the family element £4.02 million, and the taper increase £7.77 million. We heard from my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) about a range of measures that could be taken to put some money back into the system. It does not all have to come from the welfare budget. That is an ideological approach. We can make sure that we are not wasting money where we do not have to waste it.

It is an obscenity—it has to be repeated—an obscenity to seriously consider spending £167 billion on weapons of mass destruction that we can never use because if we do, what follows is mutually assured destruction. It is mad to consider using them.

[Mr MacNeil]

My hon. Friend hits on an interesting point about the waste of money on the weapons of mass destruction programme of the British Government. They wrap themselves up in patriotism and speak of great Britain. The patriotism is never ending, but the sad fact is that we are dealing here with a time when all Britons cannot live greatly. Some Britons will be in terrible poverty, but the Government’s patriotism goes only to weapons of mass destruction. O that their patriotism would reach the people and the poor of the country as well!

[Drew Hendry]

I could not agree more. When we look at the choices that we are asked to make in this place—this was mentioned earlier—we see that the effect will be on people further down the line. That kind of nonsensical excess, when we are talking about people looking into empty cupboards or sitting in the cold, is simply obscene.

I am grateful that the motion in the House of Lords on Monday night has allowed us to have this debate, but it only delays the measures—one swallow does not make a summer. If we want savings that can make a difference, and if we want a better system of democracy in this country, we must get rid of the other place. We should not have an inflated second Chamber, with people claiming £300 a day while other people are having their benefits and tax credits cut.

[Mr MacNeil]

I am grateful to my hon. Friend, who is being generous in giving way. Was he as surprised as I was to learn from a Twitter feed that seven Labour peers—perhaps at one time there were signs of socialism in their lives—voted with the Tories for these obscene welfare measures?

[Drew Hendry]

That was incredible, and it is worth repeating that fact in this House today.

There are lots of measures that the UK Government could take. They do not have to continue down this ideological path by squeezing the money out of the people who can least afford to pay it in order to ensure that other people enjoy the finery that they have had over many years. The words that have been spoken across the House today have been worth listening to. I hope that the Minister will take into account the thoughts he has heard expressed across the House, including from his Back Benches, and persuade the Chancellor to come back with something that is radically different and that supports the people in our constituencies who will otherwise be badly affected if this is not changed dramatically.