Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015

Debate between Earl Howe and Baroness Kramer

Monday 26th October 2015 Lords Chamber

[Earl Howe]

Well, it is an important point to factor in because the creation of and rises in the national living wage will affect not just those on tax credits, but many millions of others paid above that level, in the so-called ripple effect that has been widely discussed.

[Baroness Kramer]

My Lords, for clarification, will the Minister focus on the two out of 10 whom he says are losers and tell us how many people those are? How many children are in those families and what is their loss likely to be? We are talking about something close on 1 million people, largely families with children. I think that he will be able to confirm that they are in the lowest deciles of the population in terms of poverty.

[Earl Howe]

Let me address that. It has been said by some noble Lords, and the noble Baroness’s question implies it, that the brunt of these savings will be borne by those on tax credits who are relatively worse off. That is not the case. The 10% of tax credit claimants on the highest incomes—incidentally, those on £42,000 on average—contribute nearly four times as much to the savings that we are proposing as the poorest claimants. That is an important point to factor in. The problem with talking about those at the lower end of the scale is that everyone’s circumstances are different. Some people have children and some do not. Some have a disability and some do not. Some work shorter hours, some work longer hours. It is very difficult to particularise.

I can say that the cut in public spending that we propose through this regulation is one that will take us back not to some far-distant point in the past, but to the levels of spending seen in 2007-08 before the financial crash. I am talking of course about the spending position in its totality. One cannot particularise, as I said, to an individual case because people’s circumstances will be different.