Tax Credits
Debate between Greg Hands and Jess Phillips(9 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Greg Hands)
We have had a heated debate, with a great deal of misinformation from Opposition Members. Time is very short.
There are two principal reasons for reforming tax credits. First, they no longer meet the objectives for which they were originally designed. Secondly, they are unaffordable at their present level.
Greg Hands
I will not be giving way for a while.
Tax credits were introduced to help those on the very lowest incomes—a noble aim and one that we support—but the system spiralled out of control. Spending on tax credits more than trebled in real terms under Labour. By 2010, nine in 10 families with children, including MPs, were eligible for tax credits. Even now, the figure is six in 10, and the latest reforms will bring it down to five in 10.
It is not even as if Labour’s spending worked: following the introduction of tax credits, in-work poverty rose by some 20%. Members need not take just my word for that; I am going to quote in detail Alistair Darling, who has been referred to this evening and who was one of my predecessors as Chief Secretary at a time when the modern tax credit system was being planned. He was interviewed this summer for an article in The Spectator entitled, “Alistair Darling: why I changed my mind on tax credits”. Crucially, it appeared after the summer Budget introduced by the Chancellor. The Spectator asked him:
“So your tax credits had the unintended consequence of keeping low wages down?”
“Undoubtedly,” replied Darling. The last Labour Chancellor said:
“Well, undoubtedly… I think it was a good policy when it was introduced”.
He went on:
“As Keynes famously said: when the facts change, you change your mind.”
Greg Hands
I can confirm that we have got down the cost per household of the budget deficit from about £6,000 per household per annum to about £3,500 per household per annum. Those sort of figures show what reforms we are introducing.
Greg Hands
I will not give way at the moment.
Alistair Darling went on:
“One of the unintended consequences is that we are now subsidising lower wages in a way that was never intended.”
Like us, he was not calling for the end of tax credits. He made it clear:
“That is not an argument for scrapping tax credits, it is an argument for making sure that you adjust the system. And it’s also an argument for making sure that we do our level best to drive up those levels of wages”.
We recognise that as well.
The second reason is that the deficit the Government inherited in 2010 was equivalent to about £6,000 for every household in the country. That was being added to the national debt every year. It is now down to £3,300 per annum. Then, we were borrowing £1 for every £4 we spent. We have got that down to £1 for every £10. The world was beginning to doubt our ability to pay our way.