Tax Credits (Working Families)

Harry Harpham Excerpts

Tuesday 7th July 2015 Commons Chamber

[Harry Harpham (Sheffield, Brightside and Hillsborough) (Lab)]

Thousands of families in my constituency will go to bed tonight with a sense of foreboding. They are waiting for an axe to fall that will take a chunk out of their weekly budget, but they do not know where or when it will fall. I do not expect the Government to spell that out chapter and verse before the emergency Budget tomorrow, but my constituents and people across the country deserve better than the Prime Minister’s and the Chancellor’s media-teasing statements about merry-go-rounds.

Tomorrow, the Chancellor will announce a series of deep cuts to working-age benefits. We know that tax credits will, in one way or another, be reduced significantly. For many of my constituents who are in low-income work, it is tax credits that enable them to go to work in the first place. They cover childcare and transport costs, which low wages alone do not meet. They provide the security that this Government’s low-pay, low-productivity recovery has not. The irony is that without tax credits, many people would not be able to afford to work.

This is the heart of the matter: over 60% of the families with children who receive tax credits in my constituency contain someone in work. It is tax credits that make that work pay. A cut to tax credits will put at serious risk the ability of many of my constituents to support themselves. One of my constituents wrote to me just last week with her fears about the cuts. Her family’s situation sums up the vital role that tax credits play:

“My son and his wife are barely surviving with the Tax Credits that they do get. If the Tax Credits get cut, they will end up living in my attic again.”

The Government should be ashamed of creating such a situation.

Tomorrow, the Chancellor will no doubt try to justify his cuts by telling us that tax credits are letting employers off the hook, making it easier for them to pay poor wages and leaving taxpayers to make up the shortfall. I say that he is looking at things the wrong way round. Instead of cutting family incomes and hoping that employers will suddenly step in, he should be asking why those employers are underpaying their staff in the first place.

We need a substantially higher minimum wage, and I hope that tomorrow we will see positive action from the Chancellor to get more employers paying the living wage. If he wants to reduce the amount the Treasury spends on tax credits, he should not cut them, which only punishes those on low incomes, but set out a Budget that boosts low incomes, thereby taking people out of a reliance on tax credits and other in-work benefits.

Given the recent speculation in the media about the possible reduction of child tax credits back to their real-terms 2003-04 level, it is worth looking briefly at the impact that such a change would have. It would affect 3.7 million low-income families, costing them £1,400 per year on average. More than two thirds of those who would be hit would be in work, and almost two thirds would come from the poorest 30% of households. Most shockingly, the Institute for Fiscal Studies has estimated that if the cut were introduced, 300,000 children would be pushed into living in poverty.