Tax Credits

Debate between Huw Irranca-Davies and Lord Field of Birkenhead

Thursday 29th October 2015 Commons Chamber

[Frank Field]

There is indeed. That leads me neatly on to what the proposals for reform might be. I wish briefly to touch on four.

First, I make a plea to the Government to recognise just how quickly this whole debate is changing and to take advantage of that. Tax credit payments are here for the long run. When we began this debate back in 2010, there was enthusiastic talk about, in almost no time, a new benefit—universal credit—that would sweep away means tests and deliver a seamless service to our constituents. To be truthful but gentle about universal credit, its progress is very modest. I do not disagree with the Secretary of State in looking back at previous instances of trying to smash reform through whatever the costs, but at some stage somebody in Government has to look at how slow the progress of roll-out has been and question whether a full flowering will ever see the light of day. This raises questions about how tax credits might be reshaped, given that universal credit is not for the chop and is here for the longer term. It will not, in the lifetime of this Parliament or even the next, make tax credits redundant.

We have begun to have debates about this with the public. When I recorded a programme this morning, every time I said a word that people thought the public would not understand, we had to stop and start filming again. I could not say how long it took to film. We have our own language, which is a shorthand that is not understood by people outside.

[Huw Irranca-Davies (Ogmore) (Lab)]

My right hon. Friend speaks with great authority and experience on these matters. One of the very straightforward concepts that all my constituents understand is that there is a right-minded intention to get rid of taxpayer-subsidised poverty pay. In doing so, however, we cannot say to people on low pay, “We’re going to impoverish you on that journey.” The simple concept is yes, let us talk about the instruments for doing that, but remember that it is about getting rid of poverty pay and lifting people up, so that at some future date we do not have to rely on subsidy to make it worth while to go to work.

[Frank Field]

I could not agree more, in that we have not had a Chancellor who has decided that it is misplaced for taxpayers to play the role in the welfare system that wages should play in our economy. That leads welfare reform into new areas about how to raise productivity, particularly among those who are lowest paid. We should not simply accept and welcome the Chancellor’s proposals for a national living wage but think about how we take it on from there. My hon. Friend is absolutely right.

My first suggestion to those on the Treasury Bench stems from the fact of the Government’s introducing a national living wage. When the people who designed tax credits got to work, nobody thought that any Government would bring forward that proposal. They therefore incorporated two aspects into the tax credits system. The first was about how to subsidise, and make up to a more decent level, poverty wages. The second was that given the life cycle and where life’s journey takes us, there are periods when people have children and their budget is stretched, and the tax credits system should play a role in that. I ask those on the Treasury Bench, when they are thinking about what they do in only a few weeks’ time in the autumn statement, to consider whether we should now grow up and accept that we are going to have a national living wage, and that the tax credits system should not only subsidise low wages but take some of the responsibility for the costs of children. I think there would be a great deal more support in the country if tax credits were about supporting children rather than the need to subsidise poverty wages.