Tax Credits

James Cartlidge Excerpts

Tuesday 15th September 2015 Commons Chamber

[Seema Malhotra]

I will in a moment.

These cuts in tax credits will hit working families in every constituency, and they were to be sneaked in through the back door. Indeed, when asked directly during the election campaign whether the Government would cut child tax credit, the Prime Minister said:

“No, I don’t want to do that.”

His statement was repeated on “Question Time” on 1 May. Today’s debate is about a political decision made by the Chancellor which is set to see more than 3 million families lose an average of £1,000 a year.

[James Cartlidge (South Suffolk) (Con)]

Will the hon. Lady give way?

[Seema Malhotra]

I will in a minute.

This measure is ideologically driven, it is cynical, and it will directly increase levels of poverty in Britain.

[Mr Rees-Mogg]

Will the hon. Lady give way?

[James Cartlidge]

If the measure is passed, will it be Labour’s policy to reverse it?

[Seema Malhotra]

I am unclear—[Laughter.] I am unclear about why the hon. Gentleman wishes to make this an issue about the Labour party, and not an issue about why his Government have presented the House with a measure that will have a negative impact on his constituents as well. He will have to account to his constituents for the decision that he chooses to make today when they come to his surgery, knowing that—[Interruption.]

--- Later in debate ---

[James Cartlidge (South Suffolk) (Con)]

There is no doubt that this measure is controversial and that it will hurt our constituents. It is a tough measure, but I nevertheless support it strongly because of the wider picture. This country must take the journey from being an economy of high welfare spending, high welfare dependency and high borrowing to being a more competitive country with higher productivity and, most importantly, higher real wages at every level of the economy. That, in turn, will put us on the path to more sustainable prosperity and sound public finances.

I have spoken on tax credits before in the House. I said on Second Reading of the Welfare Reform and Work Bill that they were one of the greatest mistakes in the history of the welfare state. When the Beveridge report made its recommendations, which led to the welfare state, the third key principle was that state benefits

“should not stifle incentive, opportunity, responsibility”.

My biggest problem with tax credits is that it is overwhelmingly clear that they stifle incentive and opportunity.

[Suella Fernandes]

I agree with my hon. Friend. Tax credits have distorted the principle of welfare, which was to help the most vulnerable in our society who are unable to work. We now have a distorted system of in-work welfare where the state is subsidising wages. It is unsustainable.

[James Cartlidge]

I strongly agree with my hon. Friend. My point about work incentives is based on my experience as a small business owner. I found the situation with tax credits extraordinary. I had members of staff who declined pay rises because they would lose so much from their tax credits, and most common of all were part-time staff who would not go full time because the tax credits were so generous.

[Owen Thompson (Midlothian) (SNP)]

Will the hon. Gentleman give way?

[James Cartlidge]

I will not give way at this moment. People were receiving the equivalent of full-time pay on part-time hours, and in that situation can we blame someone for not wanting to take on more hours? It is a real problem, and many other employers have made the same point to me. The problem is widespread.

[Steve Double (St Austell and Newquay) (Con)]

My hon. Friend might be interested to hear that as a small business owner, I share his experience. I have offered pay rises and additional hours to members of my staff, and they have turned them down because of the tax credits that they would lose as a result.

[James Cartlidge]

I thank my hon. Friend and emphasise that this is not a fantasy. This is not a think tank or a theory; this is the real world that we have experienced. With tax credits it is difficult to incentivise staff in their interest to make the most of their talent. I genuinely believe that every person was born with incredible skills and talents. We should seek to help people make the most of those talents, but tax credits provide a perverse disincentive to do so and place a ceiling on wages and ambition.

[Antoinette Sandbach (Eddisbury) (Con)]

Does my hon. Friend recognise that the points raised by my hon. Friend the Member for Waveney (Peter Aldous) have real resonance, in particular for single parents? The welcome childcare changes will not be implemented for some time, and that will lead to a transitional period during which people will be hard hit by these changes.

[James Cartlidge]

I do not disagree. As I said, we are having to make a choice about whether the pain that this measure undoubtedly involves—we must be honest and open about that—is a price we have to pay if we are to make the whole country more prosperous on a sustainable basis for the future.

My hon. Friend the Member for Wyre Forest (Mark Garnier) made an excellent fundamental point about tax credits. At a time of general prosperity, I do not think that the state should be embarking on a widespread expansion of the benefit system and the dependency culture. In 1945 when we set up the welfare state, this country was on its knees and people needed the welfare state.

[Several hon. Members]

rose—

[James Cartlidge]

I am sorry but I will not give way again. People needed that system to support those who were in desperate circumstances. In May 1997 when the Labour party came to power, we had a strong growing economy and were to have strong global trade for many years after that. We enjoyed low inflation because of the growth of China, and we had a wonderful period of economic growth with low inflation. It was an amazing opportunity for the Government to build for the long term, but in those prosperous times what did they do? They built a £30 billion extension to the welfare system, with nine out of 10 families with children able to qualify for those benefits. That is not a safety net, it is a massive extension of the dependency culture and a total nationalisation of family and household income. That is what we are voting on today.

There is a price to pay, but we are voting on a fundamental principle in this statutory instrument: should this country move forward to an economy based on stronger wages and where people become more reliant on wages to support themselves rather than on benefits and the state? I am proud to go through the Yes Lobby today. I think this is an important measure and a key step towards a competitive, dynamic country that has sustainable prosperity for all.