Tax Credits

Jess Phillips Excerpts

Tuesday 20th October 2015 Commons Chamber

[Jess Phillips (Birmingham, Yardley) (Lab)]

I rise to beg Members on the Government Benches to think very hard about how they vote tonight. When I say that I am begging, I mean it. I am begging for 24,000 children in Birmingham, Yardley who will be hit by this change. By way of comparison, I did a quick search on Rightmove this lunchtime and found that from the hundreds and hundreds of homes available for sale in my constituency only four would benefit from the inheritance tax cut—just four. That means four people winning and 24,000 children losing, and the four people winning have to be dead before they win, so they are not very thankful. This is supposed to be a one nation Government. One nation? For the people in Birmingham, Yardley it looks like the people on the Government Benches are only looking after the same old people.

I feel the need to declare that my name is Jess and I relied on benefits. When I was 23, after the birth of my first baby 10 years ago, my husband and I received child tax credits. Our household income was £19,000. Without tax credits, I would never have been able to afford the childcare for my young son. The top-up meant that I could do small bits of paid and voluntary work and the tax credits helped me to go to work and begin to build a career.

I have heard all the well-rehearsed arguments from Government Members about how they are increasing wages and I welcome those increases, I really do, but in my case that would have made no difference because I was 23 and they are not offering a pay rise to anyone under 25. If the Government wish to brand the increases in minimum wage as a living wage, they must also accept that those who do not receive it cannot afford to live. That is the simple problem with that branding. So, will the Government ensure that any parent aged 25 and under is not affected by these changes, or are they willing to tell me that those families in their constituencies do not deserve to be able to live?

--- Later in debate ---

[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.

[Jess Phillips]

rose—

[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.

[Jess Phillips]

Will the Minister give way?

[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.