Tax Credits

Debate between Kwasi Kwarteng and Neil Gray

Tuesday 20th October 2015 Commons Chamber

[Neil Gray]

I agree with my hon. Friend that the Government do not have a mandate to implement these tax credit cuts. That is not what the people who voted Conservative voted for.

The changes are fundamentally regressive. They disproportionately target those in low-income households and punish them for this Government’s ideological obsession with austerity, which is failing socially and economically.

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Neil Gray]

No, I will not.

An International Monetary Fund report in June highlighted the fact that reducing income inequality not only leads to reduced poverty, but boosts growth. By extension, the policy of cutting tax credits, which will increase income inequality and drive more of our citizens into poverty, will, in fact, harm growth and therefore harm the Government’s apparent aim of reducing the deficit.

I absolutely agree that we need to make work pay. I believe in a fair day’s pay for a fair day’s work. I also believe that work should be a means to escape poverty, but 60% of children now living in poverty in Scotland live in working households. It was puzzling to me to see how cutting tax credits could possibly achieve the goals of making work pay and eradicating poverty.

The Government have absolutely no mandate for these tax credit cuts, as I have said, but I welcome the minimum wage rise that was announced in the Budget. Why, however, are the Government attempting to sabotage and undermine the real living wage campaign by giving their minimum wage the same label, especially when the Chancellor is giving once with one hand and taking twice back with the other?

The House of Commons Library has calculated the cumulative impact of the summer Budget on a single-earner couple with two children where the singer earner works 35 hours per week and earns the minimum wage. The Library’s independent analysis shows that a family in that situation will be £1,500 per annum worse off in 2016-17—the year all these changes will start to take effect—and more than £2,000 per annum worse off by 2020-21. How on earth can that be described as making work pay? The Government cannot reduce the deficit by waging a war on the backs of those who are least able to pay, and as the IMF has demonstrated, it makes little economic sense to do so.

I find it morally and socially reprehensible that these tax credit changes are being forced through by the Government without a mandate to do so. I hope that Ministers will look at this matter very carefully, and that compassionate Conservative Back Benchers will keep that in mind when the Division bell goes this evening, as they consider the full consequences of these shameful tax credit cuts.