Tax Credits

Lindsay Hoyle Excerpts

Tuesday 15th September 2015 Commons Chamber

[Damian Hinds]

Time is short, so I am going to make some more progress.

For too long in this country—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

[Mr David Anderson (Blaydon) (Lab)]

On a point of order, Mr Deputy Speaker. For clarification, will the Minister please explain that the wages of public sector workers are going up not by 2.8% this year, but by only 1%?

[Mr Deputy Speaker]

That is not a point of order.

[Damian Hinds]

For too long, low pay has been addressed in this country not by genuine reform and driving productivity, but by subsidising it through the tax credit system. In the decade to 2010, tax credit expenditure more than trebled in real terms. The changes introduced in this order will build on the last Parliament’s reforms and return real-terms tax credit spending to its 2007-08 levels—a decade into the Labour party’s tenure in government. It is not a stand-alone measure, but part of what my right hon. Friend the Chancellor called a “new contract” with working Britain. It says to businesses, “You will have to pay higher wages, but you will get lower business taxes and a stable economy”; it says to people, “You can get higher pay and lower tax, but with less benefit top-up”; and it says to the country, “We are going to spend less and live within our means”. These regulations are an important part of that, and I commend them to the House.

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[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.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I certainly want to hear the shadow Minister, and I would expect Conservative Members to want to hear her as well. If they do not, I am sure that the Tea Room awaits them.

[Seema Malhotra]

Thank you, Mr Deputy Speaker.

As I was saying, this measure is ideologically driven, it is cynical, and it will directly increase levels of poverty in Britain.

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[Seema Malhotra]

I—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I want to hear the hon. Lady’s reply.

[Seema Malhotra]

I thank the right hon. and learned Gentleman for his intervention. He may first want to explain why he voted against the national minimum wage when it was put to this House. We agree about people needing to come off tax credits, but we would do that through an increase in wages and in productivity.

The Government have sought to argue that working people will be compensated for the cuts by the increases in the minimum or living wage. That is contested by the Institute for Fiscal Studies, which says that it is “arithmetically impossible”. Although we welcome the increase to the personal allowance and the introduction of the so-called national living wage, as the Low Incomes Tax Reform Group has stated, any gains from those measures will not negate the impact of these tax credit cuts from April 2016. The IFS recently concluded that families will lose over £1,000 a year on average from cuts to tax credits, while they will gain between £100 and £200 a year at most from the proposed national living wage, and even that is seen as optimistic.

The IFS analysis has also shown that those on the lowest incomes are hit hardest by the Government’s tax and benefits changes. The reduction in annual income over the next five years is most marked for the poorest four income decile groups, highlighting the regressive nature of this Government’s fiscal choices.

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[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. A lot of Members want to get in, so let us crack on with a four-minute limit on Back-Bench speeches.

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[Richard Graham (Gloucester) (Con)]

Conservative Members are clear that the macro picture is absolutely right and we have to reduce the welfare bill. Does my hon. Friend agree that the Government could do one specific thing that would help enormously? The BBC has withdrawn its online calculator for people who want to know how much they will be affected by this, and online forums suggest that different calculations are produced by different newspapers. Could the Government produce their own calculator so that our constituents can find out—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Graham, you know you are pushing your luck. The hon. Gentleman has already given way twice and you are taking up your colleague’s time.

[Mark Garnier]

A very wise idea.

The second reason I am very supportive of these changes goes back to the old argument about reducing the deficit. Conservatives made it perfectly clear at the last election that we would seek to find £12 billion through benefit changes, and that was a manifesto pledge. We were elected with an increase in our number of Members of Parliament and a rise in the sitting MPs’ majorities. We have been asked by the country to deliver on our manifesto pledges, and this is part of that delivery.

We still have a budget deficit, and the tax credits system costs the taxpayer about £30 billion a year. The IFS this morning said that it expects these changes potentially to deliver £6 billion in savings. It is worth remembering that, as has been said, tax credits cost just £1.1 billion when they were first introduced, but that has now ballooned to the current level and that is simply not acceptable. It is also worth remembering that they ballooned in a period of so-called “high economic growth”. The then Chancellor, famous for many things but in particular for claiming to have ended boom and bust, was running a bizarre programme of increasing benefits at the same time as telling us that the economy was fine and growing steadily. Perhaps he knew something that he was not telling us, increasing benefits in anticipation of the collapse caused by the crisis—perhaps he knew it was coming. By 2010, 90% of families with children were receiving tax benefits. Do 90% of families actually need these tax credits, even after all those years of the Labour Government, when we would have thought that the families would be doing better? Apparently, they are not. These tax changes take us back to the real levels in 2007 and 2008.

I wish to finish by discussing one point. I was very struck, as were many Members, by the election whose result we saw on Saturday. I was particularly struck by the number of young people who were voting in that leadership election. They were voting in the name of voting against austerity. They were objecting to what they see as cuts being delivered to them today. In 20 or 30 years’ time, they will have to take responsibility for the mess that they find—we have to do something now. If we hand over the shop to them as we found it five years ago, austerity would not mean some managed cuts; it would mean devastating cuts that would be unbelievably painful. We have to take responsibility for the way things are now. I am not in the business of mortgaging the next generation’s future. I want to take responsibility for the problems we have today and not kick the can down the road. This is not austerity-heavy; it is common sense.