Working Tax Credits

Lord Touhig Excerpts

Monday 14th May 2012 Lords Chamber

Asked By

[Lord Touhig]

To ask Her Majesty’s Government whether they will reconsider the changes to working tax credits.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the changes to the working tax credit are necessary in order to tackle the record peacetime deficit which this Government inherited. Tax credit spending increased to around £27 billion in 2010-11 and extended to those high up in the income distribution. This was unsustainable. The package of changes to tax credits introduced in April will save £4 billion in 2016-17 while ensuring that the most vulnerable are protected. For that reason, they will not be reconsidered.

[Lord Touhig]

My Lords, this year, more than 200,000 low income families who work less than 24 hours a week will lose thousands of pounds as a result of the withdrawal of the working tax credit. In the present economic situation, a great many employers are not able to offer these people extra hours. Does the Minister agree that the phrase “making work pay” must seem pretty hollow to these impoverished families? I plead with the Government to take an interest in the poorest in our society and do something about this group who desperately need our help.

[Lord Sassoon]

My Lords, what underlines this change and the need for it, as well as the unsustainability of the huge cost of working tax credits, is some of the unfairness and behavioural incentives in the system. This Government firmly believe that working people on low earnings should gain through money that they earn rather than from government subsidies. The switch from reducing reliance on benefits to increasing personal allowances is part of a significant change to getting more families to gain more from working than has been the case to date and for incentivising second earners into work. There was also a basic unfairness in the system as it was in that a single parent had to work 16 hours but a couple had to work only 16 hours between them. Therefore, underlying what the Government have announced are a fairness and an incentivisation and behavioural change that are very important.