Tax Credits

Louise Haigh Excerpts

Tuesday 20th October 2015 Commons Chamber

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I am pleased to follow the hon. Member for Erewash (Maggie Throup) because I see a very different situation. I genuinely believe that the different situations that we see and the consequences of the tax credit cuts that the Government are introducing speak volumes about the choices that the British people face.

I want to take up the challenge set by the right hon. and learned Member for Rushcliffe (Mr Clarke). He rightly said that those of us on this side of the House are not an Opposition. I agree with him: we are an alternative. I want to set out what being an alternative means and why we would take different decisions on tax credits.

First and foremost, as my hon. Friend the Member for Streatham (Mr Umunna) pointed out—I am sad he is not here—the order in which change happens is crucial to the impact that it has. There is general agreement in the House that we all want to see a higher wage, lower welfare economy and higher productivity. Surely the test of every change the Government make should be whether it will achieve those things. The simple answer is that this change will not.

The evidence from the Institute for Fiscal Studies shows that none of the Government’s changes to mitigate the impact of the cuts will raise family living standards. As the right hon. and learned Member for Rushcliffe pointed out, employers are raising wages. I am a little more cynical than him and suspect that they are doing so because changes in the law are coming, rather than out of benign munificence and a recognition of the benefits to productivity of paying a higher wage.

Nevertheless, the order in which the Government are undertaking the changes will make all the difference to the people in this country. They could decide to change the order and introduce the so-called living wage first, then look at the tax credit cuts. That would make a difference because of one matter that was sorely absent from the Exchequer Secretary’s contribution. I am surprised that he did not mention it, given that he used to be an expert on it. He is presiding over an economy in which personal debt is rising at an alarming rate. The Minister looks quizzical. He says that the burden of the Government’s changes is being distributed equally, but the burden of personal debt is not equally distributed in this country, as we see at first hand in our communities. We see families for whom borrowing on a credit card or from friends and family, or taking out a payday loan, is the only way that they can make ends meet.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My hon. Friend is making a fantastic speech and I, too, am confused about why the Minister is looking so perplexed. The Office for Budget Responsibility stated that because of measures introduced in the Chancellor’s Budget, unsecured borrowing will rise by £45 billion by the next election. My hon. Friend’s point is pertinent to the debate.

[Stella Creasy]

The Minister kept talking about the amount of public debt that he wanted to attribute to each household, but average unsecured personal debt is now £10,000 per household. Given the vulnerability to which families are exposed when they have that level of unsecured debt, will the changes make it more or less likely that such personal debt will rise? No one in the House would argue that the changes as currently constituted will not lead to a rise in personal debt to families, and we know the consequences of that. I pay tribute to the hon. Member for South Cambridgeshire (Heidi Allen) who honestly and openly set out the consequences of debt. She explained the worries she has when she sees families who are struggling with debt, and Labour Members share those concerns.

--- Later in debate ---

[Louise Haigh (Sheffield, Heeley) (Lab)]

It has been astonishing to hear Conservative Members stick to their desperate defence of their indefensible policy of slashing tax credits for millions of families when they know that they are neither economically justifiable, nor socially defensible. These cuts are just one more example of the Government’s policy of moving public debt, which originated in the financial sector, off their books and on to the lowest-paid and middle earners, who simply cannot afford it. Rather than moving away from an economy based on debt, which the Chancellor said that he wanted to do, he has in fact created one.

Unlike this Government, I believe that economic common sense and social solidarity not only go hand in hand, but are the bedrock of a healthy and functioning society. We cannot have a healthy functioning economy if our fiscal policy is to transfer debt from the public purse on to the unemployed, the lowest paid and middle income individuals and families, and if secured debt becomes unsecured and unaffordable. The Chancellor should know where that leads because the Governor of the Bank of England has spelled it out for him.

Over the summer, Mark Carney warned that household debt was one reason why the recession was deep and the recovery so grudging. If enough people are highly indebted, that can have big macroeconomic impacts, so that lending standards become irresponsible to reckless. Those are some of the same risk factors that led to the global credit crunch in 2007. The structural flaws remain, but we now have one very clear difference. We have a Chancellor who is exacerbating the structural flaws by heaping public debt on to the low paid, and who acts without regard to the personal economic nightmare he is visiting on the homes of working families. That is why the Labour party is so fundamentally opposed to these measures.

An inclusive and healthy economy cannot be built while we are hurting working people. It can only be built by investing in them and supporting them. Our party believes in that to our soul, so while the Tory party spends millions on branding itself as the party of working people, those working people who have been let down by the Prime Minister will know that the Labour party is working for them.