Tax Credits

Maria Caulfield Excerpts

Tuesday 20th October 2015 Commons Chamber

[Seema Malhotra]

My hon. Friend makes her point incredibly well. It is those who are working so hard to support us in every sphere—in our public services and the economy—who will be hit the hardest by this move. I hope that the Government will change their mind today. I will make some more progress before I take further interventions.

The Chancellor says that he wants a low-welfare, low-tax, high-wage economy—this may come as a surprise, but of course we all do—but what he says and what he does are two different things.

[Maria Caulfield (Lewes) (Con)]

Will the hon. Lady give way?

[Seema Malhotra]

I will give way in a moment.

The Chancellor decides to cut tax credits at the same time as cutting income tax and inheritance tax for some of the wealthiest in our society. His failure to grow wages in the last Parliament not only led to a drop in living standards, but meant that tax receipts were lower than they would otherwise have been. In addition, as the Institute for Fiscal Studies has highlighted, welfare spending was virtually unchanged during the last Parliament because of the growth in tax credit payments and the explosion in housing benefit payments caused by his low-wage economy. Indeed, the number of people earning less than the living wage has risen by 45% since 2009. The Government may seek to hide what they are doing and to make this a debate about the Labour party, but it is a debate about the quality of life for millions of families who are working hard to make ends meet.

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[Seema Malhotra]

I thank the hon. and learned Lady for her comments. Perhaps she will say what she is doing for the 6,300 families in her constituency who will be affected by these changes. Perhaps she should speak to those in her party who have raised serious concerns about the changes, including Lord Tebbit.

Before the debate on the statutory instrument in September, the Government chose either not to perform or not to publish an impact assessment of these changes, so one was not available for the debate in the Commons. The Exchequer Secretary seemed to suggest that they had done that, when clearly they had not. The distributional analysis that the Chancellor finally submitted to the Secondary Legislation Scrutiny Committee in the other place last week has been described by my right hon. Friend the Member for Birkenhead (Frank Field), the Chair of the Work and Pensions Committee, as a “sleight of hand” and an attempt to “bamboozle”.

[Maria Caulfield]

Will the hon. Lady give way?

[Seema Malhotra]

I will make a little more progress first.

It is worth reminding hon. Members exactly what the Government propose to do with these changes. First, they will effectively halve the threshold at which claimants start to see their tax credits award tapered away, from £6,420 a year to £3,850. Secondly, they will increase the rate at which the award is tapered away to zero. That means that for every pound that is earned above the threshold, their award will be tapered away by 48p. Previously, the rate was 41p. House of Commons figures show that a family with two children and two parents who earn the minimum wage will see a fall in their income of more than £1,800 next year. By the end of the Parliament, that family will lose a devastating £7,700.

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[Maria Caulfield (Lewes) (Con)]

I am grateful to be able to speak on this difficult and contentious issue. It is important to consider all the arguments, including economic ones, for why these changes are necessary. Only last week we debated the charter for budget responsibility, and there was unanimous support among Conservative Members for running a surplus in normal times, so that if we again strike a period of economic slowdown, we will have money for our vital services. Many Labour Members acknowledged and agreed with that. We must tackle the country’s deficit and debt, and to achieve that we must reduce public spending.

[Graham Jones]

Will the hon. Lady give way?

[Maria Caulfield]

I will not. Tackling welfare spending is key to achieving that reduction, and we cannot tackle the country’s deficit and debt by leaving welfare spending as it is. The UK is currently home to 1% of the world’s population, yet it accounts for 7% of the world’s spending on welfare. That is clearly not sustainable. If we do not save £12 billion a year by reducing the welfare bill—including £4.3 billion from changes to tax credits—where will we find those savings? From the NHS budget? By cutting social care spending or reducing the education budget? Labour Members could not give one answer when asked how they would reduce the deficit. There is no easy answer—if there were, we would be doing it.

Currently, taxpayers—many of whom earn just above the tax credit limit—are subsidising employers who pay low wages, and that must end. It cannot be right that someone who gets up early, goes to work, works long hours and comes home late does not earn enough to do without welfare in the form of tax credits. Instead of fighting to preserve tax credits, perhaps Labour Members should fight harder to increase wages.

I dispute many of the figures that have been distributed by opponents of these changes. If we look at the facts and take into account all the changes in the recent Budget—including the increase in free childcare, the freezing of fuel duty, VAT and national insurance, the increase in tax thresholds, and the reduction in social housing rents—a typical family will be about £2,400 better off by 2020. As we have heard, pay is already up by 3% this year, and more than 200 firms have committed to paying the living wage. Having come from a poor background and struggled through hard economic times, I firmly believe that the way out of poverty is through work—

[Mr Speaker]

Order.