Tax Credits

Mark Garnier Excerpts

Tuesday 15th September 2015 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I am not going to pretend that it is easy to stand up and speak in favour of something that is, as the hon. Member for Feltham and Heston (Seema Malhotra) has said, going to be tough on families, but this is none the less the right thing to do. We have heard a great many estimates of how families are going to be affected, with a variety being produced by the Institute for Fiscal Studies. The one that I have seen gives a figure of £750.

This measure will affect families, but it is worth bearing in mind the fact that there are mitigating factors that will make a difference for those families. We have heard about the tax threshold increases, and it is also worth bearing it in mind that many of those families are also small and micro-business owners who have benefited from reliefs on business taxes and small business rate relief. The economy is also a lot better, with very low inflation rates at the moment.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Would the hon. Gentleman like to reflect on the fact that someone working full time and earning £17,000 a year will lose close to £2,000 as a result of these measures? Why do the Government want to punish hard-working families in this way, at the same time as they are increasing the inheritance tax threshold? This is vindictive and nasty.

[Mark Garnier]

I am not sure I recognise the figure of £2,000 on a £17,000 income, and I do not accept that this Government are punishing hard-working people. I see a Government who are doing an enormous amount by reducing the threshold tax rates and by helping small businesses. We have seen more people come into work than there have ever been before. This Government have had a huge number of successes, so I do not recognise what the hon. Gentleman is describing.

There are two particular reasons why I support this measure, the first of which was highlighted by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), the former Chancellor, and my hon. Friend the Member for Croydon South (Chris Philp) in talking about the effect that tax credits have on employers. We do not know exactly the extent to which this has been the case, but without a shadow of a doubt some employers will have been not paying the right salary or pay, given that the Government are subsidising not necessarily those people on low incomes but the employers employing people on low incomes. We also know that if that did happen early on, it is much more difficult to unravel it now, which is why it is very important that we have the new national minimum living wage. It is there to ensure that wages do start going up, although I concede that this does not necessarily cover it all.

[Helen Goodman]

How can employers take account of the tax credits, given that the tax credits are paid according to family circumstance and the wage is not?

[Mark Garnier]

Because employees will work for a wage that they can afford to work at, and if the Government are subsiding those household incomes the employers can take advantage of that. It is difficult—I completely concede that—to unravel this.

[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.