Living Standards

Meg Hillier Excerpts

Monday 5th March 2012 Commons Chamber

[Mr Gauke]

I want to make a bit of progress, because I know that many other Members wish to speak.

We are also right to reform child benefit to target the families who need it most. I fully understand that child benefit provides a vital boost in parental income for millions of families throughout the country, but it represents a substantial cost to the Exchequer. It makes up about 7% of total social security and tax credit spending each year, including child benefit payments of over £2 billion per year to higher-rate taxpayers. When we face such tight constraints on the public purse, it is right for us to refocus resources where we need them most.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The Minister mentioned the administrative cost of child benefit to the Exchequer. Can he tell us what is the estimated cost of all the extra form-filling that the change will require?

[Mr Gauke]

I was actually talking about the overall cost. We will give details of the cost of administering child benefit when we announce the details of the policy, which, as the hon. Lady will know, we will do shortly. However, as the Chancellor has said:

“We simply cannot ask those earning just £15,000 or £30,000 to go on paying the child benefit of those earning £50,000 or £100,000.”

It is simply not fair for working parents on low incomes to subsidise millionaires. If members of the Labour party believe in that, they can add it to their election literature along with their opposition to the benefit cap. By making these changes, we can continue to direct child benefit to where it is needed most, supporting millions of families and millions of children from birth until they leave full-time education at the age of 18 or even 19.

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[Stephen Williams]

All I can say is that the hon. Lady must have been reading an earlier draft, because that is not what the motion says. I shall discuss tax avoidance later in my speech, as I am sure she will be pleased to hear.

Even in the tough fiscal environment that the Government face, it is right that we should do what we can to help low-income households. That is why the Government are absolutely determined that the budget will not be balanced on the backs of the poorest and those in work who have low earnings. The Government will not repeat the fiasco that happened in good times under the previous Government. The Chancellor who became Prime Minister, in his last Budget as Chancellor, abolished the 10p rate of income tax, raising income tax for the lowest paid in society and all his hon. Friends, who, at the time, sat on the Government Benches and waved their Order Papers with glee that a tax on the poorest in society was funding a tax cut for the rich.

[Meg Hillier]

rose—

[Stephen Williams]

I have given way twice and I am on a time limit, unlike some previous speakers. The hon. Lady will have her turn later.

That is why reducing the tax burden for the lowest paid is the No. 1 priority, as far as the Liberal Democrats are concerned, of this coalition Government. I and all my colleagues stood at the last election on a promise that the income tax threshold would be raised to £10,000 and the coalition Government’s first budget raised the threshold by £1,000 to £7,475 a year, taking 800,000 people out of income tax altogether and giving a £200 tax cut to every basic rate taxpayer. From next month, the threshold will be raised again to £8,105, cumulatively taking 1.1 million low-paid people out of income tax altogether with a cumulative income tax cut for every basic rate taxpayer of £330. That is £330 extra take-home pay, particularly for part-time workers, who are disproportionately women and young people, that they can spend immediately in their communities.

Two weeks ahead of the Budget—16 days, as the shadow Chief Secretary kept saying—the Liberal Democrats want the Chancellor to go further and faster in announcing a timetable to reach that £10,000 threshold in this Parliament. We want to know that when all our constituents go out to work, they will be able to take home £10,000 a year and not face the burden of income tax. That will send out a message that we are determined to make work pay and to reduce the tax burden for everyone on the basic rate of tax.

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[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

We have heard a lot of twaddle from Government Members today. I was shocked that the Minister seemed to agree with the hon. Member for South West Norfolk (Elizabeth Truss) about the need for unregulated child care, as though high-quality, regulated child care is a cost too high for working parents to pay. As a working parent who uses child care, and as someone who represents many young people in my constituency who face having to seek child care, I must say that having lower-quality child care is not the answer. Cost is an issue but lowering the quality is not the answer. I hope the Minister will pick up on that point in responding.

I represent half of a borough that has the unenviable record of being one of the country’s poorest. About 45% of children in my constituency live in out-of-work households or in in-work households that have an income below 60% of the national average. That compares with 22% in the UK as a whole according to 2009 figures.

One in five of my constituents is under 16, so the two changes that the Government are introducing have a very big impact on a very large number of people in my constituency—the youngest, the children who need the support, and their parents as well. Anything that hits children affects Hackney particularly hard. When we are talking about the impact on young people, their life chances and their opportunities, we should not forget the impact that that has on the wider population. It is my constituents who will be paying the pensions of the older population of the rest of the country in time to come. It is my constituents who will be creating the jobs that will pay for this country in time to come. We need to make sure that we give them a little more respect than the Government currently do.

The Government have form in this respect. About a third of my constituency is aged under 24. This group has already been hit massively by the loss of the education maintenance allowance, which had a high take-up in my constituency. For example, one young woman said to me, “By Thursday, when the electricity key was running out, I would pay that,” so she could do her homework and the house would be warm. It paid for basics like that in my constituency. I will not revisit the pain of tuition fees, on which the Liberal Democrats have shown their true colours.

I turn to working tax credits. In my constituency 12,000 families receive tax credits overall. Of those, 4,500 families, which include 8,600 children, are in work and receive both child tax credits and working tax credits. Of the total 12,000 families, 1,100 families receive working tax credit only. Those figures are from December last year, and they hide real people, such as the woman who came to see me on Friday and wept as she said to me, “I’m working 16 hours a week. I want to work more but I cannot find the hours.” She will lose more than £300 a month as a result of the Government’s changes. She has one month to find eight hours of extra work. Where is she going to find that at her level of income?

A related issue, which I am digging into, is school support staff. I have had a number of reports from primary schools in my constituency where low grade staff working 10 or 11 hours a week have been told by the jobcentre that they need to increase their hours to 16, because that gets them off some statistic that the Department is gathering about part-time work. When they went back to the school to ask for extra hours, one head teacher had the wit to go to Jobcentre Plus and say, “Give me this in writing. Tell me who is directing this.” No information was forthcoming.

Those people were being encouraged to give up a good job of 10 or 11 hours a week to find some job somewhere that might be 16 hours a week, but as many of the jobs in low level retail are on zero hours contracts, it is difficult to be guaranteed the 16 hours, let alone the 24 hours. They may get 16 hours now in a good week but not in a bad week, but going up to 24 hours will be increasingly challenging. I talk about my constituency, but as we have heard, up to 200,000 working parents will lose almost £4,000 a year in working tax credit as a result of the changes, which are about three weeks away.

I move on to child benefit. We know that in London child care costs are very high and many of my constituents on good incomes find it unaffordable to work. Their child care would cost more than quite generous full-time earnings, so many have made the understandable decision to opt for one of the couple to stay at home and look after the child. The Minister’s answer was, “Unregulate the child care and make it cheaper”, but that is a retrograde step.

The Government talk about being family-friendly and wanting to support the family unit of two parents with children. The reward for those families for doing what the Government profess to want is a cut in child benefit. What does that mean? If one of the couple is earning £43,000 but the other is not earning and they have three children, they lose £188 a month in child benefit.

[Ian Lavery]

I shall be brief. The hon. Member for Bristol West (Stephen Williams) commented that that is an extreme example. Does my hon. Friend agree that it is not extreme; it is absolutely accurate?

[Meg Hillier]

I completely agree with my hon. Friend. It is rich for the Liberal Democrats to speak sanctimoniously today, when we know what they were saying on the campaign trail just over two years ago.

A family with two incomes totalling £84,000 a year and three children loses nothing in child benefit. The policy is bonkers. It was not even written on the back of an envelope. It must have been written late at night in the bar, because it does not make sense in any way, and the Minister was unable to answer my question about how much it would cost administratively for individuals to collect the paperwork to find people who are on those incomes, in order to take their child benefit away.

We will have the Budget in a fortnight’s time, but my constituents are already being hit. Working tax credit is being taken away from the lowest-paid. There are the cuts to child benefits. We hear from The Daily Telegraph that there might be some changes, but we have heard nothing today from the Minister at the Dispatch Box. VAT has been increased to 20%, affecting the cost of day-to-day purchases for all my constituents. We read of the threat of mortgage interest rates going up. Rents for new social housing will now have to be 80% of private rents, which in my constituency will make it unaffordable for most people—and we can add to that the housing benefit cap, which would affect two thirds of my constituents renting in the private sector, the fact that private rents are increasing exponentially all the time, that energy bills and food prices are going up, that unemployment is increasing, and the loss of the education maintenance allowance.

Many of my constituents may be poor, but there is no poverty of aspiration in my constituency. These policies, layered on month after month and year after year under this wretched Government, are a real kick in the teeth for my constituents, many of whom have come from other countries to do well and to put time and effort into education and training in order to improve their lot. As they are struggling up the ladder of ambition and trying to improve their lot and support their families, the Government are pulling the rug out from under their feet and taking away the lower rungs of the ladder. It is shameful.

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[Sheila Gilmore (Edinburgh East) (Lab)]

If I showed some hesitancy in rising, Madam Deputy Speaker, it is because I tend to find that I am called at the very end of debates, so I am extremely grateful to you for calling me at this stage.

Sometimes Government get things wrong and must have the grace to say so. The change in working tax credit proposed for this April is one of those occasions. Interestingly, it was announced in October 2010, before the Government’s proposals on welfare reform were fully announced and explained. There is an obvious dichotomy between what the Treasury is saying and what the Department for Work and Pensions is saying. It is unfortunate that DWP Ministers have not been present in the debate to give their point of view. Those of us who served on the Welfare Reform Bill Committee had hours of Ministers and Government Back Benchers telling us that any job and any hours of work were better than none, and how important it was that we should be encouraging the mini-jobs that we were hearing so much about. The DWP is very clear that it is important that people should be supported in working, even for relatively short hours, whereas the Treasury Minister who opened the debate told us that it is very important that a couple should work more hours, and that if they do not the Government are going to take their working tax credit from them. Those two positions are irreconcilable. It is not good enough to say that it will all come right next year when the universal credit comes into being, because people will soon be suffering from this change, which is the complete and direct opposite of what the Secretary of State for Work and Pensions has been telling us he is going to do.

Is it really the Government’s position that they want people to stop work, as some people will in this situation because it is more attractive to do so? If the family who cannot find the extra eight hours’ work give up work altogether, then without the working tax credit they will get benefits paid at a higher rate than they would otherwise have received. In addition, if they are home buyers they will qualify for other things such as help with the mortgage, which they do not get if they are working. At that point, they may well conclude that it is not worth their while to continue with their jobs. They may continue to think like that in the future. We hear a lot from the Government, particularly from the Department for Work and Pensions, about how benefits policy should drive behavioural change. This policy will drive behavioural change, but in precisely the wrong direction.

[Meg Hillier]

Does my hon. Friend agree that one of the best things parents can do for their children is to embed the work ethic early on? By working, parents not only bring in an income for their children, but set an example for them and bring future benefit.

[Sheila Gilmore]

There is a long-term benefit in people learning from their parents what it is to work.

We used to hear so much about the couples penalty from the Conservative party. It used to say that there should no longer be a couples penalty and to talk about how unfair it was. However, this provision creates just such a couples penalty. A couple who lose their working tax credit might look at their neighbour, who is a single parent, and think, “She’s not losing her working tax credit. That doesn’t seem fair.” Why, when we have heard so much about that, are the Government creating a new penalty for the sake of just 18 months or two years?

That all comes on top of the decision not to increase working tax credit in line with inflation. We have heard a lot, particularly from the hon. Member for Bristol West (Stephen Williams), about how wonderful it is that benefits will rise by 5.2% in the coming year, as if it is some unique act of generosity. In fact, people are simply being given the rate of inflation.