Tax Credits

Mike Wood Excerpts

Tuesday 15th September 2015 Commons Chamber

[Ms Karen Buck (Westminster North) (Lab)]

Before the election, the Prime Minister promised to maintain the value of tax credits. He has broken that promise. He also said on 22 April that the Government were

“using all the tools at our disposal”,

including the “tax and benefit system”, to “make work pay”. Today, we are debating the betrayal of that pre-election commitment.

As we have heard, 3 million working households will lose up to £1,000 each and a single-parent earner on £19,000—a modest income—will lose £2,000. Many extrapolations that are set out in the House of Commons briefing paper and elsewhere show the scale of the losses.

Today, we have heard from Government Members the argument that tax credits are a subsidy for bad employers. In some instances, that is true, but there is scant evidence for the assertion across the board. What is absolutely clear is that the tax credit system is an incentive, particularly for lone parents, to go into the workplace and stay in work. The positive employment incentive of the tax credit system has been almost entirely ignored by the Conservative party.

That masks a success story over the past 10 to 15 years, which has seen a dramatic increase in the number of parents, particularly lone parents, going into the workplace. We should celebrate that fact and support those working parents who have gone into work. A recent piece of research by the New Policy Institute, “Trends in parental employment in London”, demonstrates that success story in employment. Associated with that, there has been a

“large shift away from out of work claims towards in-work claims”.

A rise in the national minimum wage is welcome—indeed, employers should share with the state the responsibility for ensuring that working people enjoy a decent basic income—but it will not offset the huge hit on tax credits. As the analysis by the Institute for Fiscal Studies has shown, the new national living wage offers

“little compensation because the boost to gross wages is smaller than the announced fiscal tightening and almost one-third of the increase in gross wages goes to the Treasury in higher tax receipts and lower benefits and tax-credit entitlements.”

The IFS calculates that across the entire population that receives in-work benefits and tax credits, just 20% of the losses that will accrue from the benefit cuts will be returned to those people through the rise in the minimum wage.

[Mike Wood (Dudley South) (Con)]

Will the hon. Lady give way?

[Ms Buck]

I will not give way because many people want to speak.

My particular concern is that London has the highest level of child poverty of any region in the country and, with 356,000 families receiving tax credits, almost 750,000 children will be losers as a result of this policy. A study by the Trust for London on the higher costs that are faced by working people and parents in London, which has just come out, shows that even before the tax credit cuts, such families are £54 a week worse off than equivalent families outside London. These cuts will hit the working poor right across the country, but they will hit them harder in London than anywhere else.

As we look towards the election that we will fight next May, I absolutely guarantee that my colleagues will draw attention to those losses for families, and those families will not forgive this Government for betraying their commitment to protect the working poor.