Budget Resolutions and Economic Situation

Mims Davies Excerpts

Thursday 9th July 2015 Commons Chamber

[Mr Duncan Smith]

There are impact assessments in the Red Book. There will be relevant impact assessments before Second Reading, as there always are.

The key point on tax credits is what they got for all of that: unsustainable spending that went up jerkily, but by huge amounts; and a subsidy for employers, which enabled the payment of lower wages and completely distorted systems, and presented a bizarre set of incentives for moving in and out of work. It is now well documented that for many people it made sense to work only 16 hours —no more, no less—and we saw spikes in the employment data at 16 hours. There were huge spikes of people clustered around 16 hours, because it did not pay to work anything else.

[Mims Davies (Eastleigh) (Con)]

Families set up their lives around the 16-hour week limitation and businesses had to react to that, which affected our productivity. Does my right hon. Friend agree that the Budget will deal with this and make people’s lives better?

[Mr Duncan Smith]

I do. As my hon. Friend makes clear, if people can afford to work only 16 hours, businesses will not invest in them and their training because it will not be worth their while. That means their chances of progressing are nil. Many rotated and crashed out of work directly, because they had no sense that they could go on any further. She is absolutely right.

We believe that two-fifths of those who received tax credits ended up paying for the tax credits they received. It was a bizarre system.

This Government are different. We are building on the firm foundations of a welfare system by balancing the books and fixing the economy, while continuing to provide a strong safety net to support the most vulnerable. Our record in the previous Parliament spoke for itself, so I am going to say it again. Despite all the doomsday predictions from the Opposition—