Tax Credits

Neil Gray Excerpts

Thursday 29th October 2015 Commons Chamber

[Neil Gray (Airdrie and Shotts) (SNP)]

It is not normally my business to welcome Conservative contributions in the House, but I have to acknowledge and welcome the contributions from the hon. Members for Stevenage (Stephen McPartland), for Aberconwy (Guto Bebb) and for Tiverton and Honiton (Neil Parish). It goes without saying that SNP Members agreed with almost everything they said. They were brave and very welcome contributions—perhaps more welcome on the Opposition Benches than the Treasury Bench. That will probably be the only time I welcome Conservative contributions in this Parliament.

I am sorry that the SNP amendment was not selected, but I am still grateful to have this further opportunity to set out the SNP’s opposition to the cuts. I will devote a large part of my speech to addressing the proposals put forward by the right hon. Member for Birkenhead (Frank Field). We have much to agree on. His proposals are marginally better than the Chancellor’s, but they do not protect all low-income households from the Chancellor’s ideological wrecking ball that he is taking to social security. I am glad the right hon. Member for Birkenhead said he was proposing his measures speculatively. I hope that we will see greater consistency from the official Opposition in challenging the Tory tax credit cuts. I think that we can do much better.

We formed a strong and united opposition on Tuesday because we spoke with one voice against these cuts. Since Monday, however, we have had three different positions from the Labour party on tax credits. First, there was a push for a delay in the other place on Monday night, with opposition to scrapping the cuts outright. Secondly, to the credit of Labour Members, they joined the SNP in completely opposing the changes on Tuesday. Today we are presented with a watered-down opposition, which would still remove a significant amount of money from low-income households.

[Brendan O'Hara (Argyll and Bute) (SNP)]

Does my hon. Friend agree that, in 2015, making families rely on an unelected Chamber to protect their tax credits from this Government is a ridiculous position to be in? Does he further agree that the interests of Scotland’s low-paid would be far better served if all welfare were devolved to the Scottish Parliament immediately?

[Neil Gray]

It goes without saying that I agree with and welcome my hon. Friend’s intervention.

Under the plan of the right hon. Member for Birkenhead, every household earning more than £13,100 would continue to lose out—and in a more brutal fashion than under the Chancellor’s plan. The House of Commons Library briefing highlights that under the right hon. Gentleman’s plan, a full-time single-earner household with two children and an income of £16,000 would still lose out by £700 annually. The level at which tax credits would be removed thereafter is 65p in the pound. We are still going to see the budget balanced on the backs of low-income households.

[Frank Field]

I put forward a number of proposals. If the hon. Gentleman had been in the place a little longer, he might realise that words such as “mitigate” are words used to unite people with different views—including even those who want to see a whole withdrawal. I would like to ask the hon. Gentleman to follow carefully, when the record is published, the words of the Secretary of State for Work and Pensions when I asked him whether Scotland—under existing arrangements, without waiting for any further devolution—would be able to use its revenue-raising powers to compensate everyone in Scotland for the changes in the event that the Government do not move on tax credits. The reply was yes. Will we see the Scottish Government using their revenue-raising powers not merely to put motions on the Order Paper, but to make sure that nobody in Scotland suffers from these tax credit cuts?

[Neil Gray]

It is worth saying, first, that I hope that the Labour party is looking to work with the SNP wherever possible to oppose cuts that are going to impact on low-income families. I make my contribution today, as far as possible, in the interests of consensus. We need to work together effectively to oppose what is coming down the line from this Conservative Government. On the issue of tax-raising powers, the fiscal framework has not been agreed. We have no idea what might be coming forward and no idea whether it will be possible to use these powers to raise taxes in the way suggested. I thus think that the right hon. Gentleman introduces an element of obfuscation when he uses that example. The Library briefing shows that we will still see the budget balanced on the backs of lower-income households.

[Mike Weir (Angus) (SNP)]

My hon. Friend will remind the House that the Scottish Government have already spent £100 million in mitigating other attacks on the poor from this Government.

[Neil Gray]

Absolutely—£100 million on the bedroom tax and a further £40 million ensuring that the council tax cuts did not affect low-income households in Scotland in the way they did in England. I hope that, after today, Labour will return to where it was earlier this week when it stood side by side with the SNP in opposing Tory cuts.

The SNP will oppose these ideological, regressive and utterly punitive tax credit cuts with every opportunity open to us—and we do so again today—because we realise the damage caused to family incomes, levels of poverty and child poverty in these isles and to social cohesion in every community in Scotland. The Scottish Government analysis, discussed today at First Minister’s Question Time in the Scottish Parliament, shows that 250,000 households in Scotland will lose, on average, £1,500 from April. Thereafter, when the all the changes are fully implemented, that could rise to an average of £3,000 per household. These changes are fundamentally regressive: they disproportionately target those in low-income households and punish them on account of this Government’s ideological obsession with austerity.

For our part, the SNP stood on a manifesto that was fundamentally anti-austerity and that plotted a more responsible path for bringing down the deficit. We argued for a 0.5% increase in spending per year for this Parliament, which would have released £140 billion in total to invest in capital projects and other measures to narrow income inequalities. Our plan would have brought the budget deficit down to 2% by the end of this Parliament, while protecting public services at the same time—a far more measured and reasonable way to balance the books. Our plan was backed by an IMF report from June this year, which highlighted that reducing income inequality not only leads to reduced poverty, but boosts growth. By extension, the policy of cutting tax credits and thereby increasing income inequality will drive more of our citizens into poverty. It is, in fact, going to harm growth.

[Kevin Foster (Torbay) (Con)]

Will the hon. Gentleman give way?

[Neil Gray]

I am pushed for time and I know that colleagues want to enter the debate, too.

As well as being socially destructive, this policy is, as an extension of IMF thinking, economically incompetent. No mention was made of these wholescale cuts to tax credits in the Conservative manifesto. There were just two references to tax credits, but neither referred to anything like the proposals in front of us now. I reiterate that the changes were the central plank of this Chancellor’s first Budget since the election. He has based all his sums on the back of these cuts. One would have thought that they would merit at least a passing reference or a hint at what was coming down the line.

The Chancellor’s summer Budget was a prime example of obfuscation, suggesting that these cuts to tax credits would be compensated for by the rise in the minimum wage. That was absolute nonsense. The reality is that the full rise in the minimum wage will not come into effect until 2020—four years after the tax credit cuts start. Even when the full rise comes into effect, it will still not mitigate the tax credit cuts. Why did the Government decide to undermine and sabotage the real living wage campaign by labelling their minimum wage rise as such?

I wish to conclude by addressing some of the language used in previous debates. Many of us have rightly been focusing our time on pointing out that these cuts will impact on working households, and lambasting the fact that many working households will be dragged into poverty by these tax credit cuts. I suppose I have been as guilty as others, as we attempt to show the Government that their rhetoric on making work pay is a complete sham when considered in the light of the tax credit cuts. There should be no distinction between working or non-working households that are in poverty or living on low incomes. We cannot continue to allow ourselves to be dragged into the Tory mantra of the deserving and undeserving poor. Nobody deserves to live in poverty—nobody. So referring to “hard-working families” or “the working poor” is unhelpful. We do not know the circumstances whereby people are unable to work, and we should not judge them in the way some do routinely in terms of “there by the grace of God go I”. None of us knows when we may find ourselves out of work. We should be working to address poverty wherever it is manifested and wherever it is likely to be worsened—as it will be by this Chancellor’s tax credit cuts.

[Mr David Davis (Haltemprice and Howden) (Con)]

It is a privilege to speak in this debate. I am one of its co-sponsors, but the entire credit for the idea belongs to the right hon. Member for Birkenhead (Frank Field). He rightly identified the need for a cross-party, less partisan and, as it turns out, non-binding debate to allow everyone properly to explore these issues in the national interest without being fettered by feelings of joining one side or the other in the playground of politics.

The result has, I think, been good. I think this has been the best debate so far of a number on this subject. It falls on us all to be honest about it. This policy was a mistake. One can only think that, because I am sure that nobody in any party would intend deliberately to impoverish the working poor with dependent families—I am afraid I do differentiate in this context.

[Neil Gray]

Will the right hon. Gentleman give way?

[Mr Davis]

Not for the moment.

The problem was compounded by the method employed—the measure was introduced by statutory instrument, and is therefore unamendable—and by a lack of sufficient information. As four or five Members have already pointed out today, there was no proper impact statement. Had the measure been introduced in primary legislation and thus been amendable, and had the Government provided proper information, the measure would not have gone to the House of Lords in its current form; it would have been reformed in this House, and that is what should have happened.

I subscribe to the Government’s wish to balance the books by 2020, which I consider to be an eminently sensible and responsible aim. However, I also subscribe to the view that we need to protect the poor at all costs. The question is, how do we identify what this policy does? I wanted to find some examples that would enable us to assess both sides of the argument—not just the attack, but the Government’s line as well—and I thank the Chancellor’s Parliamentary Private Secretary, my hon. Friend the Member for Kingswood (Chris Skidmore), for being so helpful in that regard. I put some of the points that he made in defence of the policy to the House of Commons Library, and I shall now give a couple of examples that the Library supplied to illustrate its impact.

The worst-case example that I could find was that of a working single parent with two children, who, without the mitigating effects, could be £2,000 a year worse off in virtually every year until 2020. That is an unbelievable sum to take from a family who are already poor. If the family were eligible for mitigation, in particular housing benefit, the sum could be reduced to roughly £700—the fine detail is unreliable—but, again, it would be lost in virtually every one of the next four or five years,

The great battle over the 10% rate when Labour was in power involved sums that were a quarter of that amount. The great battles over the poll tax, which I remember only too well, involved sums of that size. The impact on a family who are already on the poverty line, by definition, is unspeakable and unthinkable. I grew up in a rather poorer era, and I remember children being hungry on Fridays when the bills were just a bit too big, or it was cold and the heating costs were too high.