Seema Malhotra
Main Page: Seema Malhotra (Labour (Co-op) - Feltham and Heston)Department Debates - View all Seema Malhotra's debates with the HM Treasury
(9 years, 1 month ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I beg to move,
That this House calls on the Government to reverse its decision to cut tax credits, which is due to come into effect in April 2016.
Today’s debate is incredibly important, but it is a shame that we have to hold it at all. It is deeply disappointing for the 3 million families across the UK who are set to lose an average of £1,300 from April that the Government have not taken the opportunity to step back, do the right thing and rethink these unfair proposals. The Conservatives omitted to mention these unfair proposals in their manifesto. Indeed, given another chance today to stop the changes—in the Welfare Reform and Work Public Bill Committee—they chose to vote against doing so.
Last night, we heard the latest arguments in favour of the cuts, which are already backfiring. The Government are seeking to make this a binary choice between cutting the incomes of the working poor and funding nurses, when in fact many of those in receipt of tax credits are our nurses, teaching assistants, care workers, civil servants and so many others who work day and night to keep our public services and our economy moving.
David Rutley (Macclesfield) (Con)
The decision to seek to reverse these reforms is an important one, but when was the hon. Lady made aware of it—on the Labour side? [Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. We will not have shouting from the Back Benches. Nobody will ignore anyone in this Chamber. We will have a measured debate on an important subject.
Seema Malhotra
I do not think I even need to respond to that intervention. The hon. Gentleman is seeking to trivialise this debate. We have been very clear about what we would do and about what we are calling on the Government and his party to do. His constituents will be watching him today and asking: who he is standing up for—his constituents or his party?
Several hon. Members rose—
Seema Malhotra
I will make some more progress and then give way.
These cuts will also hit the self-employed and those who run our local businesses. It is bizarre for the Government to take £1,300 off each family by highlighting how much more they have already taken in tax credits. Today, it has become even clearer that the Government have chosen to balance the books on the backs of the poor. The Chancellor has made this a debate about taking from the non-working poor or from the working poor, rather than a choice recognising that, in tough economic times, it is fairer that those who have more should contribute more.
Andrew Gwynne (Denton and Reddish) (Lab)
The £1,300 that my hon. Friend cites is of course an average. Many working people in my constituency will get clobbered by a lot more than £1,300 a year. Is not the really serious point that only in April the Prime Minister said on TV—in the studios—that he would not cut tax credits?
Seema Malhotra
My hon. Friend is absolutely right. It is not on the basis of one occasion that we are saying that the Government have changed their mind or have not told the truth; they have not told the truth on this measure step by step since it was first introduced in the Budget. They have tried to hide the impact on hard-working families across Britain. My hon. Friend is absolutely right that the £1,300 figure is an average, and many families are set to lose much more.
Chris Philp (Croydon South) (Con)
The hon. Lady will be aware that the Conservative manifesto made it very clear there would be £12 billion of welfare savings, so this was clearly flagged up. Will she explain where, if she opposes the measure, she will find the savings—which other benefit would she cut, or which tax would she raise?
Seema Malhotra
Perhaps the hon. Gentleman needs to talk to the Prime Minister about why he said on “Question Time” during the election that he would not cut tax credits. That is a conversation for him to have with the Prime Minister.
Barbara Keeley (Worsley and Eccles South) (Lab)
The hon. Member for Croydon South (Chris Philp) talks about the Conservative manifesto, but the manifesto cannot have outlined that 689,000 carers might be affected. Those who care 35 hours a week and then try to work 16 hours on the national minimum wage will be hit. What do Conservative Members have to say about that?
Seema Malhotra
My hon. Friend makes her point incredibly well. It is those who are working so hard to support us in every sphere—in our public services and the economy—who will be hit the hardest by this move. I hope that the Government will change their mind today. I will make some more progress before I take further interventions.
The Chancellor says that he wants a low-welfare, low-tax, high-wage economy—this may come as a surprise, but of course we all do—but what he says and what he does are two different things.
Seema Malhotra
I will give way in a moment.
The Chancellor decides to cut tax credits at the same time as cutting income tax and inheritance tax for some of the wealthiest in our society. His failure to grow wages in the last Parliament not only led to a drop in living standards, but meant that tax receipts were lower than they would otherwise have been. In addition, as the Institute for Fiscal Studies has highlighted, welfare spending was virtually unchanged during the last Parliament because of the growth in tax credit payments and the explosion in housing benefit payments caused by his low-wage economy. Indeed, the number of people earning less than the living wage has risen by 45% since 2009. The Government may seek to hide what they are doing and to make this a debate about the Labour party, but it is a debate about the quality of life for millions of families who are working hard to make ends meet.
Gareth Johnson (Dartford) (Con)
I will give the hon. Lady another opportunity to answer the question. If she were to reverse these reforms, how would she pay for it—would she raise taxes, cut spending or simply borrow more money?
Seema Malhotra
Perhaps the hon. Gentleman has not read any blogs or listened to any media in the last two days. We have been on the media repeatedly and have explained very clearly that we would do that through long-term growth, making sure that we invest in high skills and increased—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I cannot hear the hon. Lady, so I assume that nobody else can hear her. This is a debate and we must be able to hear the opening speeches. Everyone will have a chance to shout in their own four or five minutes.
Seema Malhotra
Thank you, Madam Deputy Speaker. I hope that the hon. Member for Dartford (Gareth Johnson) heard my answer. Perhaps his constituents will also be asking whether he has heard them. I am sure they are wondering who he will stand up for today.
Seema Malhotra
I will give way in a moment if I can make some more progress.
It is shocking that the Government continue to avoid telling the truth about these changes, including the Prime Minister, to whom I wrote last week, asking him to clarify his comments that after all the Government’s changes a family where one earner is on the minimum wage will be £2,400 better off. He is yet to be clear about how he reached that conclusion, how many families will gain in the way he suggests or what assessment he makes of the analysis by the Institute for Fiscal Studies, the Resolution Foundation, Barnardo’s and so many others who are against these changes.
The Chancellor chose either not to perform or not to publish an impact assessment of these changes for the Commons—a move that was criticised in no uncertain terms by the Social Security Advisory Committee. There are only two ways to interpret that: the Government either do not want to know or do not want to tell.
Stella Creasy (Walthamstow) (Lab/Co-op)
My hon. Friend talks about the impact of these changes. Let me give her one simple example from my Walthamstow constituency of a working mum. When her tax credits were delayed, we had to refer her to a food bank because they were literally the difference between being on the breadline and having bread. Does my hon. Friend agree that that will happen to working people across the country if these changes go ahead?
Seema Malhotra
My hon. Friend is absolutely right. She highlights, too, the impact of the Government’s appalling administrative processes on our constituents. They are left trying to make ends meet and having to go to food banks. More than 60% of the use of food banks is due to issues with benefits and benefits administration.
Lucy Frazer
After an intervention, the hon. Lady asked whether Government Members had been listening to the media. I listened to an interview she gave on Radio 4 this morning. She gave only two examples of changes that she would make to the tax system. One related to inheritance tax and the other was to raise the tax threshold to 50p. In 2017-18, that would raise only £270 million. Where would she get the other £4.2 billion?
Seema Malhotra
I thank the hon. and learned Lady for her comments. Perhaps she will say what she is doing for the 6,300 families in her constituency who will be affected by these changes. Perhaps she should speak to those in her party who have raised serious concerns about the changes, including Lord Tebbit.
Before the debate on the statutory instrument in September, the Government chose either not to perform or not to publish an impact assessment of these changes, so one was not available for the debate in the Commons. The Exchequer Secretary seemed to suggest that they had done that, when clearly they had not. The distributional analysis that the Chancellor finally submitted to the Secondary Legislation Scrutiny Committee in the other place last week has been described by my right hon. Friend the Member for Birkenhead (Frank Field), the Chair of the Work and Pensions Committee, as a “sleight of hand” and an attempt to “bamboozle”.
Seema Malhotra
I will make a little more progress first.
It is worth reminding hon. Members exactly what the Government propose to do with these changes. First, they will effectively halve the threshold at which claimants start to see their tax credits award tapered away, from £6,420 a year to £3,850. Secondly, they will increase the rate at which the award is tapered away to zero. That means that for every pound that is earned above the threshold, their award will be tapered away by 48p. Previously, the rate was 41p. House of Commons figures show that a family with two children and two parents who earn the minimum wage will see a fall in their income of more than £1,800 next year. By the end of the Parliament, that family will lose a devastating £7,700.
Catherine West (Hornsey and Wood Green) (Lab)
Does my hon. Friend agree that this amounts to nothing less than a penalty for those in work? Such a work penalty is typical of this Government.
Seema Malhotra
My hon. Friend is absolutely right. The Conservative party claims to be there for the workers, but it is going against everything that hard-working families are doing to make ends meet. It is time for the Government to rethink what they are doing and stand up for those they pretended to stand up for at the time of the election.
Seema Malhotra
I will give way in a moment.
A family with one earner on the minimum wage will be more than £1,500 worse off next year and almost £7,000 worse off over the Parliament.
The claim that we have heard most is that working families should not be concerned because the minimum wage will see significant increases in the next few years. As the Institute for Fiscal Studies has made abundantly clear, the claim that those increases will close the gap is arithmetically impossible. Paul Johnson, the director of the IFS, summed it up:
“The key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients”.
He said:
“Unequivocally, tax credit recipients in work will be made worse off by the measures in the budget on average.”
Andy Slaughter (Hammersmith) (Lab)
There are 4,200 working families in my constituency who will be affected. Given that the Prime Minister said before the election that he would not cut tax credits, does my hon. Friend think that this House and the other place would be right to vote down the proposals?
Seema Malhotra
My hon. Friend is absolutely right. I hope that Government Members will make that decision today.
The IFS has found that, as a result of all the tax and benefit changes in the summer Budget, by 2020, households with incomes in the second, third and fourth deciles will be worse off by £1,250, £860 and £530 respectively. Indeed, the Resolution Foundation’s recent report showed that the changes are likely to result in 200,000 more children being pushed into poverty at a time when the Welfare and Work Bill is effectively erasing Labour’s Child Poverty Act 2010, the duty in it to eradicate child poverty by 2020 and the measures to monitor child poverty. Perhaps a Government Member would like to ask their own Front Benchers a question about that.
Seema Malhotra
Perhaps the hon. Gentleman should ask what will happen to the 4,500 working families in his constituency who are set to see an average cut in their household income of more than £1,300. What impact will that have on whether they can keep their home, put food on the table or afford clothes for their children? I suspect that he will have a lot to answer for in his constituency.
A million single parents who are in work are set to be £1,000 a year worse off and 1.5 million married women will be £600 poorer.
Seema Malhotra
I will in a moment.
These cuts will also hit the self-employed who are on tax credits. Since 2010, self-employment has grown at twice the rate of overall employment. We know that, on average, self-employed people earn 40% to 50% less than those who are in regular employment.
Seema Malhotra
I will in a moment.
This weekend, The Observer included the case of somebody in Manchester who is self-employed. He expects his tax credits to be reduced to virtually nothing from next April. I hope that in his response, the Exchequer Secretary will be straight about what these changes mean for the self-employed.
Kwasi Kwarteng
I thank my constituency neighbour for giving way. We have heard an impressive array of statistics, but does the hon. Lady have one proposal for reducing the deficit?
Seema Malhotra
That is absolutely incredible. We have answered that point in the media and in articles, and I do not need to keep going over that ground. The hon. Gentleman might want to respond to the 3,000 families in his constituency who will be hit by these changes, and say how he will reply to institutions that have done hard research into these matters. The Government have chosen to carry out no impact assessment for what has been described as an “array of statistics”. This debate is about people’s lives, and the hon. Gentleman should stand up for his constituents, just as Labour Members will do when voting in the Lobby tonight—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The hon. Lady is clearly not giving way and hon. Members are wasting time in the debate.
Seema Malhotra
It is clear that the Conservative party is in disarray. Lord Tebbit, the hon. Members for Uxbridge and South Ruislip (Boris Johnson) and for Telford (Lucy Allan), and others, are calling for reforms, or for the Chancellor to think again.
Lucy Allan (Telford) (Con)
Does the hon. Lady agree that taxpayers’ money should be targeted at those most in need, and not used routinely to top up low pay?
Seema Malhotra
I think that comment represents a misunderstanding about what tax credits are supposed to help with. I hope that the hon. Lady’s Government will be more successful this Parliament in increasing wages—hopefully to a level where people start to come off tax credits—but they do not have a very good record to date. As I said, the number of people earning less than the living wage has risen by more than 45% since 2009.
Clive Efford (Eltham) (Lab)
In their interventions so far, Conservative Members have already conceded the argument. They started by saying that low-paid workers were going to be better off, and that Britain needs a pay rise and will get one. They have conceded that argument, but now it is all about choices and how tough it will be to balance the books. They have lost the argument.
Seema Malhotra
My hon. Friend is right, and as far as the public are concerned Conservative Members have lost the argument. It is now time for their constituents to ensure that they support the changes that we propose, and that they hold the Government to account at the next election.
The right hon. Member for Haltemprice and Howden (Mr Davis) has described the use of a statutory instrument as an attempt to avoid scrutiny, and on 6 October he said:
“The Government has to balance the books, but the burden shouldn’t be on the poorest…I hope this doesn’t turn out to be our poll tax.”
Even the Bow Group, which perhaps speaks for several Conservative Members who may not be able to speak today, has said:
“Tax Credit cuts could damage Britain’s entrepreneurial economy and the Conservative Party’s claim to be the workers party”.
Caroline Lucas (Brighton, Pavilion) (Green)
The hon. Lady is making a powerful case. In my constituency more than 4,500 families will be affected, in particular because of sky-high private sector rents. Does she agree that people will be hit particularly hard when cuts combine with the fact that Governments have not taken action to bring down rents in the private sector?
Seema Malhotra
The hon. Lady is right, and cuts are being made without any recognition of rising rents and the cost of living that affects household budgets. We cannot make such a move without thinking about the impact on family budgets, particularly of rents.
Several hon. Members rose—
Seema Malhotra
I will continue for a moment and then I will give way.
New House of Commons Library analysis that we have published today shows that at least £0.5 billion will be lost to the London economy if cuts to tax credits come into effect, and that will hit nearly 410,000 low and middle-income working families in London. In my borough of Hounslow, 13,500 working families will be affected, and the local economy will be hit by about £17.5 million of reduced purchasing power if the cuts come into effect.
Angela Rayner (Ashton-under-Lyne) (Lab)
I know from many conversations that I have held with Conservative Members that they agree that aspiration is key. I was on tax credits before coming to this place, and I also benefited from further education, so I plead with hon. Members to consider that. Does my hon. Friend agree that by cutting tax credits and further education the Government are preventing people like me from having those aspirations?
Seema Malhotra
My hon. Friend makes a powerful point and indicates through her own story how this anti-aspiration measure will hit families that are working hard not just for themselves, but to give their children a chance in the future. As they continue to struggle, these cuts will impact on those children, and it is projected that 200,000 more children will be moved into poverty.
I am conscious that many Members want to speak, so in conclusion I will say that this measure is set to hit the poorest the hardest. The Prime Minister is fond of saying that he supports those who work hard and do the right thing. His Conservative election manifesto stated:
“The British character is renewed every day by the millions who work hard, raise their families and care for those who need help, do the right thing and make this country what it is.”
He also said:
“We are fixing the economy so that everyone feels the benefit”,
but at the moment that could not be further from the truth. Far from being the party of the common ground or of workers, this move shows that the Government are no longer interested even in knowing how families are set to be hit by the choices they make. This decision is not just poor politics but poor economics, and families are concerned about what the impact will be as they struggle with paying the rent or their mortgage, and with putting food on the table at a time when food bank use continues to rise. The problem of low pay in the UK persists, and changes to tax credits are about to make things much worse. With 6 million people not earning enough to cover the basic costs of living, tackling in-work poverty is crucial, but we should not do that by making matters worse and hitting those who need help the most.
The Government have chosen to introduce these changes without even a transition plan, and when cross-Benchers and bishops start to express concern in the other place, we hear reports that No. 10 will threaten to suspend the other place if Members table and win a fatal motion. There is a chance today for every Member of the House to do the right thing and stand up for their constituents, by putting families in their constituency first and their party second. I urge Conservative Members to vote with us in the Aye Lobby today.