Tax Credits

Stella Creasy Excerpts

Tuesday 20th October 2015 Commons Chamber

[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.

--- Later in debate ---

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I am pleased to follow the hon. Member for Erewash (Maggie Throup) because I see a very different situation. I genuinely believe that the different situations that we see and the consequences of the tax credit cuts that the Government are introducing speak volumes about the choices that the British people face.

I want to take up the challenge set by the right hon. and learned Member for Rushcliffe (Mr Clarke). He rightly said that those of us on this side of the House are not an Opposition. I agree with him: we are an alternative. I want to set out what being an alternative means and why we would take different decisions on tax credits.

First and foremost, as my hon. Friend the Member for Streatham (Mr Umunna) pointed out—I am sad he is not here—the order in which change happens is crucial to the impact that it has. There is general agreement in the House that we all want to see a higher wage, lower welfare economy and higher productivity. Surely the test of every change the Government make should be whether it will achieve those things. The simple answer is that this change will not.

The evidence from the Institute for Fiscal Studies shows that none of the Government’s changes to mitigate the impact of the cuts will raise family living standards. As the right hon. and learned Member for Rushcliffe pointed out, employers are raising wages. I am a little more cynical than him and suspect that they are doing so because changes in the law are coming, rather than out of benign munificence and a recognition of the benefits to productivity of paying a higher wage.

Nevertheless, the order in which the Government are undertaking the changes will make all the difference to the people in this country. They could decide to change the order and introduce the so-called living wage first, then look at the tax credit cuts. That would make a difference because of one matter that was sorely absent from the Exchequer Secretary’s contribution. I am surprised that he did not mention it, given that he used to be an expert on it. He is presiding over an economy in which personal debt is rising at an alarming rate. The Minister looks quizzical. He says that the burden of the Government’s changes is being distributed equally, but the burden of personal debt is not equally distributed in this country, as we see at first hand in our communities. We see families for whom borrowing on a credit card or from friends and family, or taking out a payday loan, is the only way that they can make ends meet.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My hon. Friend is making a fantastic speech and I, too, am confused about why the Minister is looking so perplexed. The Office for Budget Responsibility stated that because of measures introduced in the Chancellor’s Budget, unsecured borrowing will rise by £45 billion by the next election. My hon. Friend’s point is pertinent to the debate.

[Stella Creasy]

The Minister kept talking about the amount of public debt that he wanted to attribute to each household, but average unsecured personal debt is now £10,000 per household. Given the vulnerability to which families are exposed when they have that level of unsecured debt, will the changes make it more or less likely that such personal debt will rise? No one in the House would argue that the changes as currently constituted will not lead to a rise in personal debt to families, and we know the consequences of that. I pay tribute to the hon. Member for South Cambridgeshire (Heidi Allen) who honestly and openly set out the consequences of debt. She explained the worries she has when she sees families who are struggling with debt, and Labour Members share those concerns.

[Suella Fernandes (Fareham) (Con)]

I applaud the hon. Lady’s passion but she is missing the context. The changes are part of a package that include a national minimum wage, 30 hours of free childcare, and a lock on tax rises. Taking that into account, wages and personal income will rise—does she not see that?

--- Later in debate ---

[Stella Creasy]

I beg the hon. Lady to read research from the independent Institute for Fiscal Studies that shows that none of those changes will compensate for the difference in income. I ask her to look into her heart and consider whether families in her constituency will end up borrowing because they find that there is even more month at the end of their money as a result of these changes and the way they are being introduced.

I understand the point raised by the right hon. and learned Member for Rushcliffe but there are alternative choices. We all want the deficit to go down—some of us do not want to see Governments borrowing from banks anymore—and we recognise the problems in our economy. Some of us are deeply concerned about the consequences for families of having that level of personal debt hanging over their heads. When interest rates rise—and they will—a 2% increase will lead to an extra £1,000 a year in interest payments alone that families will have to find. Families in other constituencies might have £1,000 hanging around, but not those in my constituency. With one third of people in this country having no savings at all, the changes as they stand will eat not into people’s savings or borrowings, but into their debt. That is the consequence we are facing and we need alternative ways to deal with that.

Let me offer some alternative ideas for how we could cut the cake and reduce this country’s debt. The Government could make changes to inheritance tax, although I recognise that Conservative Members do not like that idea. Alternatively, let us look at capital gains tax. The Chancellor made great play of putting capital gains tax on the sale of commercial property, but he left open a loophole for residential property. Were the Government to close that gap, none of these changes would need to take place.

Debt is a problem in itself. This Government are paying out £10 billion in public finance initiative debt repayments. Were they to get serious about renegotiating PFI debt—they would receive support for that from those on the Opposition Benches—we could save that money. The speech by the hon. Member for South Cambridgeshire was powerful because there are always choices to be made. Labour Members would make different choices and put first those people for whom £10,000 of unsecured personal debt means not only suffering the indignity of going to a food bank or going hungry every day, but that they cannot make long-term choices for their family’s future, or even entertain the idea of getting on the housing ladder. They will not be able to pay the social care costs that the hon. Member for Erewash spoke about, or let their children go into further or higher education, because they simply cannot afford it. We see the potential that will be wasted as a result.

We want to make choices that will help those families, help the economy to be more productive, and help this country truly to bounce back, but that is not the choice being made by the Government tonight. I urge Government Members who recognise the debt held in their communities and understand that this measure will make it worse not better, to think again and to work with us on when and how these changes come in and how we can make sure everyone benefits from a higher wage, higher productivity economy. I promise them that the families in trouble who are coming to them now need and deserve nothing less.