Tax Credits

Will Quince Excerpts

Thursday 29th October 2015 Commons Chamber

[Will Quince (Colchester) (Con)]

I support the principle of mitigating the effects of the proposed tax credit changes on the lowest-paid workers. I agree with my hon. Friend the Member for Stevenage (Stephen McPartland) that sometimes even friends need to be critical, as long as they are constructive. I would also like to thank the right hon. Member for Birkenhead (Frank Field) for securing the debate.

I support the principle of reforms to tax credits. We need to get on top of our welfare bills. This financial year, central Government will spend more on debt interest repayments than on the education of our children or on the defence of our nation. We cannot keep on spending indefinitely. As my hon. Friend the Member for South Cambridgeshire (Heidi Allen) has said, we cannot keep adding to our debts and asking our children to pay them off. The hon. Member for Ogmore (Huw Irranca-Davies) talked about doing no harm, but we must also be mindful of the harm to our constituents of not tackling the deficit and of burdening future generations with more debt. I take his substantive point, however.

The current tax credits system is not sustainable, however well-intentioned it might have been. Costs have skyrocketed from £4 billion in 1999 to £30 billion this year. This has had the effect of depressing basic wages and subsidising businesses, instead of driving investment in skills and training. The former Labour Chancellor, Alistair Darling, has said of tax credits:

“One of the unintended consequences is that we are now subsidising lower wages in a way that was never intended”.

We all know that the welfare system provides a safety net for the most vulnerable in our society and for those on the lowest incomes. I fully support policies that move Britain to a high-wage, low-tax, low-welfare economy, but I am concerned that the proposed tax credit changes could be very tough on some of our lowest-paid families. More needs to be done to ease the transition for those losing tax credits next year.

Many families who have worked hard and done the right thing—everything we have asked them to do—will immediately be hit with a drop in their income next year. The Government have introduced a package of measures to increase the pay of the lowest paid: the new national living wage, which will go up to £9 by 2020; the doubling of free childcare—although, having a child of three and a half, I take the point of the right hon. Member for Don Valley (Caroline Flint) that the measure is restricted to three and four-year-olds; and the raising of the income tax personal allowance to £12,500. None the less, I am well aware that many of those actions do not take effect immediately in 2016.

I am also concerned about the effect that the tax credit cuts might have on some of those who work in the public sector. Like my hon. Friend the Member for Stevenage, I have a wife who is also a teacher. Many of the biggest employers in Colchester are in the public sector. Public sector pay over the next few years has been frozen at 1%, which means that many of these workers who rely on tax credits to top up their income will not benefit from rises in private sector pay. Moreover, cost-saving measures in the public sector mean that those workers cannot easily take on more hours to raise their income.

I have had concerns about some of these measures since the summer Budget and have met the Chancellor and Ministers to raise my points with them. They have listened carefully to what I have had to say, and I know that they are alive to the concerns of Members who want to ensure that the most vulnerable and the lowest paid are protected. That is why I welcome the news that the Chancellor will be taking steps to ease the transition of some of these changes on the poorest workers and those on the lowest incomes. I look forward to seeing more detail on the extra measures in the autumn statement.

In general, I urge Treasury Ministers carefully to assess how we can introduce transitional measures. That will give families more time to adjust to the changes in tax credits and allow time for the additional policies that I have mentioned, such as free childcare and progressive rises in the living wage over this Parliament, to boost families’ incomes.

I care deeply about helping the lowest paid and making sure that work always pays. I welcome the thrust of the Government’s drive to move us to a low-welfare, low-tax, high-wage economy, but more consideration needs to be given to those low-paid workers who are trying to do the right thing and who could be caught with a gap in their income when tax credit changes kick-in.