Budget Resolutions and Economic Situation

Debate between Catherine West and Chris Leslie

Thursday 9th July 2015 Commons Chamber

[Chris Leslie]

I have given way quite generously to Government Members and I would like to make some progress, if they do not mind.

The Institute for Fiscal Studies confirms that the introduction of tax credits played an extremely powerful part in the movement in the child poverty figures. The Conservatives cannot call themselves the party of working people, as they now do, when their Budget leaves millions of working people worse off. How exactly does decreasing their work-related assistance help those who become too sick to work and are on employment and support allowance? Does that policy not run the risk of increasing the number of people who are placed in the more expensive ESA support group, as has been the case in recent years, when the Government have overspent by £4.5 billion on their original plans?

What motivation has a council tenant to get a better job and work for promotion if he or she is on the living wage and the Government take that money away immediately? That is the crude nature of the rent rise that they are proposing. Seeking a contribution from higher earners is, of course, important, and it is one solution, but, as the Government’s own analysis pointed out before the election, going about it in the wrong way will result in perverse incentives and penalties for work.

This was more a Budget of tax rises than a Budget of tax cuts. A rise of more than 50% in the rate of insurance premium tax to raise £8 billion over this Parliament will be a tax hit on the insurance for the family home, the family holiday and the family car. The new car tax will be a surprise that raises £1.5 billion by the end of this Parliament, and—much to the Secretary of State’s surprise—the Government have shelved the childcare tax support that was due this summer until 2017, even if the Secretary of State has now brought that forward by a year.

[Catherine West (Hornsey and Wood Green) (Lab)]

Does my hon. Friend agree that these measures will further divide communities in high-value constituencies such as those in London, where there are huge gaps between incomes—people with very low incomes are living in the same constituencies as people with very high incomes—and will increase our sense of massive inequality? One of the problems is the failure to deal with the need for a proper living wage. I have experience of introducing a living wage, and it is very hard work. It takes years to achieve, and it means working with businesses. [Interruption.]

[Chris Leslie]

I do not think that was a very polite reaction from Conservative Members. My hon. Friend worked very hard during her time in local government to try to support the low-paid by introducing a London living wage, and I think it commendable that local authorities and businesses in London, in particular, have tried to make headway with that. Of course, a real living wage now needs to be about £12 to compensate for the reduction in tax credits.