Tax Avoidance and Evasion
Dawn Butler Excerpts(9 years, 10 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
What has been highlighted by the publication of the so-called Panama papers is that we do not have a fair tax system. We are not all in it together, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said so eloquently. Those exposed by this scandal have knowingly exploited tax avoidance measures for their own financial gain. While it is not technically illegal, aggressive tax avoidance has been argued to be against the spirit and intention of the law and of the will of this House. What is really shocking is that Heads of Government are involved, including our own Prime Minister, and that poses fundamental questions about politics and politicians. Once again, it threatens public confidence and trust in politics and politicians. These people are meant to be providing leadership to our citizens, and such involvement calls into question their attitudes and values, as well as their motives for seeking public office.
Dawn Butler (Brent Central) (Lab)
Does my hon. Friend think the comments that have been made—for instance, the right hon. Member for Rutland and Melton (Sir Alan Duncan) said, “If you are not wealthy, you are a low achiever”—have added to the public’s distrust of politicians in this place?
Mr David Anderson (Blaydon) (Lab)
First, let me reply to a few points that have been raised today. I agree that it was utterly wrong that a cleaner was paying more tax than a hedge fund manager—it stank. But thank God that cleaner was getting the national minimum wage, which was resisted by the Conservative party and the Liberal Democrats: £3.60 instead of £1.90—that is the truth. I welcome the fact that low-paid people have been taken out of paying tax, but we must recognise that 1 million people in this country are on zero-hours contracts. That is 2.5% of the workforce who would not have been taxed no matter what the tax threshold was because their pay is so abysmal. Five million public sector workers in this country have seen their tax threshold rise, but they have also had their pay frozen or cut for the last eight years. So we must look at the whole picture, and not just say that the tax threshold has risen and therefore everything is okay. It isn’t true.
The Prime Minister was right to say on Monday that nobody should traduce his dad. That was wrong, and the attack on his mother because she gave him a gift was not right either. It is normal and right that parents want to help their kids—all parents want to do that. In principle, if someone’s dad or mother has expertise in any field, we would expect them to use that knowledge on behalf of their kids. That applies to stockbrokers as much as it does to stockmen, and to bakers as much as to bankers.
The real problem that the leak has exposed is the huge range of opportunities that are open only to the rich, wealthy and powerful in this nation, which proves that we simply are not all in this together. Whichever way this is dressed up, it is clear that those in the know have not only the opportunity or good fortune to make money in the first place, but when they get that money, many more avenues are open to them to allow them to keep their hands on it. That is one reason why eyebrows were raised across the country and in the House when Conservative Members pushed through cuts to income tax from 50% to 45%, and huge rises in the level at which inheritance tax cuts in, because they personally would gain from that. If anyone else did that we would say it was criminal, but those Members stood to gain personally from that measure.
The Prime Minister earns £150,000 a year doing a job that we all understand is really hard. He tops it up with £50,000 a year from renting out his house, and he gets another £40,000 a year from his savings and investments. He then turns round and says to poor people in this country, “I’m sorry, mate, but you’ve got to cough up another £14 a week for your bedroom tax”; or a disabled person who struggles to exist on benefits is told, “You don’t need any more money than a fit person in your position, so you’re going to have to give us back £30 a week.” And what about the anger of 5 million public servants in this country who have been told time and again—this year for the eighth year running—“You must accept a real-terms cut in your living standards”?
Dawn Butler
I had a conversation with a Conservative Member who suggested to me that Members should declare their unearned earnings. Does my hon. Friend know what that means?
DRAFT Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2016
Dawn Butler Excerpts(9 years, 11 months ago)
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Rebecca Long Bailey (Salford and Eccles) (Lab)
It is a pleasure to serve under your chairmanship, Sir Alan, and to debate such an important issue with the Minister.
As all hon. Members here will be aware, the Chancellor deviated—shall we say?—from his original plan for sweeping cuts to tax credits after ferocious opposition from Opposition Members and from some Members of his own party and, of course, after defeat in the House of Lords. However, we are now discovering that the deviation is not quite what we had hoped for; arguably, most of the cuts have been delayed and others are still going ahead.
As we have heard, the regulations seek to cut the income rise disregard, which is the buffer zone that protects families from incurring financial hardship as a result of repaying tax credits in the event that they earn slightly more than anticipated in any given year. It is an element of leeway in the system that allows a household’s income to rise a certain amount in a financial year without affecting the household’s tax credit award for that year.
A household’s tax credit award for the year ahead is based on income in the previous financial year. HMRC finalises the tax credits at the end of the year to reflect the actual income during the course of that year. If income was higher than predicted, the Government deem that to be an overpayment—effectively a debt that must be repaid—which will be automatically deducted from the claimant’s tax credit award for the next year. If the debt is greater than the award the Government will seek to recover it, in some cases potentially using private debt collectors. It is not unreasonable to expect people to repay any tax credits if they earn more than anticipated. However, the Government’s proposed approach to recover such sums appears to present a number of issues, which I hope that the Minister will carefully consider before reaching any conclusions on whether to recommend that the Committee pass the regulations.
Many families will see a change in income for various reasons over the course of a year. A member of the household may find a job or increase their working hours, exactly as the Government encourage them to do. The income rise disregard ensures that a small rise in income is not immediately clawed back, leaving low-paid families in sudden debt. It is important to make it clear that that does not mean that a household’s tax credit award remains unchanged for the following financial year, but simply that they do not have to repay any overpayment that may have occurred as a result of income rising by a small amount during the financial year just ended. The coalition Government had already cut the disregard from £25,000 to £10,000, and then halved that to £5,000 as recently as 2013. Today’s regulations will halve it again. The number of families breaching the limit has gone from 13,000, when the Tory-led coalition took office, to nearly 350,000 in 2013-14—the last year for which figures have been provided.
I ask the Minster to explain the rationale behind the £2,500 threshold. For example, has this figure been determined pursuant to an evidence-based review of all tax claimants’ increases in earnings over a specified period, resulting in a median threshold? Sadly, I do not believe that is the case. I understand that the figure is simply a return to the figure used at the inception of the income disregard in 2003. Although this figure was deemed reasonable at the time, it became immediately obvious to HMRC and the Treasury that it was too sensitive to small fluctuations in hours worked and, as such, was difficult for HMRC to manage efficiently. It also caused disproportionate hardship to many families.
Leaving the management of the overpayments system to one side for a moment, the Opposition are seriously concerned about the impact of the reduced figure of £2,500 on low-income families. The Government have stated that they champion the strivers who want to work hard and get on, but cutting the income rise disregard to such a low level means that people on lower pay are particularly vulnerable to being hit with an overpayment debt should they get a new job, work more hours, or earn a small pay rise or promotion. We are therefore concerned that the change could create a disincentive for people on low pay to take on more hours or move into full time work through fear of being hit with an overpayment debt.
The proposed reduction presents a real dilemma to families, especially those with members in jobs in which additional hours are less stable, such as zero-hours contracts, or where overtime might be offered from time to time. There might be a stark choice for these families: either work a few more hours from time to time and risk future repayments being imposed on the basis of a predicted salary, or simply decline the offer of extra work and ensure stability in long-term financial planning.
Dawn Butler (Brent Central) (Lab)
Is my hon. Friend aware of the extent of the impact assessment that the Government have undertaken on these new limits?
Rebecca Long Bailey
My hon. Friend will hear throughout my speech that I consider that to be a significant issue, which I hope the Minister will address today.
I want to make the Minister aware that our concerns are exacerbated by what can only be described as the Government’s continued silence on the potential impact of these cuts. To date, I am not aware of the publication of a specific impact assessment for these regulations or of an equality impact assessment. The fact that the Government have provided minimal information is reflected in an exchange between the Government and the Lords Secondary Legislation Scrutiny Committee on 28 January. The memorandum submitted by the Treasury stated:
“Next year there are expected to be 800,000 claimants with a reduced award as a result of their income increasing—none will be cash losers”.
But that did not provide an answer to the question posed by the Committee:
“Can you…give an indication of how many people will be affected by the change…and what the financial impact on those people is likely to be?”
I feel equally starved of information in the light of the responses I have received to my own written parliamentary questions. Since the autumn statement in which this cut was first outlined, I have tabled numerous written questions to ask for the details of its impact. I requested the modelling or case studies the Treasury undertook when formulating the policy; the impact on some example claimants; the total numbers likely to be affected; the estimated average change in tax credit award as a result of the change; and the evidential basis for the statement in the memorandum submitted to the other place that there would be no cash losers from this reduction.
I am saddened to inform the Minister that I have not received any satisfactory answers to my questions or to my requests for the case studies used to formulate this policy. I would have expected such case studies to have been undertaken as a matter of course, in the interests of acting prudently, before even drafting the regulations. It should simply have been a case of passing on the information used by the Government as their evidential base for making the suggested changes to the income disregard in the first instance. The Minister may be able to provide such evidence today—I would wholeheartedly welcome that—but from the information I have been able to glean so far, the only example provided was someone who earned £1 over the new disregard. I must flag up to the Minister that the Government have yet to confirm whether they have conducted an equality impact assessment.
I have no doubt that the Minister will understand my feelings of exasperation. Will he confirm today that a proper impact analysis and an equality impact assessment have been carried out in formulating the policy, or are the Government unaware of what the impact may be? The Minister will be pleased to know that from time to time I endeavour to be helpful to him in solving such conundrums. I have commissioned a bit of evidence-based research into the matter from the Library, and it is indeed illuminating. Its analysis of a household with one working adult on the current national minimum wage, over the age of 25 and with two children, demonstrates that, if that adult’s working hours were increased from 16 to 30 and then to 35 over successive tax years, the new disregard would be triggered and an overpayment incurred. That would then lead to their net income actually going down in at least one year, despite working more hours and earning more pay. Indeed, they would have lost £1,000 of income in at least one year, compared with the same situation under the current disregard. The Government’s claim that there are no cash losers would not be of much comfort to that family. Indeed, it would be interesting if the Minister expanded on what the Government mean by no cash losers, because that case study seems to demonstrate that there will be circumstances in which claimants who are increasing their pay could actually end up with a lower income for at least the year in question. That is just one example, of course, but an entirely plausible one.
Unfortunately, we still do not know the Government’s estimate of the maximum amount a family could lose. It would be helpful if the Minister provided that figure today; if not, perhaps he will say why it cannot be provided. He will no doubt appreciate that my hon. Friends and I are not prepared to allow legislation to be enacted that will affect 800,000 working people, without first knowing the potential impact on those people and without evidence that the Government have carried out due analysis.
To return to the management of the overpayments system, the Government have claimed that the updated real-time information system for pay-as-you-earn will make HMRC more sensitive to changes in income throughout the financial year, so that tax credit payments can be adjusted quickly, avoiding a build-up of debt. However, evidence suggests that the system is no more sensitive than it was in 2003-05, when the overpayments were recognised by all sides as excessive, peaking at £1.9 billion. The then Conservative Opposition were highly critical, and for our part, we recognise that there were problems with the initial introduction of the system. Unfortunately, it seems that while we have learnt the lessons, this Government want to make their own mistakes. Perhaps the Minister can reassure me that those fears are unfounded.
Since the coalition Government slashed the disregard to £5,000, the total value of overpayments has rocketed and again exceeded the £1.9 billion that caused the initial crisis. That does not suggest to me that HMRC is any more efficient at adjusting tax credit awards now than it was then. Cutting the disregard by half again adds further administrative burden for HMRC at a time when the Government are closing HMRC offices and reducing staffing levels across the country.
Campaigns such as Child Poverty Action Group have highlighted that people on lower pay tend to see fluctuations in their income from month to month. If the RTI does in fact prove to be effective, that could create huge administrative issues on its own, as people have their tax credit awards stopped, cut and restarted from month to month. Indeed, Mark Willis from Child Poverty Action Group has said:
“It doesn’t really matter what someone’s monthly income is... You always need an accurate estimate of annual income when you’re making these in-year changes. And no-one can really accurately predict the future, especially as we’re often talking here about people with fluctuating earnings”.
The impact on low-paid workers is particularly stark when compared with the money spent on the Chancellor’s tax cuts for the extremely wealthy. For instance, those selling a stake in a business of up to £10 million now pay only 10% capital gains tax on their profits—a tax relief worth £3 billion a year, around three times the amount estimated and dwarfing the savings made by the cut to tax credits. The bulk of this money goes to a very different group of people. The latest analysis suggests that the full £1.8 billion went to just 3,000 individuals who enjoyed a multimillion pound bonanza from selling shares—an incredible £600,000 each.
In conclusion, the Opposition are not sufficiently satisfied that the Government have considered, or indeed carried out adequate analysis of, the impact of the regulations. If indeed they have, I would ask that the information is shared and the passage of the regulations through this House paused until such time as Members have had the opportunity to review such information.
We are further concerned that setting the income rise disregard at such a low level makes people on low pay more vulnerable to accruing an overpayment debt simply by doing what the Government are asking of them. That is a disincentive for those in low-paid jobs to work harder and earn more, and is a punishment for doing so. Quite simply, working people have already suffered enough under this Government, and we will therefore oppose the regulations.
Damian Hinds
I thank everyone who has taken part in the debate, which was constructive and useful. I particularly thank the hon. Member for Salford and Eccles, who speaks for the Opposition, for a measured and constructive speech in which she put some reasonable points and questions.
Alongside the broader steps that the Government are taking on long-term reform to welfare, the creation of jobs, and making work pay, the regulations will reduce the unfairness in the tax credits system. The reduction to the income rise disregard will decrease the instances where one family receives a higher tax credit award than another family with precisely the same income and the same circumstances. That is a clear point of fairness, and I hope that hon. Members can agree that on principle it is the right thing to do.
As I have already set out, the provision returns the income rise disregard to the original level; but there is a key difference, compared with 2003. This time the Government are making sure that the system is able to cope with fluctuations in family incomes. The answer to one of the parliamentary questions tabled by the hon. Member for Salford and Eccles would be that we estimate that the income of about 800,000 claimants will increase by more than £2,500 in year, and that therefore they will have an adjustment to their tax credit payments. Those people are doing the right thing, as a number of Opposition Members have said. They are working hard to increase their income. No one will have a cash loss, because their pay rise will always exceed any change to their tax credit award in year; so there will still be a clear incentive for working claimants to increase their earnings, as they will take home more money.
Dawn Butler
As there is no impact assessment, does the Minister agree that the measure will probably affect women and children more than any other group?
Damian Hinds
The 800,000 recipients are households, and the majority of them will be couples. The majority of those couples will be male and female couples. However, let us be clear, come the end of the tax year, whatever the income rise disregard and with or without today’s statutory instrument, their tax credit award will be adjusted downwards to take account of their higher income—by which time they may, of course, have become accustomed to what was to be a temporarily higher award.
The measure ensures fairness to the taxpayer, because a system of large income disregards unnecessarily increases costs. The Exchequer—hon. Members’ constituents— bears the cost of paying tax credit recipients a much higher award than they would get if their increased income were taken into account. Rather than continuing with that, the Government are taking action to make tax credits more responsive to income changes, which ensures that more claimants receive the entitlement that more closely reflects their actual income.
Real-time information will ensure that the changes to income can be identified earlier. From September 2016, the majority of claimants will be prompted to report increases of income to HMRC through a text message, voice message or letter, with the default action, in the event of non-response, that the award will be adjusted to reflect the income change. That will mitigate the likelihood of overpayments, and will make clear to claimants, in a fair way, their responsibility to report an increase in their income.
HMRC will provide information to those affected by the change, in tax credits renewals packs and updated guidance and notes to claimants, as well as in briefing lines for the tax credit helpline, to ensure that claimants are aware of the change and what it means for their tax credit award. The Government are committed to seeing the change implemented correctly, and are taking a considered approach to both the operational IT delivery and engagement with claimants, to ensure there will be a reduction in tax credit overpayments and the number of claimants falling into debt.
I will now answer some of the points raised by the Opposition during the debate. The hon. Member for Salford and Eccles asked about the rationale for the precise number, and we have had a similar discussion in previous debates. There is never one single magic number that can be applied to such a threshold.
As the hon. Lady said, the figure of £2,500 brings the design of the income rise disregard back to Gordon Brown’s original figure. It is a balance between on the one hand making sure that the system adjusts as quickly and smoothly as possible to someone’s rise in income—to reduce the fall they would otherwise experience at the end of the tax year—and on the other not having to make an administrative change, and change the tax credit award, when there is a very small increase, such as from an annual pay award or a small increase in hours. The big change compared with 2003 is real-time information. To answer the hon. Member for City of Chester, real-time information is already operational and has been since 2013. A lot of the debates he mentioned have happened, but it is an important part of the continuing development of our taxation system.
The hon. Members for Salford and Eccles and for Banff and Buchan mentioned people on zero-hours contracts. I think it is always worth repeating this point because sometimes one could get the impression from listening to the Opposition that people on zero-hours contracts are the overwhelming majority when they are not; something like 2.5% rely on a zero-hours contract. Some of those are coming back into the workplace, and some of them are students. On average, zero-hours contracts deliver 25 hours of work a week.
The important point, which also applies to later in the debate, is that tax credits are still based on an annualised estimate of income. It is not necessarily the case that every single time there is a change in someone’s hours in a particular month they will have to say that this year’s permanence level of annualised income has changed. Through the RTI system there is an opportunity for those on PAYE to be prompted to do so, and others still can do so. The point is what they expect their total annual income to be. That is what the tax credit architecture of the system is based on today. It has always been based on an annual view of income.
The hon. Member for Salford and Eccles also asked how we define no cash losers. It is very simple. People’s pay is going up, which is a good thing. Because the tax credits award cannot go down by more than the pay has gone up, therefore these people will be better off.
Oral Answers to Questions
Dawn Butler Excerpts(9 years, 11 months ago)
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Greg Hands
The Chancellor announced in the spending review that we would be investing more in cyber and that Cheltenham would see those benefits. My hon. Friend is right to praise the employment picture and performance in Cheltenham. It has seen more than 4,000 people get into work, as well as 3,000 fewer people in unemployment. Across the UK as a whole, the Office for Budget Responsibility forecast an increase in employment of 1.1 million over the course of the Parliament.
Dawn Butler (Brent Central) (Lab)
15. Christians Against Poverty has found that 72% of people on prepayment meters, who are often working, fall behind in their council tax and other bills. What assessment has been made of the impact of this kind of tariff on household debt?
Greg Hands
We monitor household debt on an ongoing basis. If the hon. Lady has specific cases she would like to show me, I am sure we could look at them and pass them on to the Department for Work and Pensions and others. I have to say, however, that overall the employment picture remains extremely strong. We have an employment rate of 74.1%. Since the first quarter of 2010, the UK employment rate has grown more than in any other G7 country.
Education (Student Support) (Amendment) Regulations 2015
Dawn Butler Excerpts(10 years, 1 month ago)
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Dawn Butler (Brent Central) (Lab)
Thank you, Mr Percy. It is a pleasure to serve under your chairmanship. Following the speech of my hon. Friend the Member for Ilford North, I want to say that many people are pleased that he is on the inside, fighting on important issues such as this. I am confident that people on the outside will be scratching their heads and wondering why such an important decision is not being debated on the Floor of the House. It relates to our future doctors, nurses and teachers, and the Government are stifling their opportunity to go to university. This Conservative Government need to think carefully about those people’s aspirations and what they are doing to them. The Institute of Fiscal Studies states:
“The replacement of maintenance grants by loans from 2016–17 will raise debt for the poorest students, but do little to improve government finances in the long run.”
For a Government who pride themselves on their economic competence, can you please explain that one? It just does not make sense. Explain why you are making a decision that you know will not help to balance the books.
The Chair
Order. May I remind the hon. Lady that when she says “you” she is referring to me and I am certainly not doing anything?
Dawn Butler
Isn’t that the truth? I would hate to put this pressure on you. You have my sincere apologies, Mr Percy.
This Government know that the change will not help to balance the books. Instead, it will cause more poor people to plummet into debt. Genuinely, what have poor people ever done to the Minister? Why are the Government intent on victimising poor people? Governments are supposed to help people succeed. Instead, this Government are sending a clear message: if you are young, disabled, a woman, black, Asian, minority ethnic, Muslim or if you are not wealthy, they are going to make sure that if you aspire to go to university, you will leave with debts of up to £53,000, compared with well-off counterparts whose debts will be £40,500, which is eye-watering enough in itself.
Rachael Maskell (York Central) (Lab/Co-op)
Does my hon. Friend agree that there will be an impact on universities? The University of York, for example, has incredible diversity and has really reached out to people from diverse backgrounds. All of that work will go to waste if the regulations are introduced.
Dawn Butler
I agree. I am sure that universities are thinking, “Help us, but not in this way.” This Government’s decision does not help them at all.
The Minister will no doubt say that students will have a little more money in their pockets as a result of the change. As with all good cons, that is partly true, but it is a little like loan sharks or payday loans. They will get a bit up front, but they will be paying an awful lot more in the end. We again see a situation in which those who can least afford to pay are being asked to pay more than their wealthier counterparts.
Cynics might say that this is a PR stunt because, as grants count towards current borrowing, the Government can remove the figure from their books by turning grants into loans so that it looks like they are borrowing less. One might call it creative accounting. The Institute for Fiscal Studies states that
“the national accounts...will fall by...£2 billion per year”,
as the shadow Minister stated, but it adds that, in
“the long run, savings will be much less”.
This is another betrayal of parents and young people in Britain.
In 2012, the coalition Government raised tuition fees, resulting in fewer people in my constituency going on to further education. One thing that helped to soften the blow, however, was the acknowledgment of the centrality of maintenance grants, which ensured that the most disadvantaged could still access higher education. Today’s proposals were not in the Conservatives’ manifesto. Why are they doing this? Why are they doing it in such a secretive, underhand, clandestine way? I just do not understand.
The National Union of Students did a great thing in fighting to force the Government to do a full equality impact assessment. That revealed a concerning risk to the participation of students from poorer backgrounds—women students, black and minority ethnic students, mature students, disabled students and Muslim students. It seems that the only group that is not really affected are white, wealthy men.
Wes Streeting
Of course, the other group that is not affected by these changes is right hon. and hon. Members who enjoyed their university education for free and who received a grant. Is it not time, when debating student finance issues, to recognise that what is good for the goose is good for the gander?
Dawn Butler
Of course. I thank my hon. Friend for that excellent intervention.
I want to end with a question to the Minister. What does he think about the equality impact assessment? [Interruption.] He is busy chatting at the moment, so I will repeat my question: what does the Minister think about the equality impact assessment?
The Chair
Before I call Paul Blomfield, I should tell him that I plan to call the Minister at about 12.40 pm. There is another Member who wishes to speak—they are not members of the Committee, but that is perfectly in order—and I would also like to call them. I call Paul Blomfield.
Joseph Johnson
In the manifesto. Read it. It is available in all good bookshops.
Let me put the regulations in context to explain why the Government believe that they strike the right balance in ensuring these two things. In the previous Parliament, the Government took significant steps to ensure that university was open to those from all backgrounds. The policy of removing the artificial cap on student numbers, announced in the autumn statement 2013, reflected Lord Robbins’ principle from half a century ago that university places
“should be available for all those who are qualified by ability and attainment”.
Striking progress on social mobility through higher education has already been made. The proportion of students from disadvantaged backgrounds entering higher education is up from 13.6% in 2009 to 18.5% in 2015. That represents the highest proportion of students from those backgrounds entering higher education ever, and it is an achievement that we can all be proud of.
We are taking further steps on social mobility, as announced in our Green Paper. The Prime Minister has set out clear ambitions to double the proportion of the most disadvantaged students starting higher education by 2020 from 2009 levels, and to increase the number of black and minority ethnic students by 20% in the same period. We will be setting out further steps as part of our response to the Green Paper and through new guidance to the director of fair access.
Joseph Johnson
I am going to press on, if the hon. Lady does not mind. As we enable more people to benefit from higher education, we must also ensure that the system remains financially sustainable. The higher education landscape has changed drastically since Robbins set out his principle. The overall higher education participation rate 50 years ago was around 5%, while it is now close to 50%. Despite the expansion in numbers, the evidence shows that graduates have continued to benefit as the demand for higher education and skills has grown in a more developed economy.
While respecting Robbins’ principle, the Government cannot fund higher education as if the changes of the past 50 years had not happened. Given the advantages accrued by those who go to university, it is not right to ask those who do not benefit directly to meet all the costs of those who do benefit from higher education.
Welfare Reform and Work Bill
Dawn Butler Excerpts(10 years, 3 months ago)
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Dawn Butler (Brent Central) (Lab)
On the effect of the cuts, Brent council has produced its own report, which highlights the fact that in Brent 13,600 households and 26,200 children will be affected.
Dr Whiteford
The hon. Lady makes a useful point. I am aware that Brent is one of the areas where the benefits cap will be particularly keenly felt, but all our big conurbations are affected, especially those where there is a large gap between the incomes of the wealthiest and people who are earning what in any other part of the country would be a decent wage, but in certain parts of the UK is not enough to live on.
I am glad to see that Labour Members have supported amendment 56, which I intend to press to a vote this evening. I shall also address some of the related amendments, 57 to 65, all of which would affect support for those distanced from the labour market, whether under employment and support allowance or universal credit. They would remove the provisions in the Bill that seek to reduce ESA for those in receipt of the work-related activity component.
I want to be absolutely clear that SNP MPs will oppose the proposals in clauses 13 and 14, which are an outright attack on people who are seriously sick, disabled, or living with debilitating long-term health problems. We are talking about people who are so seriously incapacitated that even the Government’s own stringent assessment process has deemed them unfit for work at present. Slashing support for sick people will not help them recover more quickly. In fact, money worries are one of the things that often slow down people’s recovery from serious illness. We have just heard a powerful speech delivered from the Government Benches about support for people who are terminally ill, but sometimes people recovering from illnesses that could go either way need a long time to recover, and they do not always get the support and the sympathy they need.
I am deeply concerned by the Government’s rhetoric on this matter. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) hit a raw nerve earlier when she suggested that some of the Government’s language has been deeply inappropriate, but as recently as the summer Budget the Chancellor said it was a “perverse incentive” for ESA claimants to receive more than jobseeker’s allowance. When a person has been assessed as not currently fit for work, I fail to see how reducing their income by 30 quid a week will get them into work faster.
Today, the Disability Benefits Consortium has released figures suggesting that 70% of disabled people surveyed say that the cut will make their health worse, not better. There are other important considerations to take into account, however, particularly for those with long-term disabilities or health conditions that compromise their ability to work over long periods. A lifetime of disability or the development of a long-term condition already erodes the financial assets and resilience of too many people, including carers. About one third of disabled people already live in poverty, and sick and disabled people who are unable to work—many disabled people do work, of course, and hold down steady jobs—face many costs that might not be immediately evident. For example, they might need to heat their home throughout the day at a higher temperature than would be necessary for a more active and fit person. They also incur those costs over a long period. In contrast, the vast majority of people on jobseeker’s allowance are on it for fairly short periods. About 60% of people on JSA move off the benefit within six months, whereas almost 60% of people in the work-related activity group need that support for at least two years.
Let us face it, most of us could, with a wee bit of effort, cope with a very low income for a week or two, but for those who face an extended period out of the labour market because of their health, £73 a week is just not sustainable. People will be eating poorly and will be unable to heat their home and clothe themselves adequately on such sums. Any one of us in this Chamber could find our lives, or the lives of the people we love, transformed at any moment by serious illness or disability. Earlier this afternoon someone described this as a civilised society, but in my view to be a civilised society we need an adequate safety net. We need to remember that returning to employment immediately is just not an option for people who have been deemed not currently fit for work.
I agree entirely with the Labour Front Benchers that the language the Government have been using has vilified and stigmatised sick and disabled people. Talking about “perverse incentives” implies that they are malingering. That is not the case. I do not think that a perverse incentive involves being so ill that one cannot work. When this part of the Bill was discussed in Committee, the Government seemed to suggest that they planned to use the savings from the cuts to ESA to provide additional funding for tailored employment support for disabled people. God knows, that is badly needed, given the fairly woeful performance of parts of the Work programme, but the only figure I have seen mooted by the Government is an increase of £90 million in employment support, whereas the measures are expected to save in the region of £640 million. Based even on the most rudimentary arithmetic, that seems a fairly paltry portion of the savings. I am also not convinced that it is the best use of resources given the direct adverse impacts on low-income, disabled and sick people. I would welcome detail from the Government on that, because from where we are standing now it looks extremely thin.
New clause 9 and amendments 57 to 65 all seek to reverse the proposals to introduce further conditionality on parents and responsible carers of very young children. I am particularly concerned about the potential impact on one-parent families. There is quite a lot of evidence that many lone parents are already struggling to comply with the new conditionality regime. We have seen disproportionate numbers of lone parents sanctioned, for example, and in recent days we have seen a massive U-turn by the Government in acknowledging that the sanctions regime is not working. I met representatives of One Parent Families Scotland just over a week ago and was gobsmacked by some of the examples they highlighted of struggling parents being sanctioned in extenuating and extremely difficult circumstances.
Currently, lone parents of children under five do not actively have to seek work, but they do need to attend work-focused interviews or work-related activity. Under this group of amendments, parents will be expected to be available and ready actively to seek work from the time their youngest child starts school, but not before. These proposals, which were pushed in Committee by my hon. Friend the Member for Livingston (Hannah Bardell) and supported by the lone parent charity Gingerbread, take account of the very real logistical hurdles faced by those who are parenting single handed, and do not unnecessarily penalise those children who are already more likely to be poor as a consequence of their family circumstances. The Government’s proposals increase the risk of sanctions for parents of very young children, which can only be detrimental not just for them but for our society as a whole.
That leads me on rather neatly to new clause 12, which is in my name and which I also hope to push to a vote tonight. It would compel the Secretary of State to conduct a review of the sanctions regime. I have called for an independent review previously in the House. In the last Parliament, as we have already heard, the cross-party Work and Pensions Committee called for a full independent review. Earlier today, my hon. Friend the Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) eloquently called for that review, because it is manifestly clear that the new sanctions regime is just not working, as it is failing lots of very vulnerable and disadvantaged people. It is failing not just lone parents, but sick and disabled people, particularly those with invisible or fluctuating conditions such as mental health problems. We can see the fall-out from that in the explosion in the number of food banks in our constituencies and in almost all the communities that we serve.
Last week, we had tacit acknowledgement from the Government that the system is not working when they made their U-turn, announcing their so-called “yellow card” warning scheme pilot. They also showed a new willingness to consider reviewing those classed as at risk to include homeless people and those with mental health problems. I welcome those steps; they are an important change of tone in the Government’s approach, but we need action now and not in the new year—that part of winter when these problems will already have become a lot worse. We must recognise that these steps also fall far short of the independent root-and-branch review that is really needed.
If we are to move towards a more workable system, we need a solid evidence base and to understand better how sanctions have differential impacts on claimants who are disabled, those with protected characteristics such as gender and ethnicity, those with long-term health problems, including mental health problems, and those who are bringing up bairns single handed.
Finally, new clause 10 aims to ensure that any changes to the age of eligible claimants for housing benefit must be made by primary legislation rather than by regulation through the back door. New clause 11 offers protections for young people who cannot, for whatever reason, live with their parents. The Government said that they plan to cut housing benefit for 16 to 21-year-olds, but we on the SNP Benches do not think that that should be done through regulation. It is another example of a policy for which there is a very poor evidential base and which needs proper scrutiny. Some 60% of the young people set to be affected by this measure live in social housing. In other words, they are already likely to be deemed vulnerable by their local authority. Their age should not matter, but their need for support most certainly should. Again, this seems entirely arbitrary, and, again, we have seen none of the promised detail of support for those who are particularly vulnerable. I am forced to conclude that the Government have not thought through the implications of their slash-and-burn approach to our social security system.
Our amendments in this group seek to protect low income households, sick and disabled people and children. They offer the Government a way to mitigate the worst impacts of the legislation and help us all better to understand how we can genuinely improve our social security system. I hope that the Government will take some of that on board this evening.
Helen Whately
Over the past few weeks, the Welfare Reform and Work Bill Committee, of which I am a member, has had to make some difficult decisions, but they were decisions that the electorate showed in May that they wanted us to make. The decisions that we have had to make can be seen both in this Bill and in the summer Budget.
I do not support the Opposition’s proposed new clause 2, but its wording shows that they do recognise that these reforms are part of a broader and coherent plan. They are part of a package of measures to create the kind of economy and society that people want. I am not talking about a society in which people spend years on benefits and low pay but one in which work pays, people keep more of what they earn and everyone has a chance to be better off.
Dawn Butler
In the context of people earning more, does the hon. Lady believe that we should take into the consideration the Living Wage Foundation’s report on how much the living wage should be?
Dawn Butler
On a point of order, Madam Deputy Speaker. I think that the hon. Member for Bury St Edmunds (Jo Churchill) might be inadvertently trying to mislead the House in that the living wage is actually £9.15 an hour, according to the Living Wage Foundation.
Madam Deputy Speaker (Natascha Engel)
I am afraid that I did not catch the intervention by the hon. Member for Bury St Edmunds (Jo Churchill), but I am sure that she was not trying to mislead the House.
Tax Credits
Dawn Butler Excerpts(10 years, 3 months ago)
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Damian Hinds
Today’s bills will be paid at some point. We believe that the challenges for this generation should be dealt with by this generation, and we believe we need to get our finances under control and eliminate the deficit, and not just pass on the problem to our children and grandchildren.
Dawn Butler (Brent Central) (Lab)
Does the Minister think that the 1% pay cap on public sector workers contradicts the Government’s policy for a high-wage economy?
Damian Hinds
I do not deny that pay restraint in the public sector is difficult, but that 1% restraint has also protected 200,000 jobs in the public sector, which is an important aim. In addition, since 2007-08, pay in the public sector has risen faster than in the private.
Dawn Butler (Brent Central) (Lab)
I congratulate the hon. Member for South Cambridgeshire (Heidi Allen) on her passionate maiden speech—Government Front Benchers were visibly cringing with each word.
Michelle Dorrell, who appeared on the BBC’s “Question Time” last week, is one of the one in four people who now regret voting Tory. With tears in her eyes, she explained that she felt she had been misled by the Government. They are taking from the poor and making them suffer, and it is a false economy. On 19 April 2015 the right hon. Member for Surrey Heath (Michael Gove) said of tax credits,
“we are going to freeze them for two years; we are not going to cut them”.
The spirit of deception goes on. The minimum wage has been renamed the living wage. Ministers claim that the cuts in tax credits will be offset by the increase in the minimum wage. Like all good cons, there is a grain of truth in that, because the cuts could be offset, but not until 2020. The cliché about hard-working families who did not cause the crash having to pay for it is unfortunately true. In Brent, 64% of families receive tax credits, which means 13,600 households will be affected by these changes. We know that there is a problem when The Sun—not a left-leaning newspaper in anyone’s imagination—starts a campaign about the cuts.
Conservative MPs have an opportunity tonight to listen to their conscience, vote with us and send a message to their Front Benchers that this is not right and this is not fair. If you fail to do that, shame on you.
Several hon. Members rose—
Oral Answers to Questions
Dawn Butler Excerpts(10 years, 6 months ago)
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Mr Gauke
We are pressing ahead with various proposals to improve the administration of business rates, but I remind the House that it was the previous Government who brought in measures such as the rebate for retail and the 2% cap, so we have introduced measures to help on business rates and we are introducing measures to improve their administration as well.
Dawn Butler (Brent Central) (Lab)
8. What discussions he has had with the Secretary of State for Work and Pensions on the effect of proposed changes to employment support allowance on levels of employment.
The Chief Secretary to the Treasury (Greg Hands)
We created 2 million jobs in the previous Parliament, and our objective is to create a further 2 million in this Parliament. A crucial part of that is the welfare reforms that we have introduced to help make work pay, which is consistent with our long-term economic plan.
Dawn Butler
Of course we all want to see work pay, but a large section of the community are sometimes unable to work for short periods of time because of illnesses such as sickle cell disease. The Minister seems to have overlooked that group of people.
Greg Hands
I thank the hon. Lady for her question. Our welfare reforms are based on the principle of fairness; fair on those who receive the benefits and fair on those who pay the tax. With regard to a specific group, there is clearly a difference between the work-related activity group and the support group, and we are happy to look at those differences. She is clearly not satisfied with what we are doing, but she is also one of the 48 Labour Members who rebelled last night on welfare, so I do not think that she is satisfied with her Front Benchers’ position either.
Tax Credits (Working Families)
Dawn Butler Excerpts(10 years, 7 months ago)
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Ian Blackford
My hon. Friend is absolutely right. We hear much in this Chamber about productivity, but the reality is that over the past seven years productivity has fallen by 0.7%. Rather than attacking the poor, which is what the Government are doing, their Budget tomorrow should introduce a programme for investment in this country that will lead to a rise in real wages, improve productivity and negate the need for tax credits. Removing tax credits will not fix the problems this country is suffering.
The failure to drive sustainable economic growth means that many people who are in work are in poverty. As a result, many of them rely on tax credits in order to put food on the table to give thousands of young people a decent start in life. There has to be dignity in work, and much has to be done to drive investment in our economy, enhance productivity and see a sustained rise in real wages.
Tax credits are an investment in our people and, as a consequence, the future prosperity of our country. Tax credits have made an important contribution to tackling poverty and inequality. In 2013-14, 90% of tax credit expenditure went to families with an income of less than £20,000. Families with children received an average of £6,900, and families without children an average of £2,200, from tax credits. That represents a very clear contribution to boosting incomes and tackling poverty and inequality. Tax credits help tackle in-work poverty and child poverty.
It is worth noting that about 70% of tax credits go to families where somebody is in work, predominantly supporting low-income working families. Given that a majority of people in poverty are already in work, tax credits are thus a crucial tool to support working people.
The Child Poverty Action Group estimates that the UK Government’s welfare cuts will push an additional 100,000 children in Scotland into poverty by 2020—and that does not take into account the additional £12 billion-worth of cuts that this Government want to push through. Given that 500,000 children benefit from the tax credit system in Scotland, cuts to tax credits would certainly have a further detrimental impact on the wellbeing of children in Scotland and on child poverty figures.
Figures due to be published tomorrow by the Scottish Government show that if the Chancellor cuts child tax credit back to 2003 levels in real terms, as has been reported, the poorest 20% of Scottish families with children will lose an average of nearly 8% of their income. That will have the impact of taking a total of £425 million out of the Scottish economy. How are we to deliver sustainable growth when we take £425 million out of the pockets of the poorest in our society? It beggars belief. We want a caring, compassionate society; that is not what we are getting from this Government.
Ian Blackford
That comment from a sedentary position is correct. We used to talk about the nasty party when Thatcher was in power; it seems to have returned.
SNP Members will reflect on the choices made by the previous Government and this one. Some £375 billion of new money has been created through the quantitative easing programme. We recognise that some of that was necessary, but it created circumstances in which those in the financial markets benefited massively. A 90% increase in the value of the FTSE 100 since 2009, a huge increase in the value of financial assets, and banker’s bonuses that continue to reach eye-watering figures are the impact of this Government’s political choices. They have created the circumstances that have delivered increased value in financial markets; they have not created the circumstances in which wages could rise and the country as a whole could benefit. “All in this together”? You’ve got to be kidding!