Tax Credits
Ian Blackford Excerpts(8 years, 7 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
May I remind Government Members that £375 billion of our debt was the result of quantitative easing? The Bank of England has had to step in and use monetary policy measures because of the failure of the Government’s fiscal measures.
Neil Parish
I will not get into an argument with the hon. Gentleman about quantitative easing, although I rather fear we would not have the employment we have today had we not used some of those tools. Whether they were overused is a matter for debate—I suspect in the history books—but I suggest that QE helped with employment, and that we have got the economy running smoothly and in the right direction.
I make the same plea that I am sure hon. Members from across the Chamber will make. I ask the Chancellor please to consider how we might mitigate the impact of these changes and raise the national living wage so that people are earning more as tax credits are taken away. People will accept that. It is not a crime to be low paid. We have got to put this right, because the Conservative party and the Government’s reputation is at stake.
Ian Blackford
Will the hon. Gentleman enlighten us on how the Chancellor’s forecast for budget and debt reduction worked out in the last Parliament?
Kevin Foster
We have an economy moving forward, and we have increased health spending, unlike in Scotland. According to last Thursday’s Daily Record—one of my favourite reads over porridge, obviously—our failing NHS is the SNP’s fault. I am happy to get talking about politics any day of the week.
Returning to the key issue—[Interruption.] It is always lovely to have an accompaniment from these Benches. The key part for me is not the e-mails I have received or the stuff in the media; it is thinking about the thousands of families I now represent in this Chamber who are like the family I came from. Whatever we may think of the destination of this policy area, we should ensure that the journey we travel to get to it does not impact unduly on people who are trying to do their best in life.
I listened with interest to the speech of the right hon. Member for Birkenhead, but it is important to have alternatives that do not make things worse or create the wrong incentives. The hon. Member for Airdrie and Shotts (Neil Gray) made a point about what the Library figures mean for the right hon. Gentleman’s initial proposals. However, if that model were adopted, there would be an effective taxation rate of nearly 100%—higher than virtually anyone at the highest levels of income is paying anywhere in the world, so it would be strange to have such a system applying in this country to those earning just under £20,000. I can appreciate the sentiment of those proposals, but at that sort of level it would provide a clear disincentive to work, just as tax rates of 88% or 98% were back in the 1970s.
I look forward to seeing what the Government will bring forward, and I look forward to continuing engagement with Ministers on the Treasury Bench. I thank my hon. Friend the Member for Kingswood (Chris Skidmore), the Chancellor’s Parliamentary Private Secretary, who I see in his place, for the engagement so far. It is right that we should not oppose without offering up alternatives. I hope that there will be clear engagement with Members and Parliament about what things can be done to mitigate the impact within the envelope of an affordable and deliverable financial settlement that allows us to achieve our overall fiscal goals, which were so strongly endorsed in the UK general election not very long ago.
It has been a pleasure to sit through and speak in this debate, and it will be even more of a pleasure to welcome the Government’s proposals that will come forward in the near future to mitigate the impacts on the lowest paid, as is called for by the motion.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to speak in this debate. I am delighted that we again have an opportunity to try to hold the Government to account. I thank all the speakers who have argued that the Government should change course. In particular, I pay tribute to Conservative Members who have said many wise words, but those wise words will be acceptable only if the Government listen and change tack.
Why are we discussing tax credits again? Frankly, the Government have got themselves into a mess and they need to find a way out of it. The proposals agreed in the statutory instrument and now rejected in the other place are wrongheaded and punish those who are hard-working. We all agree that work must pay, but we do not make work pay by taking money from those in work who rely on tax credits to achieve a modest standard of living.
There is no economic, or indeed moral or ethical, rationale for ripping £4.4 billion out of the tax credits programme. Let us look at and examine the impact of the changes to tax credits. Perhaps I can start with a quote from the Adam Smith Institute, which used to be much loved by Conservative Members:
“Working tax credits are the best form of welfare we have, and cutting them would be a huge mistake. The government has long claimed to want to make work pay for everyone, but cutting tax credits would disincentivise work and hurt those at the bottom of society.”
The average negative impact of the reduction in tax credits will amount to £1,300 in 2016-17, or £25 a week, off each family’s budget. In the period of Margaret Thatcher’s Government, there was the line that if it was not hurting, it was not working. This is going to hurt, and it will hurt millions of families throughout the country. Is that what we want? Is it right and is it fair? Let us have a real debate about improving living standards, but let us also recognise that we have to reverse the growing inequality in the UK. Driving sustainable economic growth and a fairer society will, as an end result, negate the need for tax credit cuts.
Imran Hussain (Bradford East) (Lab)
As always, the hon. Gentleman is making a very persuasive case. He is absolutely right that the cuts will negatively impact some of the poorest families. Does he agree that it will also disproportionately affect black and minority ethnic communities?
Ian Blackford
The hon. Gentleman often speaks up, rightly, for those in BME communities, for which I thank him. He is absolutely right: those in disadvantaged communities will feel the brunt of the cuts—and not only them, but those in constituencies up and down the land. This must be stopped to protect people throughout the whole of the United Kingdom, regardless of where they come from.
We keep hearing that we cannot afford tax credits. This is bunkum. The reverse is true: we cannot afford to impact families in the way these measures will. We all want to reduce the deficit and the national debt. We need to drive sustainable economic growth in order to drive up tax receipts and improve our financial position. We cannot do that by taking £4.4 billion out of the economy.
It is the failure to deliver sustainable economic growth that constrains our ability to reduce the deficit and the debt. If the Government’s fiscal policy had been working, the Bank of England would not have intervened to the extent it has had to during the past few years by establishing an asset purchase programme—so called quantitative easing—to the tune of £375 billion. When we talk about our debt crisis and the need to reduce spending, we seem to airbrush away the fact that we owe £375 billion to ourselves—debt created by ourselves. SNP Members understand that quantitative easing was necessary. I might add that the financial markets have benefited massively from this injection of liquidity. The FTSE 100 index was at 3,700 in March 2009 when the programme started; today it is at 6,370—a gain of 73% over six and a half years. The Bank of England has acknowledged that those with financial assets have benefited enormously from the quantitative easing programme over the course of the past six years, and 40% of the benefits of higher asset prices have gone to the top 5% in society. Do not talk to us about all of us being in this together.
This is important because the outcome—I am being charitable in using that word—of fiscal and economic policy has been to enhance inequality, and today we are being told that the poor, particularly the working poor, must pay the price of the Government’s desire to balance the books. That is unfair and it is wrong.
In yesterday’s Prime Minister’s questions, the Prime Minister said:
“printing money, hiking up taxes—we see that it is working people like Karen who would pay the price.”—[Official Report, 28 October 2015; Vol. 601, c. 340.]
I gently point out to the Prime Minister that it is his Government who, through quantitative easing, have in effect been printing money and that the tax credit cuts are in reality a tax increase for Karen and millions of others.
The point is that this is about political choice. Those who have benefited enormously from the quantitative easing programme are now getting an additional bonus for the changes to inheritance tax. The poor are getting their income cut. Where is the social justice in that? Where is the social cohesion that we should be striving to deliver going to come from?
In the spirit of co-operation, let me help the Government.
Ian Blackford
Indeed they do. The Public Accounts Committee report on fraud and error stocktake, which was published yesterday, states:
“High levels of benefits and tax credits fraud and error remain unacceptable. Overpayments cost every household in the UK around £200 a year and waste money that government could spend on other things…Since 2010 both departments”—
the Department for Work and Pensions and Her Majesty’s Revenue and Customs—
“have made progress in reducing headline rates of fraud and error, particularly HMRC in tax credits. However, in 2013–14, DWP and HMRC still overpaid claimants by £4.6 billion because of fraud and error”.
The fact that in 2016-17 the Government are expected to save £4.4 billion from tax credit changes just goes to show that if the DWP and HMRC were not making errors in overpayments, that money could be used to protect those low-income families who are reliant on tax credits, if the proposals were reversed.
I say to the Chancellor and his colleagues on the Treasury Bench: cut out the mistakes and fraud inflicted on HMRC and you will achieve the savings. Do not go after the poor. Eliminate fraud and mistakes and it’s job done.
The Government’s economic policies have created inequality, and the coup de grâce is that the poor are having to pay again. Before Christmas, letters will be delivered to our constituents who receive tax credits, informing them of the cuts they will experience from next April.
Ian Blackford
As my hon. Friend says, happy Christmas from Ebenezer Osborne!
We will all be faced with constituents writing to us and coming to our surgeries in despair about how they are going to make ends meet.
Let me turn briefly to the proposals of the right hon. Member for Birkenhead (Frank Field). I commend him for seeking a way out of the difficulties the Government face. His alternative tax credits plan would involve introducing a secondary earnings threshold, which would be paid for by a steeper withdrawal rate for those earning above the new minimum rate. We do not agree, however, that only those earning less than £13,000 should be protected from the cuts. Everyone in receipt of tax credits ought to be protected.
It is admirable that, under the right hon. Gentleman’s proposals, those earning very modest amounts would be protected, but those on modest means would still be hit. For example, a family with two children and gross earnings of £20,000 would still lose £1,656. Simply put, that is not acceptable. The tax credit cuts in their entirety should be stopped. They must be reversed, and reversed in full.
Damian Hinds
None of the third-party analyses takes into account all the different changes and elements of support that are coming in. Of course, depending on exactly how many earners there are in the family, the age of the children and so forth, any proposals will impact differently. My point, as discussed in the debate, is that the Government are in listening mode and the Chancellor has said that he will come back and say more at the autumn statement.
The question of childcare came up more than once, including in the summing up of the hon. Member for Salford and Eccles. A review is taking place on the cost reimbursement for childcare providers, and it is important that the model is sustainable.
Questions about the devolved Administrations were raised by the hon. Member for East Antrim (Sammy Wilson) and, indirectly, by the hon. Member for Arfon (Hywel Williams). The 30-hour offer is an England offer, but there are Barnett consequentials—I hope I have the terminology right—that go with it, and it is up to the devolved Administrations to proceed in the way they think right. I am happy to be corrected by SNP Members, but I believe that the Scottish Government have committed to bringing forward 30 hours from 2020. I wonder whether they might think about doing that sooner.
Further questions were raised, although they were batted away quite effectively at the time, about the ability of the Scottish Government to pursue their own course on overall tax and benefits. Let me make it clear that from as early as 2017 the Scottish Government will be able to set rates and bands for income tax on earnings. That is clear in the Scotland Bill, which is also very clear that the Scottish Government can top up benefits and make discretionary payments to claimants. The Secretary of State for Work and Pensions cannot reasonably withhold consent for that.
Damian Hinds
I look forward to giving way to the hon. Gentleman, so that he can confirm the Scottish Government’s intentions on that.
Ian Blackford
I am very grateful to the hon. Gentleman for being so gracious with his time. We have demonstrated that the Scottish Government have mitigated some of the worst effects of the welfare cuts over the last few years, with £100 million invested to offset the impact of the bedroom tax. We want to protect the people of Scotland, but we need the powers to be able to do so. That means we need full powers over our economy, over taxation and over social security. Give us the tools, and we will protect the people of Scotland that Westminster is letting down.
Damian Hinds
SNP Members have managed to use that line for quite some time. I am not sure how much longer it will be credible to continue to use it, given the powers that are coming to them.
The reforms to the tax credit system have been discussed a number of times and voted on by the whole House on five occasions. The case for change is clear—not merely on fiscal grounds, but because a labour market dependent on a high level of welfare is not the way to deliver the stability and independence that working people deserve.
We acknowledge, of course, the concerns expressed in recent weeks. My right hon. Friend the Chancellor said we would listen—and that is precisely what we intend to do. He believes and I believe that we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy while at the same time helping in the transition. That is what my right hon. Friend will set out in the autumn statement.
We are determined to deliver the lower welfare, higher wage economy that we were elected to deliver, that the British people want to see and that working Britain deserves.
Welfare Reform and Work Bill
Ian Blackford Excerpts(8 years, 7 months ago)
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Neil Gray (Airdrie and Shotts) (SNP)
I rise to speak to the amendments in this group tabled by the Scottish National party. We also support new clause 1, which the shadow Minister moved earlier. Let me pay tribute at this stage to the efforts of my hon. Friends the Members for Ayr, Carrick and Cumnock (Corri Wilson) and for Livingston (Hannah Bardell) who worked so assiduously on the Bill Committee on behalf of the SNP, and to my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) for her work on these matters in the Work and Pensions Committee.
My wife has always suggested to me that it provides context and depth to a speech if it includes a quote early on. On this occasion, and in relation to tax credit cuts, I have a quote that was timeously delivered in the past few days:
“It’s not acceptable. The aim is sound, but we can’t have people suffering on the way… The idea that there’s a cliff edge in April before the uptake in wages comes in is a real practical human problem and the Government needs to look again at it again”.
Who is that quote attributed to? That was said by Ruth Davidson MSP, leader of the Conservative party in Scotland, as she called on this Government to have some movement on the issue by the autumn statement.
After last night’s vote in the other place, it is time for the Government to rethink these outrageous proposals. They have managed to unite a considerable swathe of political and civic society against the plans. In fact, after last night the Chancellor really stands alone in continuing to push for the cuts. If the Chancellor, the Prime Minister and this Government will not listen to Opposition Members, if they will not listen to charitable and third sector organisations, and if they will not listen to anyone else, surely they should listen to the leader of their own party in Scotland.
The SNP is completely opposed to the UK Government’s continued attack on low-income families, and we support Labour’s amendment to repeal the regulations, which will affect 350,000 children in 200,000 families in Scotland. Let me say this loud and clear: the SNP will oppose these ideological, regressive and utterly punitive tax credit cuts with every opportunity open to us today and every day, because we realise the damage they will cause to working family incomes, to levels of poverty across these isles, including child poverty, and to social cohesion in every community in the United Kingdom.
The amendments that my colleagues and I support in this group would bring about the repeal of these tax credit regulations and overturn the proposed cuts. However, should the Government decide to press on with the cuts in the face of hostility across this Chamber, and from Conservatives up the road, they must consider forms of mitigation. They must act to protect vulnerable families with a delay and a fully implemented transitional period, as is covered in our new clause 8, which we will be pushing to a vote. In the light of last night’s vote in the other place, I expect that is already being considered by the Government.
New clause 8 would mean that the measures in the Bill and in the 2015 tax credits regulations relating to the award of tax credits and the relevant entitlement within universal credit would not take effect until the Secretary of State had implemented a scheme for full transitional protection for a minimum of three years for all families and individuals currently receiving tax credits before 5 April 2016, and such transitional protection should be renewable after three years with parliamentary approval.
The transitional arrangements are important, as none are put in place by the Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015. This means that the tax credit cuts will be implemented immediately in April 2016. In fact, tax credit recipients will apparently be getting an unwelcome letter detailing the cuts to their award just weeks before Christmas. This will give working families no time to plan effectively for an average cut of £1,300. For families living wage packet to wage packet, utterly dependent on tax credits to keep them above the breadline, the cut will be devastating and impossible to plan for in such a short time.
Amendments 49, 50 and 52 would ensure that relevant benefits, child benefit and tax credits increased in line with the consumer prices index. Amendment 51 is consequential, while amendments 53 and 54 would ensure that the current child tax credit arrangements remained in place. Amendment 55 would remove changes to the entitlement to the child element of universal credit. These amendments were pushed by my colleagues in Committee. The Government did not accept any of them, but they pledged to come back with more information, which has not yet materialised.
Why on earth have the Government decided to rush the Bill from Committee, which only finished on Thursday, to this final stage today? If they are serious about introducing more detail and explaining the expected mitigation measures, why not flesh that out? The rush suggests that the cuts are purely about making savings and therefore ideologically driven. The changes are fundamentally regressive. They disproportionately target those in low-income households and punish them for the Government’s ideological obsession with austerity—an obsession that is failing socially and economically.
The SNP stood on a manifesto that was fundamentally anti-austerity but which also plotted a more responsible path to reducing the deficit. We have argued for a 0.5% increase in departmental spending per year for this Parliament, which would have released £140 billion to invest in capital projects to boost growth and narrow income inequalities. Our plan would also have resulted in a budget deficit of just 2% by the end of the Parliament, and it was backed by an International Monetary Fund report in June that highlighted how reducing income inequality not only reduced poverty but boosted growth. By extension, the policy of cutting tax credits and thereby increasing income inequality will drive more of our citizens into poverty and harm growth and therefore harm the Government’s apparent aim of reducing the deficit. So, as well as being socially destructive, this policy is—to extend the IMF’s thinking—economically incompetent.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Does my hon. Friend agree that the SNP has come up with a responsible approach to delivering sustainable growth that will drive up wages and employment, by contrast with what the Government have done over the past five years and what we see going forward? The Bank of England, with its £375 billion of quantitative easing, has had to bail them out with monetary policy because, quite simply, they have not delivered on fiscal policy.
Neil Gray
I welcome my hon. Friend’s contribution. As we are talking about affordability and sustainability, let me say that the Government think it feasible to press ahead with apparently £167 billion of Trident nuclear weapons, which is shocking and deplorable, while seeing fit to find £4.4 billion of cuts in tax credits. They are taking an ideological wrecking ball to our social security system in the name of a budget surplus by scandalously waging a war on low-income households.
Oliver Dowden
This is precisely the point that I would like to get on to. Despite the increased expenditure on tax credits, we continue to see these dreadful statistics on poverty, and that is because this is a flawed model that is based on taxing people on the minimum wage who can barely afford to pay tax, recycling that revenue through the welfare system and using it to top up low pay. That is not a sensible way to proceed.
Oliver Dowden
I will give way once more, but I am aware of Madam Deputy Speaker’s injunction.
Ian Blackford
We understand, from survey after survey, that millions of people in this country are going to be worse off as a result of these measures. What is the hon. Gentleman going to say to his constituents who come to him after next April having lost on average £1,300 of their income?
Oliver Dowden
I would say to those people that this Government have a clear and coherent plan for helping people on the lowest incomes that consists of three elements. The first is to increase the amount of money people can earn without paying any tax; by the end of this Parliament that will be increased to £12,500. That is lifting people working 35 hours a week on the minimum wage out of tax entirely. Secondly, we are introducing a national living wage which by the end of this Parliament will increase wages to £9 an hour. Thirdly, we are introducing a number of other measures such as free childcare which will help those in most need of it. That is a far better model—to move from a low-wage economy with high tax and high welfare to a higher wage, lower welfare and lower tax model.
Graham Evans
This is a very important debate. In the last Parliament I had the privilege of sitting on the Work and Pensions Committee, and it is a pleasure to follow the hon. Member for Blaydon (Mr Anderson). I am sorry to hear about how his family have been affected by Duchenne muscular dystrophy. A member of my family suffered with that condition and died aged 21 after many years of suffering. It is a dreadful disease, but this Government’s reforms are not about inflicting anything on people with diseases such as Duchenne muscular dystrophy.
Reforming welfare is crucial to achieving a sustainable welfare system that is fair to the most vulnerable in society and also to the hard-working taxpayers who pay for it. Without sound public finances, there can be no economic security for working families, and the country cannot pay for the hospitals and schools that we rely on. Those who suffer most when Governments run unsustainable deficits are not the richest, but the very poorest.
Ian Blackford
We have heard much from Government Members about sustainable welfare spending, but how would they define it? Is not the heart of the problem the fact that through the things they are doing, the Government are pushing many children into poverty and redefining poverty? Is it not the case that when we change the definition, we change the truth?
Graham Evans
I think I am grateful for the hon. Gentleman’s intervention. This is about choices and what we spend our money on. There is no such thing as a magic money tree, and if Scottish nationalists are not happy with these measures, perhaps they will inform the Scottish people how much they will pay in tax—we never hear that from the SNP. If they do not agree with welfare reform, they should tell the House and the people of Scotland how much they will put up taxes.
The Bill continues on from the Welfare Reform Act 2012, restoring the ethos that it always pays to work to the heart of the British welfare system. The 2012 Act set in place a benefit cap.
Tax Credits
Ian Blackford Excerpts(8 years, 7 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
I am pleased to have the opportunity to debate tax credits today, particularly in light of the wholly inadequate time we had to debate tax credit changes on 15 September in connection with the statutory instrument. Would it not have been better if the proposed changes were made part of the Finance Bill so that they could have been properly scrutinised and debated and so that many Conservative MPs would not have been made deeply unhappy about what their Government have done?
During the week of the tax credit debate, a damning report from the House of Commons Library was published on the effect on many people of the changes consequential on these proposals. Let me state that the Scottish National party wholly opposes the changes to tax credits, which are nothing less than an attack on low-income families in this country.
The Prime Minister told his party conference that he wants a “war on poverty”. I would tell the Government that actions speak louder than conference rhetoric when cutting tax credits is going to increase poverty, particularly child poverty. The reality is that this is not a war on poverty, it is a war against the poor. All of us came into politics to make a difference. I say to the Government and to all Conservative Members that they should examine their consciences. Do they want to push through these cuts that will damage millions of families, increasing inequality in this country?
Chris Philp
Will the hon. Gentleman confirm that it is now the policy of the SNP to use the new tax-raising powers shortly to be introduced to increase income tax in Scotland in a year or two’s time to increase tax credits in Scotland?
Ian Blackford
I find that extraordinary. We fought in the general election on delivering home rule to Scotland, which meant full fiscal autonomy. Given the damage that the hon. Gentleman and the Conservatives are going to do to hundreds of thousands of families in Scotland, they should give us the power over our economy and over welfare so that we can protect people in Scotland from the damage they are going to do.
We hear that individual Tory MPs have been summoned to speak to the Prime Minister and Chancellor to be straightened out. I appeal to them not to be bought off. They should do the right thing and support today’s motion. This is a Government who cut inheritance tax for those wealthy enough to have £1 million-plus properties and punish those on low incomes. “All in this together”?—well, we can reflect on that line.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Will my hon. Friend reflect on the fact that the Government have also refused to close what is called “the Mayfair loophole”, allowing more than 8,000 people earning more than £1 million a year to pay only 28% tax, while hammering the poor?
Ian Blackford
My hon. Friend is absolutely correct. We have seen growing inequality over the course of the last few years, and the Budget will only increase it.
Ian Blackford
Let me make a little progress, and then I will.
Let us look at the facts of the matter. In Scotland, more than 500,000 children are in families that rely on tax credits, 350,000 of which are from the more than 200,000 low-income families who will be hit by these changes. If we take the UK as a whole, the Library tells us that 3.3 million in-work families received tax credits in April 2015, of whom 2.7 million had children. The Library tells us that the average negative impact in the reduction of the tax credit award in 2016-17 will be £1,300. As the Library puts it, the changes to tax credits will deliver savings of £4.4 billion in 2016-17. Of course, that is one way to put it; in reality, it is £4.4 billion that will be taken out of the pockets of the poor and the majority of working families, and £4.4 billion-worth of spending that will be taken out of local economies.
Michelle Thomson (Edinburgh West) (Ind)
Do not people in lower income groups tend, in general terms, to spend money in their local communities, and will the cuts not therefore remove potential investment and growth from those communities?
Ian Blackford
Indeed, and I shall be saying more about that a little later. You do not fix the deficit by taking spending out of the economy. The point is that those hard-working families who receive tax credits tend to spend every penny that they get, injecting money into the local economy, paying tax, and so on.
Imran Hussain
The hon. Gentleman has rightly referred to inequality. Does he accept that these cuts will disproportionately affect the BME communities, thus increasing racial inequality?
Ian Blackford
That, too, is a very reasonable point. I think that what the Government are doing will pose real dangers to the cohesion of society.
Dr Andrew Murrison (South West Wiltshire) (Con)
Will the hon. Gentleman give way?
Ian Blackford
I will make a little progress, but then I will happily give way again.
The House of Commons document also states:
“There is no transitional protection for existing families on tax credits.”
Let us just dwell on that statement. The harsh winds of a winter chill are brought to you by Her Majesty’s Government—or, as we might put it, Ebenezer Cameron. I do not believe that any of us came into this place to put our hands on our hearts and say that we want to do this to hard-working families. We have it in our power to stop it today. Just imagine the letters dropping through constituents’ letter boxes, telling them about the massive cuts that are about to afflict them, and for what purpose! We must pause, reflect, and change course. Today is the opportunity that the House needs to recognise that we have got this one wrong. We need to be brave, be bold, and collectively do the right thing.
Let us stop and think about this for a minute. Low-income families, on average, will lose £1,300 a year. Let us now look more specifically at a single-earner couple with two children, working a 35-hour week on the minimum wage. That couple will see their tax credit award fall by £1,853 in 2016-17. The impact of the so-called national living wage will only modestly offset the impact of a fall in tax credit income, and the net family income will fall by £1,525.
James Cleverly (Braintree) (Con)
Will the hon. Gentleman concede that the parties represented on his side of the House have made a series of apocalyptic predictions about the British economy since the 2010 general election, and that, one after another, those apocalyptic predictions have been proved wrong? Why should we believe your predictions now?
Ian Blackford
We are not making any apocalyptic predictions about the economy. What we are talking about is the impact on hard-working families. We want to see investment in our economy. We want to see investment in innovation and skills, improving productivity and improving the living standards of all, in Scotland and elsewhere. We want to work with you so that we can improve those things.
Patricia Gibson (North Ayrshire and Arran) (SNP)
Will my hon. Friend give way?
Ian Blackford
I will give way in a second, but I want to make a little bit of progress.
Let me pose this question to Conservative Members. What will you say next year to constituents, hard-working, decent folk, many of whom will have voted for you, and who have just seen their incomes cut by more than £1,000? Are you going to tell them that their hard work is paying dividends—that for them, work is paying? You do not have an answer, because there isn’t one. The policy is wrong, and you have the opportunity to change it: to do the right thing for the country, and to do the right thing for hard-working families in your constituencies.
Andrew Percy
As the hon. Gentleman knows, he is making many points with which I agree. I know that he is keen to be honest with the House, but will he be clear about one thing? Tonight’s vote will not overturn the changes in tax credits, although a vote in the other place may do so at some point in the future. Today’s debate is a good opportunity for us to express our concerns, but I do not want the hon. Gentleman to lead anyone who is watching it to believe that the vote will be on tax credits. Even if the motion is passed, it will make no difference. Will the hon. Gentleman be clear about that, please?
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Before the hon. Member for Ross, Skye and Lochaber responds to that intervention, I must tell him that he has been talking quite a lot about “you”. I am sure that he does not mean the Chair. Perhaps it would work rather better if he addressed the Minister.
Ian Blackford
Thank you very much for those wise words, Madam Deputy Speaker.
I agree with the hon. Member for Brigg and Goole (Andrew Percy) that what the House has today is an opportunity to send a message to the Government that they ought to reflect on what has been proposed. I think that they have made an honest mistake. I hope that it is an honest mistake, that we can reflect on it, and that we will not punish people in the way that the tax credit changes will do.
Ian Blackford
I want to make some more progress, because I know that many other Members want to speak.
I mentioned that constituents would be coming to you, and asked what answer you would give them. I think that what we must do is the right thing: the right thing for hard-working families in all our constituencies.
Several hon. Members rose—
Ian Blackford
I am going to make some progress.
Every Member of Parliament should look up the online House of Commons paper, which contains a link to the number of tax credit recipients by constituency. Any Members who support the Government’s proposals can see exactly how many of their constituents will be affected by them. We remember Mrs Thatcher saying, back in the day, that there was no alternative. That, of course, was nonsense. We also heard that there was no such thing as society. That sort of behaviour should be a thing of the past. There has to be social cohesion. We have to demonstrate that we want to help people out of poverty, not remove a ladder that would take them out of it.
I know what people in my constituency are saying. They do not like this. It is seen as mean-spirited. It is punishing the poor: ordinary, hard-working folk. There is no excuse for it, and we can stop it. There will be a massive impact on families, and we know that the end result will push families with children into poverty. We hear—and we have heard it in the Chamber today—that many Tory Members have voiced concerns at the impact of the changes. We should say to the Government, “You need to listen to those of us on this side of the House, as well as some of your own voices that are reacting to the impact of what you are doing.”
Rebecca Pow (Taunton Deane) (Con)
You asked just now—not you, Madam Deputy Speaker—
Rebecca Pow
Thank you so much, Madam Deputy Speaker. I remembered as soon as I had said it that I should not have said it. Apologies, Madam Deputy Speaker.
The hon. Gentleman asked just now what it was that we wanted in our constituencies. What we really want is a better future for everyone. We do not want people to be hard done by. Will the hon. Gentleman comment on this? We want more jobs, a better future, more money and better childcare, all of which the Minister has outlined today.
Ian Blackford
We all want a better future. We all want more jobs, and better-paid jobs. But the point is—the point that we cannot get away from—that you do not do that by punishing those who are in work, and who will be pushed into poverty. As the Government have often said, work must pay. You cannot do what you are doing and be consistent with your own objectives.
Deidre Brock (Edinburgh North and Leith) (SNP)
Does my hon. Friend agree that although it is of course indefensible for the Government to pick up the tab for employers who refuse to pay their staff decent wages, cutting the support from the working poor will not force wages up? A strong labour market will, as will rigorous enforcement of a genuine living wage and ending zero-hours contracts.
Ian Blackford
Absolutely. I hope that we will go on and have a robust debate about productivity in this country and about skills and innovation, because driving investment into the economy will drive wages up and negate the need for tax credits. None of us has a fundamental desire to see the long-term existence of tax credits, but they can only be removed when wages are driven up. What we cannot do is what the Government are doing and cut tax credits ahead of increases in wages.
Ian Blackford
I am going to make some progress, because I am aware of the time.
One has to ask about the moral compass of a Government who want to increase the inheritance tax threshold while the poorest in our society are being squeezed to such an extent. One nation, they tell us, but whose nation is that? It is not a country in which we want to live. Perhaps from an economic point of view we need to ask where the logic is in this policy. We are told that it is about getting the deficit down, but taking cash out of the pockets of the poorest means taking cash out of the economy and depressing economic activity. Those on low incomes tend to spend what money they have. This provision does not fix the deficit; it takes spending—[Interruption.] That is patronising? I will tell Government Members who is being patronised, and that is poor people in this country.
Let us make it clear, as we did during the election in Scotland, that we want to get the deficit down but that this is not the way to do it—[Hon. Members: “How?”] Members ask how we will do that, and I am happy to give them an answer since they have given me the opportunity. I remind them that we won the election in Scotland, with 56 MPs returned for the SNP, and we had a progressive message that we delivered to the people of Scotland of investing in our country by increasing spending by a modest 0.5% per annum that would have delivered additional spending in the UK of £140 billion and would have reduced the deficit to 2% of national income by the end of the decade. That is a much more responsible way to deal with the future of our country.
There is a philosophical question of whether effective support through tax credits for employers paying low wages excuses those employers from paying a real living wage that offers dignity for work. I would argue that we all want to reach a situation in which work pays, to the extent that those in work have a decent standard of living. The SNP has been championing a real living wage as a response to dealing with poverty and that would mean that hard-working families would become financially sustainable, driving up tax revenues, reducing the deficit, enhancing economic activity and, ultimately, leading to an enhanced fiscal position. The desire to make work pay, which the SNP fully supports through the idea of the living wage—the real living wage, not the Tory construct—has to go hand in hand with an environment that encourages productivity, but we know that that has not happened for the past eight years, with productivity flatlining and even the OBR’s forecast for the next four years showing only limited recovery in productivity. We cannot have sustained growth in wages unless we have growth in productivity.
Ian Blackford
No, I am going to make some progress.
We need a national debate about how we can strengthen and drive sustainable economic growth, driving up living standards and making work pay. We can only reach a high wage economy with investment in skills, innovation and business. That is not happening, and its absence is why we need the safety net of tax credits. That is why the Government must reconsider what they have voted through.
The Resolution Foundation has shown that the so-called living wage will boost wages by £4.5 billion by 2020, nowhere near the impact of the £13 billion of cuts to various working age benefits. It cannot be acceptable that working people pay such a price. We need to cut inequality, not drive it, which is what the Government are doing.
Let us come back to the example of the family losing £1,525 of their income next year. What will the Government say to such families when they are faced with difficult choices? Family budgets are already tight and something has to give.
Ian Blackford
I will not give way just now.
Just imagine what will happen when someone living hand to mouth faces an unexpected problem. Perhaps over the winter the central heating boiler will need to be fixed or a fridge will need to be replaced. What will Members say to their constituents when they knock on the surgery door? Where is the compassionate Conservatism we used to talk about? When their voters have their income cut by more than £1,500, all those problems will mean difficult choices. That is why this issue needs re-examining. I am appealing to the Government to listen to the many voices raising legitimate concerns.
The Government talk about being a one nation Government, but if that is their desire they cannot square it with the rise in inequality that will be accelerated through these measures. We know that a report published by the Resolution Foundation on 7 October estimates that the tax and benefit changes will push a further 200,000 children into poverty in 2016. Is that really a price worth paying? We cannot accept that that can be right. This is not just a question of the 200,000 who will fall into poverty next year; the figure will increase to 600,000 by 2020.
Alex Chalk
The hon. Gentleman has talked four or five times about doing the right thing, but is it not important to recognise that that includes doing the right thing by the next generation, which stands to be saddled with billions of pounds of debt that cannot be paid back?
Ian Blackford
Of course we need to make sure we are doing the right thing for people today and for the next generation, but that comes back to what I explained to the House: the position the SNP had at the general election—a responsible position of investing today and for tomorrow, a responsible position of dealing with the deficit but investing in the future of the country.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Does my hon. Friend agree that part of the problem in making today’s children suffer in the short term is that child poverty has enormous long-term consequences?
Ian Blackford
My hon. Friend is absolutely correct. We must ensure that we deal effectively with child poverty in this country, but these measures will constrain that effort.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
On Friday a lady called Edith came to my surgery to complain about her daughter’s situation. She is a nursery assistant earning £8 an hour. She works 30 hours a week and cannot work any longer because she has school-age children. Edith was mortified about the effect of the cut in working tax credits on her daughter and her family’s welfare. What does the hon. Gentleman think the Prime Minister should say to people like Edith up and down the land as to how they can trust his word in the future?
Ian Blackford
The sad reality is that I do not think the Prime Minister has anything to say to Edith in the hon. Gentleman’s constituency. That is why I am appealing to hon. Members on both sides of the House to reflect on the damage that these measures will do to Edith and others. We are having a good debate today.
Several hon. Members rose—
Ian Blackford
I want to finish off as I have spoken for quite some time.
Perhaps it is little wonder that the Government want to redefine poverty. The numbers being pushed into poverty are frightening. It is not a price that a civilised society can pay.
In conclusion, I am grateful that we are having this debate today, but it must not end here. I would plead with the Government to change course before it is too late. These millions of families should not be affected by these tax credit changes. I hope the Government act, but failure to do so would demonstrate yet again that we need full powers over Scotland’s welfare system to be in Scottish hands, not the hands of the Chancellor and the Work and Pensions Secretary.
There is a clear contrast, with a Tory Government in Westminster attacking the poor and a Scottish Government using their powers to protect the poorest and most vulnerable in our society. The Scottish Government have invested £100 million to ensure no one pays the bedroom tax and invested £40 million to protect council tax benefit. That is a caring, compassionate Scottish Government. If Westminster wants to punish the poor, it should give Scotland powers over tax and spending so that we can protect our own people from this heartless Conservative Government.
Suella Fernandes (Fareham) (Con)
All of us who are here today share a belief in the welfare state. In a country like ours, it is right that we offer help to the most needy, and that there should be a safety net for those in difficult circumstances, but under the Labour Government the welfare system became immensely unfair in its discrepancies.
Today’s debate goes to the heart of who we are as a country and what we stand for as a people. It is about more than Treasury statistics: it is about real people. That is why I am proud to support these tax reforms as part of a package set out by the Chancellor. They are fundamentally the right thing to do if we are honour the true notions of what welfare is, and what it is to work.
I want to look back at history—
Ian Blackford
Would the hon. Lady like to comment on what was said this afternoon by the Adam Smith Institute, whose views are often quoted by the Conservative Government? It said that
“working tax credits are the best form of welfare we have, and cutting them would be a huge mistake”.
Suella Fernandes
I disagree with that comment, assuming that it has been rightly attributed. I believe that tax credits have distorted the very notion of what welfare was supposed to be. Let us look back to welfare’s genesis in the Beveridge report, which was published 73 years ago, in 1942. Opposition Members tend to claim a monopoly on William Beveridge, but he was not the socialist Robin Hood whom they so often cite. He was an economist, versed in the principles of contribution and industry, and his principles were very clear. They were about taking responsibility, alongside the state’s establishment of a “national minimum”. They were about ensuring that the most vulnerable were looked after, while also ensuring that the nation remained fiscally viable. We have drifted away from that concept of welfare—that it should provide occasional and temporary support for those in unemployment, sickness and retirement. We now have a system whereby the state is subsidising low pay, and that cannot be right. This Government are introducing reforms, and restoring the principle that welfare should be the safety net that it was intended to be.
I want to make three main points. First, the tax credit system has allowed business to act in a way that is both unpalatable and bad for the economy, facilitating the underpayment of workers and sanctioning chronic under-training and under-investment in those workers. If a business knows that low wages will be topped up by the state, what is the point in investing in them, providing extra training and more scales and promotion? The business people I meet in my constituency are crying out for more skilled work forces. Secondly, the deployment of the tax credit system was chronically dysfunctional, and very confusing for many people. Lastly, the Conservative party is nothing without social justice. This measure will restore social justice to the heart of our economic principles, and I commend it wholeheartedly to the House.
Greg Hands
I will not give way at the moment.
Alistair Darling went on:
“One of the unintended consequences is that we are now subsidising lower wages in a way that was never intended.”
Like us, he was not calling for the end of tax credits. He made it clear:
“That is not an argument for scrapping tax credits, it is an argument for making sure that you adjust the system. And it’s also an argument for making sure that we do our level best to drive up those levels of wages”.
We recognise that as well.
The second reason is that the deficit the Government inherited in 2010 was equivalent to about £6,000 for every household in the country. That was being added to the national debt every year. It is now down to £3,300 per annum. Then, we were borrowing £1 for every £4 we spent. We have got that down to £1 for every £10. The world was beginning to doubt our ability to pay our way.
Greg Hands
I will not give way.
This Government’s mandate is to get our spending down, run a surplus and get our national debt down, and these reforms are a crucial part of that. That is what we were elected to do, and that is what the House agreed just last week. In particular, our general election mandate is to make reforms to reduce the welfare bill by £12 billion.
Tax Credits
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
Would the hon. Gentleman like to reflect on the fact that someone working full time and earning £17,000 a year will lose close to £2,000 as a result of these measures? Why do the Government want to punish hard-working families in this way, at the same time as they are increasing the inheritance tax threshold? This is vindictive and nasty.
Mark Garnier
I am not sure I recognise the figure of £2,000 on a £17,000 income, and I do not accept that this Government are punishing hard-working people. I see a Government who are doing an enormous amount by reducing the threshold tax rates and by helping small businesses. We have seen more people come into work than there have ever been before. This Government have had a huge number of successes, so I do not recognise what the hon. Gentleman is describing.
There are two particular reasons why I support this measure, the first of which was highlighted by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), the former Chancellor, and my hon. Friend the Member for Croydon South (Chris Philp) in talking about the effect that tax credits have on employers. We do not know exactly the extent to which this has been the case, but without a shadow of a doubt some employers will have been not paying the right salary or pay, given that the Government are subsidising not necessarily those people on low incomes but the employers employing people on low incomes. We also know that if that did happen early on, it is much more difficult to unravel it now, which is why it is very important that we have the new national minimum living wage. It is there to ensure that wages do start going up, although I concede that this does not necessarily cover it all.
Finance Bill
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Shabana Mahmood
As the Financial Secretary knows because we have already had such an exchange—I feel we are reliving our greatest hits—on a number of occasions in the past couple of years, our policy at the general election was our manifesto commitment not to go ahead with the corporation tax cut from 21% to 20%. We would not have gone ahead with that additional cut to 20%, but instead used all the money to pay for a cut to business rates this year and a freeze next year. It was a direct switch spend. We wanted to make a commitment to small and medium-sized businesses in our country to do something practical on business rates, but we needed to find a way to pay for that, and we chose to switch-spend in respect of the additional corporation tax cut. We of course lost the election, and the Government are proposing a further decrease of the corporation tax rate. We will support the corporation tax measures, but we will ask questions about what that means for the future direction of travel.
Following an intervention, the Financial Secretary mentioned the BEPS project. On corporation tax more generally, it is important—given how some companies seek to shift profits and game international taxation rules—to have international agreement. Concern has already been expressed in some quarters that some of the countries with which we need to do business and with which we need to agree international tax rules might start to see us as a tax haven. I disagree with such a characterisation, but there is such a risk in getting agreement within the OECD BEPS process. I would welcome it if Treasury Ministers could, in Committee, provide further details about what is happening and about how our friends in the BEPS process are reacting and responding to the Government’s proposal on the headline rate of corporation tax.
One measure we have already voted against relates to inheritance tax. Clause 9 introduces an additional residence nil-rate band for inheritance tax when a home is passed to the direct descendants of the deceased on or after 6 April 2017. The provision, which runs to more than 400 lines, is extremely technical, but it in effect allows parents to pass on a house worth £1 million to their children free of inheritance tax. We have made it clear that the focus of tax cuts should be to help people on middle and lower incomes and to tackle tax avoidance. The Treasury has admitted that 90% of households will not benefit from the Government’s inheritance tax policy. Their priority should be to help the majority of families and first-time buyers struggling to get a home of their own, rather than a further cut to the rate of inheritance tax at this stage.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
I must say that I am listening to the hon. Lady with a degree of sadness. Last night, we saw the Labour party abstain on welfare. Today, Labour Members are yet again failing to provide an effective opposition to this Government. Is it not time that they came across to our Benches and to SNP Members, who are providing the real opposition that Labour Members are failing to provide?
Shabana Mahmood
The hon. Gentleman rather forgets that the Scottish National party is not a national party; in fact, it is committed to breaking up our Union. If he and his colleagues aspire to be an official Opposition, they may wish to stop being a party of only national interest and stop trying to break up our country. We did not merely abstain on the welfare Bill. As he well knows, we voted for our reasoned amendment, which is exactly what his party plans to do today. If that approach was not good enough for us yesterday, why do he and his colleagues think that it is good enough for them today?
If the hon. Gentleman has been listening to my now very lengthy remarks, he will know that I have gone through the Finance Bill and the Budget in detail and made it very clear that the Bill does not contain many of the most contentious of the Chancellor’s Budget decisions. We will debate and oppose such measures when they are brought before the House as statutory instruments, but those measures are not in this Bill. I have laid out in depth our approach to all the different measures in the Bill, including those that we support and those on which we will ask further questions and to which we will table amendments, which we will vote on, as the Bill continues through its stages in this House.
The Government have published further changes to the direct recovery of debts from bank accounts and in relation to carried interest. That has excited some interest in the inboxes of Members’ email accounts with the campaign by 38 Degrees. We had a manifesto commitment in respect of carried interest. I am not sure that the Government’s proposals in the Finance Bill go as far as we were hoping to go, had we been elected. As I say, we will test the detail in Committee.
In short—sorry, I mean “in conclusion”, as I have been on my feet for a while—many of the most contentious elements of the Budget are not in the Finance Bill. It contains a mixture of measures that we support and measures that we will return to in great detail when we get to Committee of the whole House. I look forward to debating with Ministers as the Bill progresses through the House. I hope that in winding up, the Minister will deal with some of the questions that I have raised in respect of bank taxation, the climate change levy and insurance premium tax.
Roger Mullin
Absolutely, and I am glad my hon. Friend raised a matter that I will come to shortly. Investment is critical for productivity in this country.
I am struck by how the detail of the Finance Bill suggests that, rather than addressing key issues in a positive manner, the Government present some highly counterproductive measures on productivity. I and my colleagues initially welcomed some of the changes to the banking levy and the introduction of a surcharge. However, whether through carelessness or incompetence—what I am about to say surely could not be planned—the scope of the changes now captures both challenger banks and many building societies whose practices are very different from those of the big banks. Challenger banks already face additional hurdles compared with the big banks, and as the British Bankers Association has pointed out:
“The surcharge’s disproportionate effect on smaller and challenger banks was evidenced by the resulting fall in their share prices following the announcement, in some instances of over 10%.”
Of more concern to me and my colleagues is that the BBA has estimated that:
“Our preliminary analysis based on modest growth projections across the sector suggests that the contraction in lending could be around £10 billion over five years”.
If there is anything we do not need when trying to boost productivity, it is a contraction in lending, particularly for SMEs. If that was to be the only drag on productivity it would be bad enough, but let me turn to another.
Ian Blackford
If we are to get sustainable economic growth in this country, we need sustainable growth in bank lending, but the Government’s actions will restrain what is necessary to deliver bank lending growth in this country. What has happened to the £375 billion of quantitative easing that was supposed to do exactly that and increase bank lending? It is another failure of this Government.
Roger Mullin
My hon. Friend answered his own remarks with his last four words. It has been a failure, and now the Government are also failing on productivity.
As I was saying, the potential contraction of £10 billion in lending is made worse because it is now paralleled by a further planned drop in public sector capital expenditure, as my estimable colleague, my hon. Friend the Member for Dundee East (Stewart Hosie), revealed earlier today in questions to the Chancellor.
Barbara Keeley (Worsley and Eccles South) (Lab)
Thank you, Madam Deputy Speaker, for calling me to speak. It seems that it is third time lucky.
We have had a lively debate. We heard speeches from the hon. Members for Charnwood (Edward Argar), for Kirkcaldy and Cowdenbeath (Roger Mullin), for Dudley South (Mike Wood), for East Antrim (Sammy Wilson) and for Lewes (Maria Caulfield), my hon. Friend the Member for Hornsey and Wood Green (Catherine West), the hon. and learned Member for South East Cambridgeshire (Lucy Frazer), and the hon. Members for Brighton, Pavilion (Caroline Lucas), for East Lothian (George Kerevan), for Foyle (Mark Durkan) and for Edinburgh East (Tommy Sheppard).
Last week, the Labour Opposition voted against the Budget, which my hon. Friend the Member for Streatham (Mr Umunna), the shadow Business Secretary, described as “unfair” and “regressive” and
“not equal to the challenges that we face as a country.”—[Official Report, 14 July 2015; Vol. 598, c. 768.]
This is the context in which we start our scrutiny of the summer Finance Bill. There has been much rhetoric and spin from Ministers but little acknowledgment of the hardship that the Government’s measures will cause to more than 3 million people on low incomes. We heard much on that point today.
The hon. Member for Edinburgh East challenged my hon. Friend the shadow Chief Secretary on Labour’s stance on the general direction of the Finance Bill. I am not a Hansard writer, so I do not claim that this is absolutely verbatim, but it is worth repeating what my hon. Friend said, which was that Labour disputes the Government’s characterisation of the measures in the Budget and the Bill. We do not see them as they see them. They use these descriptions of national living wage, working people and so on, but we do not see it that way. However—this is an important point—the measures we oppose are not all in this Bill. Some will be in delegated legislation. I hope that explains our position to the hon. Gentleman.
Given the hardship that the Budget’s measures will cause to 3 million families on low incomes and that we debated yesterday, the tax lock is of course welcome. However, there were giveaways in this Budget, which are detailed in the Finance Bill, such as the cut to inheritance tax. That featured a number of times in the debate. I want to question the priorities that are behind the choices made by this Government. Whenever we talk about increases to the national minimum wage, we must bear in mind, as many Members have done, that the cuts to tax credits more than outweigh those wage increases. My hon. Friends have taken the opportunity to outline our opposition to these regressive measures that will hit more than 3 million working people. Despite the gimmick of the tax lock on VAT and income tax, the Government’s other tax increases will also have an impact on families over and above the impact from cuts in tax credits.
Ian Blackford
I am pleased that the hon. Lady mentioned Labour’s opposition to the impact of the tax credits, but there is concern on the SNP Benches and elsewhere in the country—this goes to the heart of the matter—that people who will be affected by the Budget and what is happening in this Finance Bill need leadership. It is that failure to give leadership—to oppose, as the Opposition party in this House—and to stand up for people who are affected by these measures on which the Labour Opposition will be judged.
Barbara Keeley
I do not believe that is the case. We have been through the whole of the last Parliament being the official Opposition and we are still in that position again after the election, much to our chagrin. I know there are a lot of new Members in the House, but I must say that a Bill does not pass through the Commons in one sitting—it does not pass through the Commons in one day—because it goes to Committee. When we come back in September we will have a Committee of the whole House, and we have started to table amendments for debate on those days. There are also Public Bill Committee sittings, Report and Third Reading, so there are many occasions when speeches can be made.
Oral Answers to Questions
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Damian Hinds
The Budget contained measures that will boost skills and support high-tech businesses across the north, including in my hon. Friend’s constituency. Greater Manchester local enterprise partnership is invited to bid in the new round of enterprise zones, there will be new regius professorships to support universities and there is an ambitious transport package that will provide much needed infrastructure for the north of England.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
T1. If he will make a statement on his departmental responsibilities.
The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)
The core purpose of the Treasury is to ensure the stability and prosperity of the economy.
Ian Blackford
We hear from the Institute for Fiscal Studies that the gross impact of the higher minimum wage will be about £4 billion, but that the cuts to tax credits represent about £6 billion. The proportion of children in poverty who are from families in work rose from 54% to 63%, and that statistic can only get worse. It is little surprise that the Government want to redefine child poverty. To change a definition is to change the truth—
Mr Speaker
Order. I thought the hon. Gentleman had a background in the financial world. He cannot have been allowed to prate on at that length when he was busy making important decisions with commercial substance involved. He will really have to practise.
Rent-to-own Sector
Ian Blackford Excerpts(8 years, 10 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Blackpool North and Cleveleys (Paul Maynard) for securing the debate. He spoke with passion about this important matter, as did the hon. Member for Makerfield (Yvonne Fovargue).
The hon. Member for Blackpool North and Cleveleys said that non-transparent markets cannot be regulated, but our discussion this morning has highlighted the need for effective regulation. The fact that so much of it is not transparent—we are talking about protecting the most vulnerable, the poorest and the most disadvantaged in our society—means that the Financial Conduct Authority has got to take proper responsibility for this growing market, for all the reasons that have been set out.
We all recognise that the FCA is in its infancy, and that it has had a number of major tasks over the past few years. In our opinion, the FCA has got to take far greater responsibly for ensuring that the sector is effectively regulated. One of the issues is what has been described as the bundling of services. As we have seen in other areas of the market, there has to be an unbundling of services. It has to be made explicitly clear why the consumer is charged for each part of the service provided in the rent-to-own sector.
The Government must look at what legislation is required to force the FCA to take effective action to protect the consumer in this important area. We all accept that there is a need for the rent-to-own sector in our society. There are people who will be tempted by the desire to pay weekly for products. The sector has existed for a long time, but it is important that it is effectively regulated. I will confine my comments to that.
Tax Credits (Working Families)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
Thank you, Madam Deputy Speaker.
I congratulate the Labour party on bringing this most important debate to the House. Having listened to the Minister over the past 25 minutes, I think that we on the SNP Benches must live in a different world from the one that he lives in. When we revisit what has been happening over the past couple of weeks, with the scandal of the Secretary of State for Work and Pensions coming to this Chamber and wanting to redefine how we measure child poverty, we can see that that indicates the scale of the problem we face. But the cat is now well and truly out of the bag. We listened to the Minister taunting the Labour party and accusing it of being the party of welfare. On these Benches, we see the importance of what we call social security in Scotland. We believe that society is as strong as its weakest link. The battle that we are facing in this Parliament is an ideological one with a Government who want to demonise the poor of this country.
Let this House take the opportunity to say to the Chancellor of the Exchequer, before he rises to deliver his emergency Budget tomorrow, that he should not use the failure of the Government to fix the deficit as an opportunity to attack the poor and the disadvantaged in our society. In particular, the Government should pause and reflect on the importance of tax credits to those who rely on the contribution that they make to the household budgets of many of our citizens. Tax credits have a significant impact in raising the income of low-income households, particularly those with children. The tax credits system was designed as a key mechanism for tackling poverty and inequality, and the SNP firmly opposes any moves to gut it, as the Tories have hinted at doing.
Tax credits require a significant amount of expenditure, which largely goes to supporting children in lower income families. In 2013-14, tax credit expenditure in Scotland was £2 billion, supporting thousands of people on low incomes. The SNP recognises the vital role that tax credits play in providing such support, and that is why our manifesto proposed to protect their value by increasing tax credits annually in line with inflation.
We need to go much further, however, and do more to raise wages, including raising the minimum wage, promoting the living wage and increasing the work allowance in universal credit. It is the delivery of real wage growth that will lead to a natural reduction in tax credits. These benefits cannot be removed at a time when many are on low pay.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
My hon. Friend is right to talk about the moral case and the position in which the poorest in our society are being put. The Conservative party also talks about productivity. Does my hon. Friend agree that cutting tax credits will harm the possibility of raising productivity in the economy?
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!
Chris Philp
Will the hon. Gentleman join me in welcoming the fact that inequality actually fell during the past five years?
Ian Blackford
I must tell the hon. Gentleman that according to the figures released two weeks ago, child poverty in Scotland is up by 20,000. That is the reality of what his Government have done to people in my country.
Sammy Wilson
The hon. Gentleman made a point about quantitative easing. Does he accept that one of the problems identified was the lack of bank lending to industry, and that banks needed liquidity to increase lending to businesses?
Ian Blackford
I thank the hon. Gentleman for his question, because we need a debate about that in the House. The real reason behind quantitative easing was exactly that—to produce an increase in bank lending—but if we look at what has happened over the past five or six years, we can see that there has hardly been a significant increase in bank lending. The money has gone into the financial markets and benefited the banks and the bankers, but we as a country have not seen the benefits that we should have had. That is the reality of what has happened. The previous Government had the choice between investing in the real economy and sticking cash into the back pockets of the bankers, which is what they achieved.
Why do the Government not invest in growing the economy and supporting low-paid workers, rather than punishing them for the Government’s failure to deliver sustainable economic growth?
Imran Hussain (Bradford East) (Lab)
Does the hon. Gentleman agree that this Government need to stop persecuting the poorest in society, and instead put pressure on big business to provide a proper living wage?
Ian Blackford
Absolutely. I concur 100% with the hon. Gentleman. When we come to vote on the emergency Budget, I appeal to Conservative Members to examine their own consciences, look at the pain that will be caused if they go ahead with cutting tax credits, and recognise that we need to invest.
Kwasi Kwarteng
Why in such debates do Opposition Members never mention the deficit or the country’s financial and fiscal situation? I am curious as to why they make no attempt to address that matter.
Ian Blackford
I must say that I find it remarkable that the hon. Gentleman has asked such a question. I have spent much of the past 10 minutes talking about the need for sustainable economic growth, because that is how we can reduce the deficit, not by punishing the poor in this country. That is what he fails to accept.
Ian Blackford
I will make some progress and then I will give way.
The SNP firmly believes that we need to do far more to tackle poverty, and addressing inequalities is at the heart of the Scottish Government’s programme for Scotland. We challenge the UK Government to commit to a more ambitious rise in the minimum wage, and to follow the Scottish Government’s lead in paying all staff the living wage.
The UK Government have already cut tax credits. In 2012, the eligibility threshold for child tax credit changed from a family income of £41,000 to £26,000 for lone parents and to £32,000 for families with two children. The number of hours that couples with children had to work in order to be eligible for working tax credit went up from 16 hours a week to 24, with one parent having to work at least 16 hours. As a result of those changes, 11,370 Scottish families lost working tax credits worth up to £3,870 per year and 73,300 Scottish families lost child tax credits worth about £545 per year.
More than 500,000 children in Scotland benefit from tax credits. Two thirds of the £2 billion expenditure on tax credits in 2013-14 went to low-income families with children; only 5% went to households without children. That is why we are alarmed. Any removal of tax credits will clearly lead to an increase in child poverty. It is simply inhumane to consider such a move.
In a speech last week, which was widely interpreted as a statement of intent to gut tax credits, the Prime Minister said:
“There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back—and more—in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity—helping to create well paid jobs in the first place.”
Those comments suggest that the Tories are planning to target child tax credits and working tax credits, which provide support to low-income working people.
Although we agree that we need to take urgent action to tackle low pay and raise wages, removing the vital support that tax credits give cannot be the answer. The SNP has set out a range of policies that aim to boost low incomes and drive wage growth. We have proposed raising the minimum wage to £8.70 by 2020, raising the incomes of the lowest-paid in our society and reducing dependence on tax credits.
The Scottish Government are the first living wage-accredited Government in the UK, and we are actively promoting the living wage by encouraging companies to sign up to our Scottish business pledge. We challenge the UK Government to follow suit and guarantee that all their staff will be paid the living wage.
We want to see a £600 increase in the work allowance of universal credit, which determines when people entering work begin to have their benefits reduced. That would support people on low incomes and boost the income of a worker who receives universal credit by £390.
Removing much need financial support for those on low incomes, in the form of tax credits, simply cannot help make work pay. The SNP wants to make work pay, but we must do so by raising incomes and tackling low pay.
Rebecca Long Bailey (Salford and Eccles) (Lab)
The problem with the Government’s suggestion that cutting tax credits will lead to higher pay is that the labour market is weighted in favour of the employer, rather than the worker. The only way to restore wage growth across the board, especially in the private sector, is through the expansion of collective bargaining. We simply cannot have wage growth in a country where the erosion of trade union rights is right at the top of the Tory agenda. The Government are doing the exact opposite of what they intend, which is to get people back to work and on decent pay—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Order! Honestly, we must have short interventions. I want everybody to get to speak. Interventions are not meant to be speeches. We have to help each other today because a lot of people wish to speak. The shorter the interventions, the more people we will get through.
Ian Blackford
I agree with the gist of what the hon. Lady said. We need to ensure that there is proper protection for trade union rights throughout the UK.
The Resolution Foundation, which has been much commented on, has assessed the proposed plans. It found that more than two thirds of the families affected—2.7 million of them—would be in work. Working families with two children would lose up to £1,690 a year. Almost two thirds of the cut would be borne by the poorest 30% of households; almost none of the cut would fall on the richest 40% of households.
A poll by YouGov and The Sunday Times the other week found that there was opposition across the UK to cuts in tax credits, and that the opposition was highest in Scotland: 56% of Scots are opposed to the cuts and only 37% are in favour. Clearly, there is public opposition to any attempt to target tax credits, and that opposition is strongest in Scotland.
The Tory assault on the welfare system is already pushing more and more people, particularly thousands of children, into poverty. There are worrying links between welfare reform and food bank use. The Trussell Trust has reported that 117,689 people picked up a three-day supply of groceries from Scottish food banks in 2014-15, including 36,114 children. That is eight times the number of people who were helped just two years ago. Given the social harm that is already being done by Tory welfare cuts, the future damage that could be caused by gutting tax credits is unthinkable. The Tories’ plans, and the high degree of uncertainty about the future of that lifeline support, demonstrate the need for full powers over Scotland’s welfare system to be in Scottish hands, not those of the Chancellor and the Secretary of State for Work and Pensions.
Chris Philp
I look forward to hearing the point after the debate, perhaps.
Let me turn now to the topic before us. When Gordon Brown introduced these measures in the early 2000s, he told us that tax credits would cost perhaps a couple of billion pounds a year. The truth is that today they cost £30 billion a year, an astronomic burden on the Exchequer.
Let us think for a moment about what tax credits mean. They are a subsidy paid to top up wages because employers are not paying their staff properly. I deplore the fact that some employers are not paying their staff properly and are effectively abusing the generosity of the Government by underpaying their staff. Any reforms in tomorrow’s Budget that end that abuse will be extremely welcome.
Tax credits provide disincentives to work, as some of my colleagues have pointed out already. They are withdrawn at the same time as income tax and national insurance kick in. Effectively we have marginal tax rates at around the 75% to 80% mark, so it is no surprise that employees in the companies run by my hon. Friend the Member for South Suffolk (James Cartlidge) were reluctant to take pay rises when marginal tax rates were so high. One Member mentioned the 16-hour-a-week limit, now raised to 24 hours a week. I know people who have employed part-time staff who refused, understandably given the system, to work extra hours for fear of losing those extra tax credits. That is all wrong. The fundamental fact is that people are helped out of poverty not through Government handouts but through hard work and earning more money.
Ian Blackford
The hon. Gentleman was asked about food banks in Yorkshire and we have heard a lot about facts, so perhaps I can give him a fact. Between the end of 2012 and September 2014, nearly 150,000 sanctions were applied in Scotland, affecting 85,000 individuals. That is what is driving people towards food banks. Does he think that that is right?
Chris Philp
It is right that wages are now rising, that people on low incomes have been helped with tax cuts and that the Government are directing assistance to people on low incomes. That is what is right. Over time, as the cost of living issues that have been mentioned are eroded by rising wages combined with zero inflation, the problem that the hon. Gentleman has referred to will without a doubt be alleviated.
There are other issues with tax credits. Employers who abuse tax credits by underpaying their staff have no incentive to invest in education, training and technology and, unfortunately, that contributes to our productivity problems. I believe that tax credits, introduced by the previous Labour Government, are a symptom of failure. They encourage companies to underpay their staff and place the burden of that underpayment on the general taxpayer. Any move in tomorrow’s Budget to reduce the burden of tax credits on the Exchequer while improving the earnings power of people on low pay will be very welcome. I join many colleagues on the Government and Opposition Benches in supporting moves towards a higher minimum wage. I have publicly called for that in London and I think that it would be a good move for the country as a whole.
We have heard about another cost of living issue: housing. There will be a housing Bill in the autumn that will promote house building and therefore affordability, but I point out to Opposition Members that the number of housing starts last year was about 50% higher than the number of starts in 2009-10. The Government have already made fantastic progress.
The foundations of prosperity and the way out of poverty lie in work, not benefits, and I endorse the Government’s approach.
Scotland Bill
Ian Blackford Excerpts(8 years, 11 months ago)
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Mr Gauke
As I said, a decision was made by the Scottish Government, believing that the efficiency savings were more than sufficient to outweigh the costs incurred by losing the section 33 refund. That was the basis for the decision, and the position in respect of section 33 was clear.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
We keep hearing about respect. We all know why the Scottish Government introduced the change—it creates efficiency in the delivery of police and fire services in Scotland. A clear case has been made by many of my hon. Friends and by those on the Labour Benches as well. If there is a genuine feeling of mutual respect between the Government in Scotland and the Government in Westminster, all the Treasury has to do is make sure that we get the VAT back and we will invest it in front-line services to benefit the people of Scotland.
Mr Gauke
We respected the Scottish Government’s decision, because they were perfectly entitled to decide to reform the police and fire services in the way they did, but they knew what the consequences of the law of the land would be with regard to VAT. That decision was taken and it would be unreasonable for us to maintain the existing legislation, given that there are many demands on section 33.
Let me turn to clause 15. The hon. Member for Dundee East (Stewart Hosie) asked why we are simply assigning half of the VAT revenue, rather than all of it. That reflects the agreement reached by the five main political parties under the auspices of Lord Smith. It represents a balance between providing a sufficient incentive for Scotland to grow its economy, relative to the rest of the United Kingdom, in order to increase its revenue from VAT and exposing the Scottish Government’s budget to potential fluctuations in VAT receipts.
Productivity
Ian Blackford Excerpts(8 years, 11 months ago)
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Greg Hands
Yes, my hon. Friend is here, unlike half the shadow Treasury team who went into the election and were wiped out by either the Conservatives or the Scottish National party—and that includes the hon. Gentleman’s former leader.
Greg Hands
I shall give way shortly. I think I have awakened the hon. Gentleman’s interest with my reference to the SNP.
I thought that it would be helpful to start by setting out the productivity question in relation to the UK’s general economic competitiveness, setting the scene for the problems we face. Hon. Members will of course be aware that, thanks to our long-term economic plan, we can be proud of having the highest growth of the major advanced economies in 2014, and we are predicted to repeat that in 2015. We are highly competitive, and that is linked to productivity. We are ranked ninth of 144 countries globally for competitiveness, we enjoy the lowest corporation tax in the G7, and we are seen as being well governed, as we are in the top 20 of 102 countries on all eight factors of the World Justice Project’s Rule of Law index for 2015. London remains a world-leading international financial centre. British universities are by far the best in the world outside the US. For those who complain that we no longer make things, within two years we expect the UK to match its all-time car production record, which was set back in the 1970s. The city of Sunderland now produces more cars than the whole of Italy put together. We are extremely competitive.
Greg Hands
Let me make a bit of progress.
The high productivity that I have mentioned is very good, but we need to be equally honest about the areas where we can do better. We need to improve our literacy and numeracy skills, and our OECD position for intermediate skills needs to rise. To match the highest rate of female participation in the workforce in the G7, which is in Canada, or in the OECD, which is in Iceland, we would need over 500,000 or 2.5 million more women to enter the labour force respectively. Our gross value added growth is still too reliant on London and the south-east. We are not building enough housing, and our investment in roads and rail has not yet undone the effects of the decades in which we under-invested. All that means that our economy needs to find an extra gear.
We should view this debate in the context of the broad decreases in productivity growth across the OECD over the past few years. We are not unique in this regard. Other G7 countries, including Germany and Italy, have seen their measured productivity per worker fall since 2007. We have to accept that productivity is a major challenge, but it is not a new challenge—it has been around for decades. To meet that challenge, we must look calmly and seriously at the variety of factors that affect productivity, and put in place wide and ambitious long-term reforms.
Importantly—the hon. Member for Nottingham East needs to engage with this point—those reforms must not jeopardise other elements of our economic growth. That is the approach that the Government will take in our productivity plan, because productivity is not an end in itself, but a means to an end. It is all about prosperity. When we publish our productivity plan, I hope that the Labour party will see fit to support it, because we agree that improved productivity will be good for living standards across the country and help us to meet our fiscal commitments, which is a point that he raised.
Ian Blackford
What the Chief Secretary is saying does not meet the reality of what has been happening for the past seven years. Productivity in the UK has fallen and the Government have failed to deliver prosperity. The root of that has been the failure of macroeconomic policy. Your big idea was quantitative easing, with £375 billion of new assets being created, but none of that has fed through to bank lending. That is why we have not seen the underlying investment in our economy that is required. You need to address that and make sure that we see investment in infrastructure, industrial investment and a plan for growth, not some meaningless productivity, which is just hot air and words, but no reality.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Several people this afternoon, not just the hon. Gentleman who has just spoken, have used the word “you”. When one uses the word “you” in this Chamber, it refers to the Chair. I have not done any of the things I have been accused of this afternoon. I do not want to pick on individual Members at this early stage of the Parliament, but please let us use the correct language.
Greg Hands
I dispute the premise of the hon. Gentleman’s question. Productivity in this country is rising, albeit at a relatively low level. We would like it to be higher. It has risen by 0.9% this year. The OBR’s projection is that productivity will increase by between 2.1% and 2.5% per annum in the coming years. We need it to increase by even more than that, but it is certainly not the case that productivity has collapsed over the past couple of years.
Greg Hands
Okay, I hear the hon. Gentleman.
To answer the point raised by hon. Member for Nottingham East about the OBR, the OBR already produces forecasts and commentary on productivity, and will continue to do so independently and impartially as it always has done.
Michelle Thomson
I am going to address that point.
The much-vaunted recent growth has brought us back only to a certain point. When judged against nations smaller in population size—those with between 3 million and 10 million people—the sluggishness of UK plc is laid bare for all to see. Sweden’s productivity is 18% higher than that of the UK; Denmark’s is 26% higher and Norway’s an incredible 77% higher. Even poor Finland, which has no oil, no fisheries and no substantive premium food and drink industry—in fact, it has none of the inherent advantages and natural resources that Scotland enjoys—delivers a productivity performance some 8% higher than that of the UK. The phenomenon is not limited to Scandinavia. In central Europe, Austria’s productivity is 13% higher, and Switzerland’s 23% higher, than that of the UK.
Ian Blackford
The picture that my hon. Friend is painting of many small, successful countries is one with which we are all familiar. I am delighted to see that our friends in the Scottish Government have an aggressive agenda of investing in innovation and skills. If Scotland had powers over taxation, however, would not that allow us to deliver higher rates of productivity similar to those of the small, successful European countries?
Michelle Thomson
I am inclined to agree with my hon. Friend, and I shall address that point further in a moment.