Guardian’s Allowance Up-rating Order 2012

Baroness Lister of Burtersett Excerpts

Monday 27th February 2012 Grand Committee

[Baroness Lister of Burtersett]

My Lords, I have a few brief points to make about the Tax Credits Up-Rating Regulations 2012. The Minister mentioned the change for couples, the 16 to 24-hour rule. Can he tell the Committee how many people are going to lose tax credits as a result of this and how this improves incentives for that group to take mini-jobs?

The Minister also mentioned working tax credit and childcare costs and went on to talk about how the measures are improving incentives to work, especially for women. I am sure that he is aware of the report published today by the Daycare Trust about childcare and how the cuts in the level of childcare costs to be met by tax credits are contributing to the crisis in childcare. Growing numbers are unable to afford childcare because no affordable and accessible childcare is available. This certainly does not improve incentives for women to take paid work. On the contrary, some women are having to leave paid work because they cannot afford the childcare, particularly when this is combined with the changes that will come in with universal credit where the withdrawal rate will be worse for second earners, the great majority of whom are women. It is difficult to see how these will be a great improvement in incentives for women.

I want to raise one other point. When the Minister repeated the Autumn Statement in your Lordships’ House, I asked him about the decision to renege on the pledge to increase child tax credit in real terms and what impact that would have on children living in poverty. I was referred to the Treasury website. I realised why, of course, when I discovered that the impact would be to increase the number of children living in poverty by 100,000. Perhaps that was not something the Minister particularly wanted to tell the House. I then had another go with the noble Lord, Lord Freud, in Oral Questions when I asked him why the Government had dismissed the projected 100,000 increase in child poverty due to the change in tax credits—reneging on the tax credits increase—as a statistical quirk that arose from the relative nature of that poverty, even though in opposition the Prime Minister had made the loud and clear promise that,

“the Conservative Party recognises, will measure and will act on relative poverty”.

The answer that I received from the noble Lord, Lord Freud, seemed to be a response to a different question. I hope that perhaps the noble Lord, Lord Sassoon, may now be able to give me the answer to that question, given its relevance to the tax credits uprating order.

--- Later in debate ---

[Lord Sassoon]

What I will concede is that we look at the effects of tax, tax credits and benefits together. Therefore, whatever makes up the bundle—some of it inherited, some not—comes in to that mix. Regardless of where individual measures came from, it is important to look at them in the round, which is what we have done and will continue to do.

In relation to the questions of the noble Baroness, Lady Lister, I concede that I will probably fall into the trap of answering in a way that does not quite get to the nub of one or two of them, but I will come back to them. In headline terms, regarding the impact of the Autumn Statement on the number of children in relative income poverty, analysis shows an estimated increase of around 100,000 in 2012-13 on the measure used previously. However, this does not represent a forecast of the actual change in child poverty year on year because the measurement does not take into account, among other things, the value of public services that benefit children such as education and healthcare. These are very important in improving life chances, particularly among poorer households. Again, we have to be very careful here about whether we are using measures that properly capture the full effect of government policies.

In relation specifically to childcare, as I am sure the noble Baroness knows, the Government are investing a further £380 million a year by 2014-15 to extend the offer of 15 hours’ free education and care a week to disadvantaged two year-olds, and to cover an extra 130,000 children. Under the universal credit we are investing an extra £300 million so that 80,000 more families will get help with their childcare costs. However, I have not had a chance to see what has been published today. As I say, I will write on those points.

As I said in my opening remarks, the employment situation in this country is not easy. However, we had to take urgent action to tackle the deficit that we inherited, particularly the unsustainable welfare bill. I have mentioned the extraordinary increase in expenditure on tax credits in seven years from £18 billion to £30 billion a year. It is spending that is poorly targeted and totally unsustainable. The reforms to tax credits in these regulations and orders that we have been discussing are a fair and proportionate way to deal with this very difficult inheritance, as I have explained.

Essentially we have ensured that those most able to contribute to the deficit do so while those with the lowest incomes continue to be supported. It is because of that commitment that the highest decile of earners will make the greatest contribution towards reducing the deficit both in cash terms and as a percentage of their income, as I think the noble Lord, Lord Eatwell, recognises. In that context, the orders and regulations before the Committee are an important step towards realising our ambition to restore the UK to economic stability, but in a way that drives prosperity and means that we tackle the deficit in a fair and responsible manner. I commend the orders and regulations to the Committee.

[Baroness Lister of Burtersett]

Will the noble Lord write to me on the question I asked about the impact on couples of the change from 16 to 24 hours?

[Lord Sassoon]

I will write. I do not know what information I will be able to give but I assure the noble Baroness that I will cover the point.