Tax Credits (Working Families)

Damian Hinds Excerpts

Tuesday 7th July 2015 Commons Chamber

[The Exchequer Secretary to the Treasury (Damian Hinds)]

The Government’s clear mission is to support working people as they strive to build security and achieve their ambitions throughout their lives. We know that most people want to do their best to provide for themselves and their families; that education and skills are the bedrock of success and security; that productive employment is the only sustainable way of delivering them; that the state should incentivise independence and self-reliance; and that when someone is working, they should keep more of what they have earned.

We need to make welfare savings so that we do not have to ask other working families to pay more, but when people need support, of course it is right that we support them. These are the principles that have underpinned our welfare and employment policies: making work pay; creating jobs and apprenticeships; improving childcare, education and training; cutting taxes, especially for the lowest paid; and, for those who need extra support, making the benefits system simpler and fairer for them and other taxpayers. On all these fronts, we have achieved a great deal, and we have done it at the same time as cutting the deficit and restoring growth.

Before responding to some of the points made during the debate, I want to make one thing clear. We have set out our commitment to reducing the deficit, which, among other things, requires £12 billion of savings to be realised on welfare, on top of the £21 billion we saved in the last Parliament. Further details, of course, will come from my right hon. Friend the Chancellor in tomorrow’s Budget, and clearly I am not going to pre-empt any of that this evening.

We have had a very good debate today. In particular, we have heard three distinguished maiden speeches. The hon. Member for Bradford West (Naz Shah) spoke of the sartorial act she had to follow, and she united the House—a rare occurrence—in sharing her pleasure at giving her predecessor a little more time to work on his wardrobe. She was also very generous about her Conservative opponent and the positive role he played in that difficult campaign. That was very much appreciated.

The hon. Member for Blackburn (Kate Hollern) spoke about her ambition to be the pinnacle, or indeed the pineapple, of politeness—a reputation she brings with her from her leadership of Blackburn with Darwen Council—and reminded us of the long historical roots of the northern powerhouse. She also reminded us of our schools days with her comments about Hargreaves and the spinning jenny. She, too, has a hard act to follow, in the shape of Jack Straw and Barbara Castle—two great parliamentarians.

The hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) spoke about maintaining a sense of perspective. She also spoke movingly about her battle with serious illness and about how that helped her get perspective on what was most important in life. In reminiscing about the election, she also reminded us that, in our work in the House, it is not about “me”; it is about “us”.

There were some other excellent speeches. My hon. Friend the Member for Bexhill and Battle (Huw Merriman) advised that we should always listen to the originator of a policy and what they intended. I am sure that in this case the originator did not intend, and never expected, that the total cost of tax credits would eventually top £30 billion. My hon. Friend the Member for Solihull (Julian Knight) talked about the uneven generosity of the Labour party in reaching that figure and about the particular increases just before 2005 and 2010. My hon. Friend the Member for South Suffolk (James Cartlidge) spoke about the jagged edges in the welfare system that universal credit—that great reform—is set to smooth out.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) spoke about the importance of productivity, which is what underpins real-wage growth and is an absolute focus for this Government. We shall hear more about the productivity plan very soon.

Today’s debate occasionally strayed into realms of speculation about what may come in the days to follow, but in a powerful speech, my hon. Friend the Member for Croydon South (Chris Philp) reminded us to focus on the facts. Some of those facts include this Government’s strong record on reducing income tax, which has already seen a typical basic rate taxpayer benefit to the tune of £825 since 2010, with that figure set to rise to £905.

Responding to some points raised by Opposition Members, I first remind them that the number of children in workless households is at a record low, which is something we should all celebrate. I say to the Father of the House, the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman), that according to the most recent statistics, the number of children in low-income households in Manchester has fallen.

In contrast to what the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) said about the quality of the enormous number of 2 million jobs created since 2010, there has been a 1.5 million increase in the number of people in full-time employment and a 1.27 million increase in the number of people in high- skilled employment. I remind the hon. Members who spoke about zero-hours contracts that they account for something in the region of 2.5% of the total jobs in this country, delivering an average of 25 hours’ work a week.

Even the Labour party nominally agrees that tens of billions of fiscal consolidation will be necessary over the course of this Parliament. I have to remind Opposition Members that the Charter for Budget Responsibility was passed by 505 votes to 18, and we will have to continue the journey towards balancing the budget. I hope that that is a journey we will be able to go on together.

In 2010, spending on tax credits had spiralled out of control, with nine in 10 families with children eligible for tax credits. We were taking money away from people in the form of income tax and then giving it back to them through another route. That is why we reformed the system to target support at those who needed it most—for example, by increasing the disability element while lowering overall Government spending.

[Hannah Bardell]

rose—

[Damian Hinds]

I am sorry, but I am too short of time.

In the longer term, we will be migrating tax credits into the new system of universal credit, which will improve incentives to work, reduce reliance on benefits, make households better off and increase the number of people in work.

There are three key ways to help people to build success and security for themselves and their families: make sure everyone can get a good start in life; create the strong economy that sustains quality jobs; and let people keep as much as possible of what they have earned. We have been doing all three. We have increased our support on childcare and early years education by £1 billion; radically extended childcare provision; and increased funding for the most disadvantaged children in our schools and nurseries. We have created record job growth of 2 million—more than the rest of the EU put together—moved more and more households out of unemployment and supported millions of new apprenticeships. We have lowered income tax for 27 million people, including moving the lowest-paid 3 million out of tax altogether, and for the next five years, there will be no increases to income tax, VAT or national insurance contributions. These are the policies that our working people deserve—the ones they expect and have recently voted for.

The only sustainable way to raise living standards is to keep working through the Government’s long-term economic plan to build a resilient and dynamic economy. Just last week, we learned that living standards had risen again by 3.9% against the same period last year—further proof of how our long-term plan is helping hard-working families. We have reversed the system inherited from Labour, where it could be more rewarding to live off benefits than to get a job. We have cut income tax for 27 million people. We have capped benefits in a fair way and increased support for those who need it most. We have simplified the benefits system, cracked down on those who abuse it, and helped to provide millions of jobs to empower people to help them get on in life. This Government have continuously stood up for both the vulnerable and the hard working in our society, and we will continue that support every step of the way.

Question put.