Tax Credits

Liz McInnes Excerpts

Thursday 29th October 2015 Commons Chamber

[Liz McInnes (Heywood and Middleton) (Lab)]

I thank my right hon. Friend the Member for Birkenhead (Frank Field) for bringing this debate to the House.

A wiser Chancellor would not have cut tax credits to some of the poorest families in Britain in the first place, but I believe that the right hon. Gentleman now has some wriggle room and that he can put right the mess he has created for Britain’s families. The Child Poverty Action Group believes that the proposed changes to tax credits will damage work incentives and increase child poverty. I think we have got the message loud and clear that the cuts will mean that work pays less.

The changes affect recipients of working tax credit, who by definition are in work. Analysis by the House of Commons Library finds that 3.2 million people will lose an average of £1,350 next year, and although doubt has been cast on that figure by the hon. Member for Morecambe and Lunesdale (David Morris), I find that, generally, Library staff are fairly thorough and reliable. The same Library analysis finds that more than 750,000 families earning between £10,000 and £20,000 a year will lose up to £2,184 next year. More than 580,000 families—Britain’s poorest working families, earning between £3,850 and £6,420 a year—face being taxed for the first time. They will lose 48p in tax credits for each pound they earn. Some low-income families will keep just 3p in every extra pound they earn after the changes are made. Child poverty will increase as £4.4 billion is taken from low-paid families.

The cuts are not compensated for by other changes, such as the so-called national living wage, the rising income tax threshold or the free childcare offer. Importantly, the impacts of the cuts have not been thoroughly assessed. Some working families now face an effective 97% tax rate on each extra pound they earn: they will lose 32p in income tax and national insurance payments, 17p from entitlements to other benefits, and 48p in tax credit entitlements, leaving them with just 3p in the pound.

At his last party conference speech before becoming Prime Minister, the right hon. Member for Witney (Mr Cameron) argued against high effective tax rates on low-income families, saying,

“if you’re a single mother with two kids earning £150 a week, the withdrawal of benefits and the additional taxes mean that for every extra pound you earn, you keep just 4p. What kind of incentive is that?”

What has changed? Two thirds of poor children live in a family where somebody works, and it is inevitable that taking £4.4 billion away from low-income working families will force more children into poverty. Child poverty is rising: independent projections from the Institute for Fiscal Studies show clearly that the falls in child poverty rates seen at the beginning of this century are at risk of being reversed. In my constituency of Heywood and Middleton, the number of working families with children claiming tax credits is 5,500 and the number of children living in working families receiving tax credits is 9,700. In the neighbouring constituency of Rochdale, the figure is 14,900. Nearly 25,000 children across the borough of Rochdale will be affected by the changes.

My constituent Emma Divine emailed me to say:

“I’m dreading going back to work. I’m a single mother of three children and I know I’m going to go back soon, but I’m scared how we will survive—I’m already struggling as it is.”

Another constituent—a public sector worker—wrote to me to say that she provides essential public services and that tax credits are an important part of her household income. She said that although she would gain from the £80 increase in personal tax allowance, overall she would be much worse off, especially, as she said, if we

“take into account the fact that the government only wants me to get a 1% pay increase over the next few years.”

Those women and many more like them speak to the reality of life for the working poor—something that some in this House are comfortably insulated from. Indeed, when I worked for the NHS, child tax credits helped me. They helped me to remain in full-time employment because I was able to afford a childminder for my school-age son.

Of course we welcome the higher minimum wage and the increase in free childcare provision, but, as many hon. Members have pointed out, that only goes so far. We need to get work incentives right. That is critical to tackling in-work poverty. What we need to do first is push employers to pay the living wage—the real living wage, not the Government’s new national minimum wage, which is lower and does not apply to workers under 25. We need to tackle the causes of low pay before we start to cut tax credits.

I agree with my hon. Friend the Member for Darlington (Jenny Chapman) that the vote on Monday may have done the Chancellor a favour, giving him breathing space and a chance to put this situation right by supporting working families instead of penalising them for doing the right thing. Although the right hon. Gentleman may have only just discovered that the House of Lords is unelected, I hope that he will take this opportunity to reverse the tax credit cuts.

--- Later in debate ---

[Mr Allen]

My hon. Friend is absolutely right.

We, and some of the media, think this is a big issue right now, but you would be amazed how many people do not know that this is going to hit them, and they will not know until that letter drops and it actually happens. A wise old bird—Joe Ashton, who used to be the MP for Bassetlaw—taught me this lesson: passing a Bill will not influence anybody’s real life until whenever—in this case, I believe, next April—it takes effect. Then there will be a shock. Then there will be a tidal wave of people saying, “My god, what are you doing to us? Why did you allow this to happen? We don’t care which way you voted, why are you allowing it to happen?” That is why between now and then we have to bend our backs to ensure that we mitigate the worst consequences.

The national living wage is a bit like English votes for English laws: it is such a smart slogan that one could perhaps run an election on it. Does the reality, however, have the substance and the detail that people need in their lives? Saying that we are going to have a national living wage sounds fantastic, but if it does not actually mean that incomes will be at least as good as they were before, it is a fraud.

[Liz McInnes]

Does my hon. Friend agree that the Government’s national living wage is not the actual living wage, which is set by the Living Wage Foundation? The actual living wage is far higher than the Government’s national living wage. To call it a living wage is a misnomer.

[Mr Allen]

I totally agree with my hon. Friend. The Living Wage Foundation has already blown that myth straight out of the water and said it is not actually what everybody else seems to think of as being the living wage. Indeed, the Institute for Fiscal Studies and our own House of Commons Library have both said that the so-called national living wage does not make good what people will lose. Both those highly authoritative, independent organisations say it will only cover about a quarter of the loss that families will incur. On top of that are a lot of other factors. Difficulties relating to the introduction of universal credit are compounding the situation for people on low incomes.

For my constituency, all this shows that society is not addressing deprivation in the way it should. In the past five years, the indices of deprivation have indicated that in my constituency 5.9% more people are in the category of being deprived than they were five years ago. I ask the Chancellor to try to understand that it is not always about Tatton or Witney. The 20 most deprived constituencies—such as Nottingham North, Liverpool Walton, Birmingham Hodge Hill, Manchester Central and so on—are where our people live. That is where people need their representatives to stick up for them. That is where the free market politically does not work. Inviting people over for a weekend of shooting, riding or whatever—that is not where I live, and it is not the way our people will get the message over and have their voices heard. It is by sensible people, from all parties, putting the case forward.

Finance Bill

Liz McInnes Excerpts

Monday 26th October 2015 Commons Chamber

[Paula Sherriff (Dewsbury) (Lab)]

New clause 7 is tabled in my name and supported both by my hon. Friends and by a number of Members on the Government Benches.

It is time to end the tampon tax once and for all, and we have the chance to take a step towards achieving that today. It is absurd that in Britain tampons and sanitary towels are taxed as luxuries, not essentials, and not treated as a public service activity or medical provision by EU law. Almost 250,000 people from across the country have signed up to a call for that to change, and it is about time they were heard in Westminster and Brussels. Quite simply, a tax system that lets someone dine on crocodile steak on their private jet without paying a penny, when we cannot survive a period without the Treasury taxing us for it, cannot be a fair one.

That is why the Minister’s predecessor, Dawn Primarolo, urged on by many of my predecessors on these Benches, reduced the rate to 5% under a previous Labour Government, and it is why Laura Coryton and other feminist campaigners are running a campaign to finish the job with a zero rate now. Hon. Members can still sign up at change.org/EndTamponTax.

Periods are a fact of life and it is not as though women have a choice. Many were shocked to see Kiran Ghandi run the London marathon without a tampon to highlight the fact that too many women around the world do not have access to sanitary products. But that is the point—this is a basic matter of biology and it is time to end the taboo.

We can buy tampons in this country, but we are taxed for doing so. This is an issue for all women, but, as with so many things, it hits the poorest the hardest. Imagine being homeless when that time of the month comes. Think about what it is like to face a period without even having a bathroom.

[Liz McInnes (Heywood and Middleton) (Lab)]

My hon. Friend refers to the plight of the homeless. As I am sure she is aware, homeless shelters can request free condoms from the NHS, but not free sanitary products. Does she agree that it really is time we dealt with that indignity, because homeless women face enough challenges already?

[Paula Sherriff]

I completely agree that homeless women face enough challenges without the added burden of periods without sanitary products.

Some great work is being done by food banks, and student unions, such as those at Leeds University and Sheffield University, have started selling sanitary products at cost price in order to avoid VAT, but this is an issue where the Government need to lead from the front. The Minister told us in Committee that he was sympathetic to this, but we do not need to be patronised with tea, sympathy and platitudes; we demand action. He told us that his hands were tied and that change would require difficult negotiations and EU reform, but the Prime Minister has just promised us that he will undertake just such negotiations, and that he will be able to deliver just such EU reforms. This issue, which affects the majority of people across Europe, could hardly be more difficult to achieve than the rest of his demands.

Frankly, VAT on tampons is the vagina added tax. It is a tax on women, pure and simple. Therefore, instead of going to Brussels to water down our protections at work, the Prime Minister has an opportunity to deliver a victory for women across the continent. This issue transcends party politics, and I am pleased that the amendment has received cross-party support, from other parties on the Opposition Benches and from some Members on the Government Benches. I sincerely hope that Members on both sides of the House will support taking steps to axe the tampon tax tonight.

Budget Resolutions and Economic Situation

Liz McInnes Excerpts

Monday 13th July 2015 Commons Chamber

[Liz McInnes (Heywood and Middleton) (Lab)]

I am pleased to be able to contribute to the debate. We have heard the Tories’ repeated claim to be the party of working people, but we have a Tory Budget that is not the Budget that working people need. It leaves working people worse off and fails the test of building a more productive economy to bring the deficit down.

Cuts to tax credits will hit working people on middle and lower incomes, as well as those with larger families. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) asked the Secretary of State last week for an equality impact assessment of the Budget. She was assured that the Budget had been fully equality impact assessed, but the document appears to be a closely guarded secret. It certainly does not appear as an accompanying document to the Budget on the Government’s website. I hope that in his winding-up speech the Exchequer Secretary will direct me to where I can find that elusive document.

Certain groups seem to be hit hard by the Budget, and I would like to concentrate specifically on the effect of the change from maintenance grants to loans on young people hoping to go to university. It might dissuade many students from poor and modest backgrounds from going to university, but might none the less result in large sums never being paid back to the Treasury.

The current system of maintenance grants supports students from the poorest backgrounds through university. In England, students from households with incomes of £25,000 or less receive a grant of £3,387 each year to cover accommodation, living expenses, books and course materials. In 2014-15, 400,000 full-time students in England received a full maintenance grant and 135,000 received a partial maintenance grant. Even with those grants, the system is stacked against working-class students. Students from wealthy backgrounds are 10 times more likely to receive a place at university than those from poorer backgrounds, according to the Sutton Trust, an education charity.

Following the Budget, our students will be saddled with even more debt, in addition to repaying tuition fees. Maintenance grants will be replaced with loans to be repaid under the same terms as tuition fee loans—that is, once a graduate is earning more than £21,000 a year. I will give credit where it is due: during the coalition years, the Liberal Democrats blocked plans to convert maintenance grants into loans. Here we have a fully fledged Tory Budget, and we see just what the Government want to inflict on our young people.

The general secretary of the University and College Union, Sally Hunt, has said:

“Maintenance grants are crucial for engaging students from disadvantaged backgrounds who are already daunted by cripplingly high tuition fee debt. Increasing the debt burden on students will act as a disincentive to participation, and it does not make sense for the taxpayer either, as the extra loan amount is unlikely to be repaid in full.”

We already have students living in poverty, and the replacement of grants with loans will just exacerbate that. The president of the student union of the University of the Arts London, Shelly Asquith, has described her university’s students as having to use food banks and payday loans to make ends meet. Others are being forced to take on work,

“often for so many hours it has a huge impact on their study.”

A typical student currently leaves university with debts averaging about £44,000, and no one knows what effect a loans-only system will have on university applications. There is a real risk that the Government are experimenting with the future of the current generation of secondary school students. In my constituency, 40% of working people do not even get paid the living wage —and that is the real living wage, which is set independently by the University of Loughborough and is currently £7.85 an hour. Five years ago, poorer students also received education maintenance allowance, which the Government have also taken away. We need to look urgently at the impact of the Budget on disadvantaged young people who aspire to go to university, and who will get the most out of it.

Bankers’ Bonuses and the Banking Industry

Liz McInnes Excerpts

Wednesday 25th February 2015 Commons Chamber

[Liz McInnes (Heywood and Middleton) (Lab)]

As the motion states, we believe bonuses should be a reward “for exceptional performance” and not a compensation for failure. This applies in other industries and it should in banking, too. Many industries, particularly those in the public sector, manage to get by without awarding bonuses. In industries such as banking, where the bonus culture does exist, there needs to be more accountability. Pay must be more closely linked with long-term performance.

[Chris Evans]

Does my hon. Friend have sympathy for the high-street bank worker, who has had nothing to do with the scandals, but has often had to take abuse from customers for them? As someone who worked in a bank, my hon. Friend will know that these same high street workers are under strong pressure to achieve sales targets and that when they do not, they often face disciplinary action. Does she think that is fair, particularly when the senior executives are taking such massive bonuses?

--- Later in debate ---

[Liz McInnes]

I thank my hon. Friend for his series of questions. I will try to answer them in the order he asked them. I think my hon. Friend alluded to my having worked in a bank—

[Chris Evans]

I worked in a bank.

[Liz McInnes]

It was my hon. Friend who worked in a bank; now I understand. My two elder sisters both worked in banks and both were forced out because of the selling culture overtaking the “service to the customer” side of banking, so I fully understand the plight of the ordinary bank worker and the pressure they are under, not to mention the abuse they sometimes suffer because of misunderstanding on the part of the general public about the role of ordinary workers in banking. I thus fully appreciate my hon. Friend’s points, and I hope that answers his questions adequately.

I was referring to the scandals over the last year, most recently, as we are all aware, at HSBC. Regrettably, it looks like this year’s round of bank bonuses will be very generous once again. That is why Labour is determined to repeat its tax on bankers’ bonuses in order to fund a paid starter job for every young person out of work for more than a year. We will also extend clawback of bank bonuses that have already been paid, where inappropriate behaviour has come to light, to at least 10 years.

This Government have not done nearly enough to rein in excessive pay and bonuses. They have refused to repeat Labour’s tax on bankers’ bonuses and they have stopped short of implementing all the recommendations of the Parliamentary Commission on Banking Standards. Instead of repeating Labour’s tax on bankers’ bonuses, the Chancellor of the Exchequer has instead wasted taxpayers’ money by mounting a misguided and ill-fated legal challenge to the EU cap, which limits bonuses to 100% of salary—or even up to 200%, with shareholder approval.

The next Labour Government will guarantee a job for all young people on unemployment benefits for over a year and also for all adults aged 25 and over who are on unemployment benefit for over two years. This is the only policy we will fund with the proceeds of the bank bonus tax.

Being unemployed when young really damages prospects years into the future, so this is an important policy for Labour to champion. According to the latest labour force survey, youth unemployment stood at 740,000 in the three months to December 2014—an increase of 3,000 in comparison with the last quarter. Research shows that young people unemployed for a year will, on average, be £125,000 worse off over their working lifetimes. That means someone on the average wage would have to work nearly six years longer to make up for the cost of being unemployed when young.

The performance of the banking sector is vital to the health of the UK economy. The finance and insurance sector makes up around 8% of the total UK economy, employing more than 1 million people who carry out essential roles working with businesses and consumers to manage their money and ensure that they are able to invest, make profits and plan for the future. Too often in recent times, however, banks have continued to pay high bonuses in the face of falling profits and falling standards. This has led to a level of pay and bonuses to some highly paid bankers that has become disconnected from banks’ performance and their wider economic contribution.

Last year saw a marked increase in the level of bonuses paid by banks, with three out of four major high-street banks increasing their bonus pool in comparison with the previous year. While thousands of bank employees, along with millions of other taxpayers, are struggling by on modest salaries and face a rise in the cost of living, those at the top are benefiting from high bonuses, reinforced by the Government’s tax cuts for the top 1%.

Bonuses have remained high in the face of a series of high-profile scandals. Barclays, HSBC, RBS and Lloyds have paid £1.5 billion in compensation for mis-selling interest rate hedging products. Other recent scandals include HSBC’s role in facilitating tax avoidance, the LIBOR fixing scandal and the mis-selling of payment protection insurance. At the same time, however, many banks are failing to fulfil their core functions. Lending for businesses has fallen by £55 billion since 2010, with several Government lending schemes having little impact. Labour believes that action is needed to ensure that banks act with greater restraint, that pay mirrors performance and that bonuses can be clawed back for up to 10 years in cases where malpractice has come to light.

Following the LIBOR scandal, the Parliamentary Commission on Banking Standards examined how the culture of the banking sector should be reformed. Although this led to some important reforms, such as the introduction of a ring fence between investment and retail banking, the Government’s implementation of the recommendations has too often fallen short. The Government have also failed to implement the institutional reform we need around access to finance, such as the setting up of a proper British investment bank, which could provide vital financing to small and medium-sized businesses and start-ups.

The banking sector plays a vital role in the UK economy. As the global financial crisis showed, the dislocation of the banking sector undermines the whole economy. Financial incentives for bank employees need to be better linked to the long-term stability and performance of their banks.

Income Tax

Liz McInnes Excerpts

Wednesday 5th November 2014 Commons Chamber

[Liz McInnes (Heywood and Middleton) (Lab)]

I will be brief. Like my hon. Friend the Member for Stretford and Urmston (Kate Green), I doubt that many of my constituents would find themselves in the position of having to pay a 50p tax rate. It is right that we should be discussing reversing this Government’s tax cut for millionaires.

The Government’s decision to cut the 50p tax rate handed a £3 billion tax cut to the richest 1% in this country, yet at the same time ordinary people are worse off, with families paying hundreds of pounds a year more in VAT, thanks to the Government’s decision to raise VAT to 20%. In addition, Tory cuts to tax credits have hit millions of working families. Figures from the Institute for Fiscal Studies show that households will be nearly £1,000 a year worse off by the time of the next general election because of tax and benefit changes that have been made since 2010. We are most definitely not “all in this together”.

Like the constituents of my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali), people in my constituency are struggling with the cost of living, with wages flatlining and the prices of food, fuel and energy increasing all the time. They are told that the economy is in recovery, but they are not feeling it. As winter approaches, many families in my constituency will face a stark choice between heating and eating, for they cannot afford to do both.

It is absolutely right and proper for the 50p tax rate to be brought back for high earners. It is simply not right for them to be given tax cuts while the poor and the vulnerable bear the brunt of this Government’s austerity programme. This Government give tax cuts to millionaires while penalising the disabled for having an extra bedroom in which to store their medical equipment. This Government give tax cuts to millionaires, yet deny NHS workers a below-inflation 1% pay rise. It is clear whose side this Government are on, and it is not the side of ordinary people. They have no sympathy for those who are struggling on low incomes, yet defend to the hilt the right of high earners not to pay their share. That is why we will reverse the £3 billion tax cut for the top 1% of earners, as part of our plan to balance the books in a fairer and more equal way.