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Tax Credits

Volume 507: debated on Wednesday 17 March 2010

2. What recent discussions he has had with the Chancellor of the Exchequer on the tax credit system in Wales. (321806)

7. What recent discussions he has had with the Chancellor of the Exchequer on the number of families claiming tax credits in Wales. (321813)

8. What recent discussions he has had with the Chancellor of the Exchequer on the number of families claiming tax credits in Wales. (321815)

We introduced tax credits to provide support to families, to help to reduce child poverty and to make work pay, benefiting about 326,000 families and more than 500,000 children in Wales.

Happy St. Patrick’s day, Mr. Speaker.

Can my right hon. Friend assure me that he has no plans to axe or cut tax credits?

I, too, wish you a happy St. Patrick’s day, Mr. Speaker.

I can certainly give my hon. Friend that assurance, as can the whole Government. Tax credits have made work pay, lifted hundreds of thousands of people out of poverty, and encouraged people to get off benefits and into work. That is why I resent the fact that there is now a Tory sword of Damocles hanging over tax credits for those on low and modest incomes in Wales. The sooner that the Conservatives stop threatening to cut tax credits and many other support mechanisms in Wales, the better.

In my constituency, just more than 7,000 families have benefited from the child tax credit system. Can the Secretary of State tell me how many families in total have benefited from the policies of this Government on this important issue?

As I have said, 326,000 families have benefited right across Wales. This is not simply a question of their benefiting from tax credits; these measures have helped to lift people out of poverty. About 50,000 children in Wales have been lifted out of poverty, and we also have a policy to offer free breakfasts for primary school children. That is part of our policy of tackling poverty. All that would be threatened if the Tory policies to cut free breakfasts for primary school children and to cut tax credits were ever introduced.

Does my right hon. Friend agree with my constituents that the tax credit system is certainly not a gimmick? Will he confirm my understanding that this Labour Government will continue with the £66,000 limit, whereas the Tory proposal is to reduce it to £50,000, which would certainly affect my constituents?

Order. I know that the Secretary of State will probably not need reminding, but I hope that he will focus his reply only on the policy of the Government.

I pay tribute to my hon. Friend the Member for Conwy (Mrs. Williams), who is standing down at the next election. She has been a real warrior for north Wales, and particularly for women right across Wales. Everyone respects her for that. As she has said, tax credits have played an absolutely vital role, particularly during the downturn, in helping to keep people in work and off benefits. About 21,600 families whose income fell for six months last year benefited from an average increase of £36 a week in tax credits. That helped to keep people in work, and those people would not have stayed in work if that support mechanism had been cut from underneath them, as the Conservatives are planning.

Is not this pathetic scaremongering over tax credits merely a smokescreen to prevent discussion of Labour’s true failure on welfare in Wales—namely, that after 13 years of this sorry Government, almost exactly one quarter of the working age population in Wales is economically inactive, out of work and doing nothing? That is a shameful record.

I am surprised that the hon. Gentleman dares to mention economic inactivity on a day when the statistics show that it has fallen in Wales by a larger proportion than anywhere else in the UK. This shows that the curse that we inherited from the Conservative Government of people being smuggled off the dole queue on to incapacity benefit and of other forms of economic inactivity has been tackled under Labour. Employment is up to nearly 100,000 extra jobs in Wales, giving people more support, while economic inactivity is down, contrary to what the hon. Gentleman has said.

Will the Secretary of State tell the House how many constituents at his advice surgeries have been in tears in his office because of the tax credit system over the past five years?

I will tell the hon. Gentleman what I have had in my constituency—[Hon. Members: “Answer the question.”] I am answering the question, but I do not think that the hon. Gentleman will like the answer. In my constituency office, I have seen people desperately worried—some in tears—about the threat to their tax credits from the Conservatives, should the Conservatives get into government. Many thousands of my constituents, and many tens of thousands across Wales, have benefited from tax credits, which have given them much better prospects for prosperity in the future.

No would argue other than that the driver for tax credits is a perfectly acceptable and laudable aim, but we all have lots of cases in our constituency surgeries of where they have gone wrong. About 80,000 families in Wales are not claiming a total of £140 million that could be claimed. Does the Secretary of State agree that we should look at raising the income tax threshold by £1,000 to take those people out of the bureaucracy and mistake-making?

As the hon. Gentleman knows, we have lifted many thousands of people across Wales out of tax altogether through the changes that we have made to taxation. Of course, we want to make sure that especially those on low incomes pay the minimum possible tax and no tax at all, if possible. The tax credit system, notwithstanding the administrative problems that we have seen at the heart of it, has liberated many hundreds of thousands of people right across Britain, including Wales, giving them a chance to work. Otherwise, those people would have been languishing on benefits, as they were under the Conservatives.

Does my right hon. Friend agree that families in my constituency and in Wales will benefit from the policy change recently announced by the Government, which means that there will be much greater flexibility in the tax credit system to cope with changes in the make-up of the household? Will that not provide an even better way of targeting help to those at work who most need it?

I completely agree with my hon. Friend. Women have especially benefited from tax credits, and they feel especially threatened by the policies of the Opposition. May I take this opportunity to welcome the fact that some 400 new jobs for 18 to 24-year-olds have been announced today in Cardiff, spearheaded by Cardiff county council, which will help to create employment? Many of them will be able to benefit from tax credits in the future, if this Labour Government, but not the Conservatives, are re-elected.

As we have heard, the tax credit system is very complex and fraught with difficulties. I am sure that the Secretary of State agrees that one of the main causes of poverty in Wales is the very low level at which income tax starts being paid, which stops people entering or re-entering the employment market. Will the Secretary of State take the opportunity this morning to support the Liberal Democrat proposal to have a personal income tax allowance of £10,000, which would take 220,000 people out of tax altogether in Wales?

I am not sure how that policy fits with the Liberal Democrat policy of cutting tax credits to many on modest incomes—a policy shared with the Conservatives. I would have thought that the hon. Gentleman would welcome not only how the tax credit system has benefited so many people in Wales, but the fact that unemployment measured by the claimant count is down, that employment is up and that economic inactivity is down—all better news as Wales struggles to get out of this recession. The situation is still very fragile, but we are making progress, which would be wrecked if the Conservative policies of cuts were ever to take effect.

Tax credits offer important support to people who are in work, and we support them. Many voters in Wales will be surprised that the Secretary of State thinks that £50,000 is a low income—it obviously is to him. This morning’s figures show that the Labour Government have mismanaged this economy, that 9,000 more Welsh workers have lost their jobs and that the Welsh unemployment rate is the worst in the UK. Is the right hon. Gentleman not ashamed that more and more people in Wales are no longer eligible for working tax credits? How can he so blithely say “making work pay”, when one in 10 are now not actually working?

The Institute for Fiscal Studies has said that household incomes of £31,000 or more will be subject to tax cuts if Conservative policies are implemented, and that the figure of £50,000 cited by the shadow Chancellor is wrong. I prefer to believe the IFS rather than the shadow Chancellor, especially given that his policies are being powered by Lord Ashcroft’s illegal—