Skip to main content

Working Tax Credit

Volume 541: debated on Tuesday 6 March 2012

1. What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. (97998)

4. What assessment he has made of the effect on the economy of changes to the working tax credit to be introduced in April 2012. (98001)

6. What assessment he has made of the effect on the economy of changes to the working tax credit to be introduced in April 2012. (98003)

7. What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. (98004)

13. What assessment he has made of the effect on families of the changes in eligibility rules for working tax credit to be introduced in April 2012. (98011)

The Government are reforming tax credits to ensure that support is targeted on those most in need and costs are controlled. The change to the working hours requirement for couples with children makes the system fairer by reducing the disparity between lone parents and couples. Lone parents have to work 16 hours a week to be eligible for tax credits, so it is right that couples should have to work more hours between them.

Some 730 families in Newport will be hit by the changes to tax credits, which means that they will either have to work more hours or face losing up to £3,800 a year. The Government have so far demonstrated no understanding of the difficulties faced by families in this position trying to find extra work. Will the Minister tell my constituents exactly where these mythical hours will come from?

I shall be precise. I can tell the hon. Lady that the number of vacancies was up by 11,000 in the last three months to January 2012, and 1.07 million people moved into employment in the last quarter.

I was interested to hear that response from the Minister because a representative of the Union of Shop, Distributive and Allied Workers in my constituency told me that in one supermarket alone close to 30 employees had requested extra hours. Those extra hours just do not exist. Will she confirm that from April a couple with children on the minimum wage who cannot increase their hours to 24 per week will be £728 better off out of work?

I cannot comment on that particular set of circumstances, as the hon. Lady will appreciate, but the fact is that about 80% of households with children will see their tax credit awards rise. It was the previous Government who allowed nine out of 10 households with children to be eligible for tax credits. That was unsustainable and uncontrolled spending.

The Minister will remember that in an Adjournment debate last November I warned her about the devastating impact that the cuts would have, particularly because the hours were simply not available for people to increase the number they worked to meet the eligibility criteria. This week, a coalition of charities has written to the Government begging them to postpone these devastating changes. May I ask her and the Chancellor to meet some of the families affected so that they can understand what the impact will be on them from April?

Any elected MP will regularly meet constituents in their constituency and discuss a range of matters. I certainly do that, and when I have met those affected in my constituency—whether as a constituency MP or, most recently, as a Minister—I have explained the fairness of this measure, which is that it puts couples on a par with lone parents. Where is the Opposition’s concern for single mums and dads, who have always had to face that challenge?

The Minister knows fine well that in today’s economy part-time workers will find it extremely difficult, if not impossible, to get the extra eight hours a week to keep their working tax credits. The lowest-income families will lose £3,870 a year, which would be crippling for any family, let alone the poorest. To accord with reality—something that the Minister should get back in touch with—what are this Government going to do about that?

This Government’s main priority, as the hon. Lady knows very well, is to reduce the deficit left to us by her party, for which her party shows no responsibility whatever. She will also know that the cumulative average loss for households from our measures next year will in fact be £310.

Last week a young woman constituent employed locally by the Stroke Association complained to me that as a result of the association’s funding being cut, her hours were being reduced from 28 to 20, so she loses eight hours’ pay and tax credits as well. What advice can the Minister give my constituent other than to stop work and go on benefits?

I would be sure that the hon. Gentlemen’s constituent in that case took a clear look around at the opportunities available throughout the economy. I refer him to my previous response, which is that vacancies were up in the three months to January 2012. There are jobs out there: hon. Members need only to hear, for example, this morning’s announcement from Nissan—somewhere near the hon. Gentleman’s constituency—to know that there is work available.

Is my hon. Friend aware that, according to the Office for National Statistics, there are currently 476,000 job vacancies? It should be possible for a couple, between them, to find an extra eight hours’ work. Does she agree?

I do agree with my hon. Friend. As I have said already, it is a question of fairness. This measure asks a couple to do what a lone parent has always had to do, and I think that is fair.

Can the Minister confirm that, under the current system, a single parent who is offered more than 16 hours’ work a week by his or her employer would face a marginal withdrawal rate of up to 97%, and that such anomalies will disappear with the change to the universal credit?

My hon. Friend makes a very fine point, and she is absolutely right that the reform paves the way for the universal credit, through which this Government are proud to be tackling the incentives that make work pay.

Should we not look at providing tax help for hard-pressed families in totality and in the round, in particular, through measures such as increasing the personal allowance to £10,000 for income tax?

I certainly agree, and my hon. Friend will know, just as other Members of this House do, that that measure would take more than 1 million low-income earners out of tax altogether, which is a healthy start and a step on the path to our economic recovery.

We have heard incredible complacency so far from the Minister about couples in receipt of working tax credit, who are desperately worried. Liz, a low-paid worker in Suffolk, told her union, the Union of Shop, Distributive and Allied Workers, that

“two weeks ago my boss informed me that the likelihood of finding the eight extra hours I need was next to none, at least for another three months. I have been looking for another job to boost my hours, but so far have had no joy”.

What advice would the Minister give to Liz and thousands of families in her position, who stand to lose up to £4,000 in just a month’s time?

Liz from Suffolk might like to listen to Rachel from Leeds, who says that

“we must ensure we pass the test of fiscal credibility. If we don’t get this right, it doesn’t matter what we say about anything else.”

The Minister offers Liz cold comfort, especially as the Government’s own figures show that families are likely to be £728 better off out of work, rather than in work, as a result of these crazy changes. The Minister could not answer my last question, so let me ask her about another family. Let us imagine that a single mum with three kids who is earning £42,000 a year is offered a promotion that would take her pay to £43,000. If she takes the pay rise, she will lose almost £2,500 in child benefit—every single penny of it. What is the Minister’s advice to her? Should she turn down the promotion to keep her child benefit, or should she reduce the number of hours she works?

It is absolutely extraordinary that the hon. Lady is unable to deal with any aspect of her own challenge on fiscal credibility. May I ask her whether she voted for the welfare cap that highlights the average family’s earnings within the example that she just gave?