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Tax Credits

Volume 765: debated on Wednesday 4 November 2015


Asked by

To ask Her Majesty’s Government what is their assessment of the impact of the proposed reductions in tax credits on the number of children in working families living in poverty.

My Lords, the Government are committed to moving from a high-welfare, high- tax, low-wage economy to a lower-welfare, lower-tax, higher-wage society. As the Chancellor has made clear, the Government will set out in the Autumn Statement how we plan to achieve the same goal of reforming tax credits and saving the money we need to save to secure our economy while, at the same time, giving help in the transition, including to families with children.

When the leader of the Opposition asked the Prime Minister a question about this matter this morning, he made reference to increases in the minimum wage and personal tax allowance, due next year. Does the Minister accept that those measures will do little to prevent the 200,000 increase in child poverty figures, forecast by the Resolution Foundation, if the tax credit cuts go ahead? They cannot target support on children and will not, in any case, be of benefit to many of those affected by the cuts.

My Lords, we believe that work is the best way to help children. There is evidence to support the fact that children in workless households do worse than those in working ones. In addition, we are helping families with children. We are doubling free childcare and, under universal credit, we will support the increase to cover up to 85% of childcare costs where all parents are in work, regardless of the number of hours worked. The early years pupil premium provides £50 million in extra funding. We are currently providing free school meals for all infant school pupils in the first three years and we are introducing tax-free childcare from 2017.

My Lords, I thank the Chancellor for listening to the debate on tax credits. Will exemptions be made for the child element within tax credits, particularly in exceptional cases: for instance, where there is domestic abuse in a family with more than three children; where a family with more than two children face the bereavement of the person who is working; or a family where the third child is disabled? I would welcome the Minister’s assurance that the Government are listening to this.

My Lords, I am afraid that I am going to have to disappoint the noble Baroness. The Autumn Statement is when the Chancellor will announce what he is going to do about the transition and what will happen to the tax credit position following the events of last week. It is worth repeating what the Chancellor said.

The noble Lord may not want to hear it but I will tell him anyway:

“We will continue to reform tax credits and save the money needed so that Britain lives within its means while at the same time lessening the impact on families during the transition”.—[Official Report, Commons, 27/10/15; col 177.]

The Chancellor has said that he will set out those plans in the Autumn Statement.

My Lords, does the Minister have an estimate of the number of disabled children whose families will be driven into debt as a result of the planned tax credit cuts? Will he give the House an assurance that he will put pressure on the Chancellor to mitigate these quite appalling consequences in his Autumn Statement?

My Lords, I am not quite sure what the planned tax credits are now, which is why we will wait until the Autumn Statement. However, I can say that for disabled people we have until now protected those benefits related to the additional costs of disability and we will continue to do so.

My Lords, is it not shown by the Social Mobility and Child Poverty Commission that 7 million children will suffer as a result of the cuts in tax credits and that the income of 45% of working families will go down? This is not a constitutional crisis, it is a humanitarian crisis, for which the savage and shameful policy of the Government is solely responsible.

It is interesting that since we took over as the Government in 2010, 800,000 fewer people are in relative low income before housing costs and 300,000 fewer children are in relative low income.

My Lords, is the Minister aware that, following an exchange in the debate we had last week, his noble friend, the noble Earl, Lord Howe, sent a communication to my noble friend Lord Campbell-Savours? I have permission to quote that communication, in which the noble Earl says:

“The plans in the draft regulations would mean that, from April 2016, a family with children who are in receipt of child tax credits would receive those tax credits elements at the same rate of payment as currently applies in respect of those children”.

How does the Minister justify that as a true and fair view? What is paid in terms of tax credits reflects not only the various elements—the building blocks—but the net effect of applying the income threshold and the taper. The former has been dramatically lowered and the taper accelerated. So why will the Government not come clean? This does mean that there will be reductions in child tax credits and working tax credits.

My Lords, the noble Lord is referring to a television programme with David Dimbleby. The PM said that,

“child tax credit, we increased by £450”.

The presenter asked:

“And it’s not going to fall?”.

The PM confirmed:

“It’s not going to fall”.

The award has not changed. It is £2,780 and it was before.

My Lords, can the Minister explain how the new focus on changing people’s life chances will be more effective in addressing the root causes of poverty than the child poverty targets introduced by the last Labour Government?

My Lords, my noble friend’s question slightly moves away from tax credits on to the welfare Bill, which this House is going to consider in a couple of weeks’ time. We are working to end child poverty, and until now, the talk about poverty has been caught up in the old mindset of an arbitrary limit, and this needs to change. The existing statutory framework, which was set around four income-related targets, is flawed because it focuses the government action on tackling the symptoms, rather than the root causes, of child poverty. This new system will focus on the root causes of poverty: there will be two new measures—educational attainment and the number of children in workless households—plus various non-statutory life-chance indicators. The Second Reading of the welfare Bill is on 17 November.