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Child Tax Credits

Volume 615: debated on Wednesday 12 October 2016

[Mr George Howarth in the Chair]

I beg to move,

That this House has considered Government plans to restrict tax credits to two children.

It is a pleasure to see you in the Chair, Mr Howarth.

I come to this debate in great frustration. When I first uncovered this issue in the Budget on 8 July last year, I did not expect that I would still be talking about it one year, three months and four days later. Incredibly, unless the Minister can tell me differently this afternoon, the Government are still unable to say exactly how their pernicious and medieval policy will operate.

To set the context, the then Chancellor, the right hon. Member for Tatton (Mr Osborne), outlined in his Budget the Government’s intention to limit the child element of tax credits and universal credits to the first two children in a family. The Budget stated:

“The Department for Work and Pensions and HMRC will develop protections for women who have a third child as the result of rape, or other exceptional circumstances.”

None of the questions asked on the Floor of the House or put directly to Ministers by me or my colleagues over the past year have been answered with a justification or explanation for this fundamentally flawed policy. I want to set out my anger about writing a rape clause into our social security system and about the wider impact of the two-child policy. Neither the rape clause nor the two-child policy is fit for a Government who proclaim their support for families.

Let me deal with the rape clause first. I put on record the public opposition to it from Scottish Women’s Aid, Rape Crisis Scotland, Engender and the more than 10,000 people who signed a petition on the issue. I am deeply upset and disturbed with the attitude that the Government have taken to very vulnerable women and children. No woman should have to prove that she has been raped in order to get tax credits.

I suppose it is not in the spirit of the chummy way in which people in this place like to do things, but I am unapologetic about the way I have spoken out about the meeting I had with the welfare Minister, Lord Freud, back in May. As he is a Member of the House of Lords, I have no opportunity to challenge or question him. I have been to many meetings in my eight years as an opposition local government councillor and in my year in this place, but I have never been so furious. For a Government Minister to open a meeting by saying “I’ve had to learn a lot more about this issue than I really wanted to” is appalling, and to go on to suggest flippantly that women facing the extremes of domestic violence should just flee demonstrates a dangerous ignorance. I hope the Minister will take the opportunity today to dissociate herself from her colleague’s comments. I do not think it is radical to suggest that Government Ministers ought to understand the implications of a policy before they inflict it on some of the most vulnerable people in our society.

Children being born of rape is not something that tends to happen because a rapist jumps out of the bushes and attacks a woman, as awful as that very rare circumstance is. Rape happens when women are so vulnerable and so powerless that they are in fear for their lives. Rape happens as the result of control in relationships. Rape happens in marriage. If a woman is in such a relationship, she is not going to nip down to her local jobcentre and report to a Government official that her child was born as the result of rape. For a start, with the single household payment in universal credit, she is not going to see the money in any case; it will go straight to her partner and he will know what she has done. Nor will she want to go through a third-party reporting mechanism, as suggested by Lord Freud. She will not want to tell her family GP. If the family are not known to the social work system, she will probably not want to alert social workers. She might not yet have sought the support of her local Women’s Aid or of other sources of assistance. She will almost certainly not want to contact the police just for the tax credits.

There is no clear statement from the Government on how their policy will operate. Once the rape is disclosed, what burden of proof will be acceptable to Her Majesty’ Revenue and Customs and the Department for Work and Pensions? After all, they are not organisations known for taking people at their word. What will the time limit be? Once a woman has left an abusive relationship and is in a position of safety, will she be able to make a claim retrospectively? Can that claim be backdated? For how long? If a woman needs to claim tax credits at a later stage in her life, because that is the nature of tax credits, will she need to trawl through her sexual history to identify that one of her children was conceived by rape?

How will a claim be recorded? I cannot conceive of a way of doing that that would not be hugely stigmatising both for the woman and for the child. Lord Freud suggested to me that it might take the form of a letter that a woman would have to retain in her records at home. I cannot imagine the distress caused if somebody else in the family came across that letter at a later stage. Alternatively, will the information have to be held on the woman’s records with DWP and HMRC? Will staff have access to it? Which staff? Will they receive appropriate training? The Public and Commercial Services Union has come out against the policy because of the difficult position it would put its members in.

Tax credits may be required at different stages in a woman’s life; would her claim be flagged up on any further occasion when a claim was made, or would she have to declare it on each separate occasion and relive that abuse again and again? Asking a woman to recount such abuse, perhaps on multiple occasions, to different officials is not protection in any sense of the word. The Government are not protecting any woman, or indeed any child, with this policy. In her heart of hearts, does the Minister believe that putting women through such trauma and humiliation is worth it? The rape clause must be scrapped.

I will not be content, though, with solely removing the rape clause, because doing that would offer no protection to families either. The two-child policy must go too. Women’s Aid, the Child Poverty Action Group and the StepChange debt charity all believe that the policy runs counter to the Government’s much-vaunted family test and produces a perverse incentive for families to separate or for single parents to forgo entering new relationships.

The Government have stated that twins and multiple births will also be protected, but I have discovered that that is true only if the twins come after a single birth. According to the Government, people who have twins first have had their lot. That is despicable.

The letter I received from the Chief Secretary to the Treasury on 30 September stated that the Government’s intention was that

“all families—those in receipt of benefits and those supporting themselves solely through work—will be faced with the same sorts of financial considerations when making decisions about having more children”.

Aside from sounding as if it has come from some kind of totalitarian regime, that statement is absolute nonsense. Quite evidently, not all families start from the same point, but all families are valuable and worthy of support. The state has a duty to protect the most vulnerable among us.

The Chief Secretary to the Treasury is also quite wrong in his assumptions about those claiming tax credits. Some 63% of families who currently receive tax credits for a third or a subsequent child are in work. They are the very “just managing” families that the Prime Minister referred to on the doorstep of Downing Street. Will she make good on her commitment through deeds and not just warm words? Pursuing the two-child policy would pull the rug from underneath the very families she claims to want to protect.

The two-child policy is completely disproportionate. The Child Poverty Action Group notes that 42% of those who claim child tax credits have only one child, 36% have two children, 16% have three children and only 7% have four or more children. The policy will have a devastating impact on those families and their income but a very limited effect on Treasury coffers.

The Chief Secretary to the Treasury’s claim about people

“making decisions about having more children”

fails to recognise that perhaps when a family had their children, they were well able to afford them. I also doubt that many families make life decisions solely on the basis of their future tax credit income. Is this the thin end of the wedge from the Government? Life is not that simple. It could take only sudden illness, the death of a partner or changes to circumstances that could not reasonably have been foreseen to plunge a family into a situation in which they might need to claim tax credits. The third child that we are speaking of already exists and needs to be cared for. The extra support that tax credits provide could make the difference that gives that family enough food to eat or the ability to pay their bills. Providing for people in such situations is the very essence of why social security exists.

Evidence that I have received from StepChange demonstrates that if the two-child policy were applied to their current clients who have three or more children, 90% of those families would have absolutely no money left at the end of the month. The charity fears that, faced with mounting bills, unexpected everyday expenses and other commitments, those families will become extremely vulnerable to going into unmanageable debt. The cost of the bankruptcies that will follow will then end up being passed on to the state. StepChange’s research says that the average client that it deals with would be £327 worse off per month under the Government’s plans.

The policy also has very serious equalities implications, which the Government have not addressed at any stage. Concerns have been expressed to me by the Interlink Foundation, which represents the Orthodox Jewish community and which strongly believes that the policy will perpetuate disincentives to work for families with three or more children, as any additional earnings would reduce their entitlements. It will also make it impossible to achieve the Government’s aim of being better off in work. Interlink points out the substantial differential impact on religious communities, where reproduction, use of contraception and family size can be determined by beliefs and prevailing cultures, which the Government do not appear to have taken into account. According to Interlink’s figures, 52% of Jewish families have three or more children. For the Muslim community, the proportion is 60%. That stands in stark contrast to the population as a whole, out of which only 30% of families have three or more children. I am shocked that the Government have not addressed such a clear equalities issue.

It has been said by no less than the former Prime Minister—perhaps the Minister will repeat these claims today—that I am endlessly whinging, and that the Scottish Government now have the powers to deal with this issue. Those who say that are being extremely misleading, and also unfair to women and children in the rest of the UK, with whom I express my solidarity. The powers being transferred by the UK Government do not allow us in Scotland to set the eligibility criteria for child tax credits. Tax credits are a reserved benefit, and our Government in Scotland should not have to pay for the UK Government’s regressive policies. We have already spent £55 million on mitigating the hated bedroom tax. I would rather see the Scottish Government making positive choices, with all the powers of a normal Parliament, supporting families and lifting people out of poverty.

The hon. Lady is making a powerful speech and I very much agree with the argument she is advancing. I am pleased that she mentioned the Child Poverty Action Group; I pay tribute to the work it is doing on this matter. Does she agree that if the Government are determined to pursue such a punitive policy, at the very least they should publish an analysis of its impact on child poverty levels?

I absolutely agree. The United Nations suggests that impact assessments should be carried out on policies that affect children. Such an assessment appears not to exist for this policy.

The Scottish Government can provide top-up benefits where someone is already eligible, but not where they are not. There is also a gap: the two-child policy and the rape clause come into force early next year, but it is unlikely that the full range of social security powers will be operational in Scotland until 2018.

I shall conclude by speaking briefly about our obligations to protect and support children. I contend that the limiting of the child element of tax credits and universal credit to the first two children in a family runs counter to our obligations under the United Nations convention on the rights of the child. We are obliged by article 2 of the UNCRC not to discriminate on the basis of birth, but the two-child policy clearly does so, by apportioning value according to when the child was born into a family. We are obliged under article 3 to make the best interests of the child a primary consideration, but the two-child policy and the rape clause stigmatise, and say that the Government do not value all children equally. They also limit working parents’ ability to feed and care for the children they already have. We are obliged under articles 26 and 27 to provide access to social security and an adequate standard of living, to assist parents in the bringing up of their children. The two-child limit completely undermines that right.

The UN Committee on the Rights of the Child and the UN Committee on Economic, Social and Cultural Rights have both recently investigated the UK for its approach to welfare reform and highlighted in very strong terms their concerns about the Government’s austerity agenda and the cuts to tax credits that have already happened. In its July report, the UN Committee on the Rights of the Child stated that it was

“seriously concerned that…Recent amendments to the Tax Credits Act (2002), the Welfare Reform Act (2012) and the Welfare Reform and Work Act (2016) have limited the entitlement to child tax credits and social…regardless of the needs of the households”.

That is absolutely appalling. In their report to the UNCRC, the UK’s Children’s Commissioners said that

“measures should not discriminate against children from particular groups for example children of lone parents, children with disabilities or children from large families.”

The rape clause and the two-child policy do discriminate in those ways.

The two-child policy and the rape clause fundamentally punish families for the circumstances they are in— circumstances that may be beyond their control and in which children already exist. I urge the Minister and the Government to act in the best interests of children, as our international commitments make clear they must. I urge them to stand up for the most vulnerable in our society. Families in situations of poverty, who are working hard and doing their best, are extremely vulnerable. Women who have been raped are extraordinarily vulnerable. The Government need to think incredibly carefully about how they wish to pursue these policies, if they wish to pursue them at all. I call on the Government to protect the “just managing”—those people they say they value and wish to support—and to scrap the abhorrent rape clause and the pernicious and discriminatory two-child policy.

It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate the hon. Member for Glasgow Central (Alison Thewliss) on securing the debate. She is right to point out that she has been determined in her pursuit of this policy. She has certainly taken every opportunity to raise the matter with Ministers. I wish, though, to put on the record my support for my noble Friend Lord Freud, who has worked tirelessly on this matter. I entirely reject the hon. Lady’s portrayal of him, and believe that she has deliberately given an inaccurate and misleading account of a private meeting.

This debate explores the limitation of tax credits to two children, which was legislated for under the Welfare Reform and Work Act 2016. I know that the hon. Lady has a strong interest in this topic, and that it is something she has raised in the past. I welcome the opportunity to set out the purpose of the policy. In so doing, I hope that I can allay many of her concerns and particularly underline that we are absolutely committed to ensuring fairness for all families.

The welfare reforms that the Government have introduced are about much more than simply money. Our reforms seek to bring about a positive change in our nation. They are about putting welfare spending on a sustainable footing, but it is important to do that in a way that protects the most vulnerable. As the Prime Minister herself has said, we will fight against the injustices we see in our society.

The current benefits structure, which adjusts automatically to family size, is unsustainable, and it is not fair to the taxpayer or to families who support themselves solely through work and necessarily make difficult choices. That is why we have announced that, from 6 April 2017, families with third and subsequent children born after that date will no longer be able to claim additional support through child tax credit and universal credit. The policy will also apply to future new universal credit claims from families with more than two children.

Is the Minister prepared to commit today to publishing an analysis of the likely impact of the policy on child poverty levels?

I shall address the impacts of the policy later in my speech.

The Government believe that the policy strikes the right balance between protecting the vulnerable, such as by retaining extra support for families with disabled children, and encouraging families who receive tax credits to make the same financial decisions about the number of children they can afford to support as those families who support themselves solely through work do. Parents will continue to receive help with the cost of raising children through the payment of child benefit, which will continue to be paid regardless of family size.

Does the Minister accept that there is a fundamental contradiction in the Government’s saying that they will pay child benefit for as many children as are in a family but not tax credits?

No, I do not accept that there is a contradiction. Later in my speech I hope to be able to set out why we have been so specific when it comes to child tax credits.

The separate disability element of child tax credit will remain payable for all disabled children. I should also be clear that those families already receiving child tax credit for children born before 6 April 2017 will continue to receive it. It is important that I pick up on the hon. Lady’s comments about the 63% of families with three or more children who receive tax credits and are in work, whom she said would be affected. She said that it would be pulling the rug out from underneath them, but that is far from the case, because the families she identified—the 63%—already have those children. We are not talking about retrospectively applying the policy; it is for children born after 6 April next year.

The reforms to tax credits cannot be considered in isolation. The Government are committed to making life easier for working families. We want to support parents claiming benefits to get into and stay in work after having a child. From September next year, the Government are extending free childcare entitlement from 15 hours to 30 hours a week for working parents of three and four-year-olds. Alongside the introduction of tax-free childcare, that support gives parents more freedom when making decisions about whether and, indeed, when to return to work.

Does the Minister accept that there is a further inconsistency? Tax-free childcare is not limited to the first two children within a family; it is for all children within a family, unlike this limitation that she is seeking to impose.

The hon. Lady may not like the response that I keep giving but I will continue to give it. The reality is that the Government want working families and those in receipt of working tax credits to be on the same footing and to make the same difficult decisions. I have no doubt that there will be people in this Chamber who have made difficult decisions about how many children that they wish to have and can afford to have. This issue is about fairness for all families.

Of course, as the hon. Lady will be aware, roll-out of universal credit, the Government’s flagship welfare reform, is continuing. Universal credit is already transforming lives across the country, with those in universal credit moving into work significantly faster and staying in work longer than under the old system. We are now expanding universal credit to all claimants across the country, so that everyone has the chance to benefit from the dignity of a job, the pride of a pay packet and the security that comes from being able to support their family.

The evidence shows us that universal credit is working. As I say, people move into work faster than before. For every 100 people who find work under the old jobseeker’s allowance system, 113 universal credit claimants have found a job. People on universal credit spend more time than before looking for a job—in fact, around 50% more time—and they are actively looking to increase their hours and their earnings.

More than a quarter of a million people are now receiving universal credit, with some 12,500 new claims every week. We have already launched universal credit full service in Musselburgh and Inverness, and next month we are rolling it out to Kirkintilloch, Port Glasgow and Greenock. I have had the pleasure of visiting both live service and full service jobcentres in Barnsbury and Newcastle. I was impressed by what I saw, including the commitment of the work coaches, and indeed their sensitivity and ability to respond to the different circumstances and the different needs of individual claimants.

The hon. Lady shakes her head, but I extend to her an invitation, which I am sure she has already received from others, to visit a local jobcentre, to see for herself how our reforms are working in action.

We also recognise that some claimants are not able to make the same choices about the number of children in their family as others. The Government have been clear that there will be exemptions for certain groups, and it is worth outlining these groups in some detail. Exemptions apply to third or subsequent children who are part of a multiple birth, where there were previously fewer than two children in the household; to children living long-term with friends or family and who are at risk of entering the care system; or to those children born as a result of rape.

I would give way to the hon. Gentleman but there are many really important points that I would like to get through in the time allocated to me, and I have already taken a number of interventions from the hon. Member for Glasgow Central and one intervention from the hon. Member for Barnsley Central (Dan Jarvis).

Today, I am pleased to be able to inform hon. Members that, as part of the Children and Social Work Bill, the Government have given further consideration to the position of children who are being adopted from local authority care, and we will extend the announced exemption to all third or subsequent children in these circumstances. This change will support families who care for our most vulnerable children, and they will be provided for, along with the other exemptions, in regulations.

Of course, we are aware that these exemptions are sensitive and complicated, and we want to make sure that we get this process right. That is why we are consulting with a number of stakeholders from charities, women’s representative organisations and indeed religious groups.

The Government recognise that women who have a child born as a result of rape face extremely difficult circumstances. That is why we are considering very carefully the best possible way to deliver this exemption. I want to be very clear that we are not looking to rely on or to pre-empt decisions within the criminal justice system. Instead, we are looking to ensure that claimants receive the help they need at the time they need it, using criteria that are straightforward to apply and not overly intrusive, while providing the right assurance to Government that the additional support is going to those for whom it is intended.

Our current thinking is that a third-party evidence model offers the most promising approach to strike the balance we need to achieve. This is a model where a woman can request the exemption by engaging with a professional third party, such as a healthcare professional or a social worker. This approach would not be new for the benefit system. For example, within universal credit we use a similar model for the relaxation of the requirements to be available for work in cases of domestic violence, where the evidence required is the reporting of abuse to a third party acting in an official capacity, and that model was developed with input from stakeholders. We recognise the sensitivity of this exemption and the need to get advice from experts, so we have sought views from stakeholder groups involved in supporting victims of rape to help us to develop this exemption.

The hon. Member for Glasgow Central raised a large number of issues, and I will set out the Government’s vision for a sustainable welfare system that supports working families and encourages them to make similar decisions to those made by people who support themselves fully through work. I will also respond to the intervention from the hon. Member for Barnsley Central regarding the impacts of the policy of limiting support to two children in tax credit and universal credit, while meeting our obligations as set out in the public sector equality duty. The Government have set out our assessments of the impacts of the policy as part of the Welfare Reform and Work Act 2016, on 20 July 2015, in a published impact assessment.

The Government are cutting income tax for more than 30 million people this year and we took 4 million of the lowest paid out of income tax completely during the last Parliament. By 2018, a typical basic-rate taxpayer will pay more than £1,000 less in income tax than they did in 2010. Universal credit now provides for 85% of childcare costs for families with two children; this could be worth £13,000 a year.

The number of people in work is at a record high. With the national living wage, we have given a pay rise to 1 million of the lowest paid, and we have overhauled the welfare system so that it pays to work rather than to claim benefits. The number of workless households has fallen by nearly 200,000 in the past year and now stands at 3.1 million, which is the lowest figure since records began. The number of children living in workless households has fallen by 557,000 since 2010, and there are now 100,000 fewer children in relative low income compared to the number in 2010. In the hon. Lady’s own constituency of Glasgow Central, the employment rate has increased by 2.9 percentage points since 2010, to 62.9% in March 2016. This reflects the fact that there are now 2,000 more people in work in her constituency than there were in 2010. The Government are committed to ensuring that those in work are paid a fair wage and have opportunities to progress and to achieve their potential.

The Smith Commission agreement was very clear that universal credit should remain a reserved UK Government benefit, so that there is a clear and consistent offer of vital support to people in England, Scotland and Wales. Where the UK Government decide to make changes to reserved benefits, such as eligibility criteria, or to how payments for dependent children are calculated, those changes will apply equally across England, Scotland and Wales.

However, the Scotland Act 2016 gives the Scottish Parliament and Scottish Ministers significant new welfare powers. Not only can they now work with us to change certain defined elements of universal credit, such as the way that the housing cost calculation is made, but they will also get responsibility for a range of existing UK Government benefits, which were worth £2.7 billion in Scotland in 2014-15.

Crucially, the Scottish Government also now have new, wide-ranging powers to pay cash top-ups to anyone receiving a reserved benefit, or to introduce brand new benefits in devolved areas. This means that the Scottish Government can tailor the welfare system in Scotland, to meet both their own political aims and local needs.

In conclusion, I would like to reassure hon. Members that the Government are committed to achieving these welfare reforms. Putting welfare spending on a sustainable footing, and in a way that protects the most vulnerable, is vital as we progress to a society that will give working families more control over their lives. It will also ensures fairness for all families—both those who are paying for, and those who are receiving support from, the welfare system.

The hon. Member for Glasgow Central is right to raise the issue about the rape exemption; she has made her point and she has made it repeatedly to different Ministers. However, the Department for Work and Pensions is determined to address this issue with fairness and sensitivity, to make sure that women have the opportunity to report in a safe environment to trusted professionals. It is critically important that we extend that opportunity to them and that we do not remove the exemption, because I think that would be a very dangerous and unfair thing to do.

However, it is important that we instil within the benefits system a fairness for all families, for those who make choices about how many children they can afford to have, and that will apply to those who are working and supporting themselves solely through work, as well as to those who are in receipt of tax credit. Our priority remains to help working parents by providing them with the support they need to get on in life, and in doing so we will make life easier for all families.

Question put and agreed to.