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Ms Ruth Kelly (Bolton, West): Is the hon. Gentleman seriously suggesting that the previous national insurance system, which meant an entry fee for both employer and employee, was a better system than that proposed by the Government? Would he revert to that system if, bythe strangest chance, the country re-elected the Conservatives?

Mr. Duncan Smith: The hon. Lady said "the strangest chance"; perhaps she is a little less concerned than the hon. Member for Corby (Mr. Hope). I am not trying to persuade anyone to revert to the previous position.

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I am simply pointing out--[Hon. Members: "Ah!"] No, I am legitimately pointing out that a reform that continues what my noble Friend Lord Lawson started as early as 1988, and is seen as natural continuance, has knock-ons. It will have a major knock-on not because of what a Conservative Government would have done but because the major commitment that the Labour Government have made to the national minimum wage makes the whole thing different. The hon. Lady and her hon. Friends have to answer that question. It is not a question of the simple change, but of the shuffle-up that will take place as a result of the national minimum wage.

The working families tax credit is the Budget's flagship proposal. The Chancellor's proposal is not new: it has been around since the 1960s and does not necessarily lie along party lines. The idea of integrating tax and benefits has been adopted and opposed at different times by both main parties. Each time it has been proposed, it has been rejected, often with the assistance of Labour Members--and particularly the Secretary of State for Social Security.

One of why the reasons why the Secretary of State would have rejected the idea in the past is the old issue of wallet versus purse. She may have changed her view, but she was adamant about it before. The argument is well known among Labour Members, some of whom will no doubt rehearse it. When family credit was being debated, the arguments of the Minister for Welfare Reform were largely responsible for the change from a tax credit system to a benefit system.

The Chancellor says that he has solved the problem by allowing couples to make the decision after discussion and to tick the box. That is surely not a solution, as it simply adds complication, not only in bureaucracy but in the matter of who is to carry the main weight of decision. Perhaps the Secretary of State can tell us who will decide, in the case of a dispute between husband and wife, whose position will be pre-eminent.

Will the state take the view that the main breadwinner matters most, or that the wife should prevail? The Government will be in the position of arbiter between the two, perhaps even sitting at the breakfast table to decide who is right. Perhaps the Secretary of State can answer that point. Who will be pre-eminent? I invite her to intervene. There is no answer.

I hope that my hon. Friends will take note: the Government have launched a supposed solution, but are unwilling to answer a direct question on the main point.

Kali Mountford: I am somewhat bemused by the hon. Gentleman's assumptions about families. Does he at least agree that one of the problems with family credit is poor take-up? Many families suffer poverty unnecessarily. Does not this solution bring people out of poverty without the stigma of benefits, supported for so many years by the Conservative party?

Mr. Duncan Smith: There is no stigma. No evidence has been produced for that. In fact, when Martin Taylor was asked directly by the Social Security Committee what stigma there was, he had to admit that there was no evidence. I think that the Chairman of that Committee, the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), is nodding. It is no good trying to build up a straw man as the reason for the change: the supposed problem does not exist. The take-up is more than 80 per cent. in financial terms and 70 per cent. in numbers.

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Studies conducted for the Department of Social Security show that it is difficult to identify, among the 30 per cent. who do not take up family credit, whether stigma is the reason. In fact, the 30 per cent. contained many people who should not really have been identified as qualifying for the benefit. If the working families tax credit is predicated on the supposition of stigma, it is wrongly based.

The Secretary of State has not mentioned the experience of Canada and America. Canada has a benefits system that is in many ways close to ours. The WIS--working income supplement--system in Canada has failed and a benefit-based system is being reintroduced. What studies did the Government conduct on that? Perhaps the Paymaster General can answer.

Interestingly, the Government were even advised by Mr. Mendelson, who wrote the document for Rowntree, that for every $100 spent, only $6 went in the end to the objective of increasing employment. That was one reason why the scheme was abandoned. There was also a huge increase in fraud, and overall costs spiralled.

If the Government intend that the working families tax credit should shrink the benefits bill, they are clearly listening to the wrong argument, because it is much more likely to increase it. Even by their own admission in the Red Book, it will increase dependency by putting many more people on a 60 per cent. marginal rate. The Government's figures suggest that that will happen to an extra 250,000 people.

If, as the Minister for Welfare Reform said,

and are to be rejected, someone should explain why. The administrative cost to business will be increased and employers will be supplied with hitherto confidential information about household incomes. As was found in the Canadian experience, employers will know who is being cut in on the subsidy, and that leads to fraud.

If anything, stigma is increased, because more people know who is receiving the benefit. The experience in Canada and America was that that deterred people from taking it up. The Department's own figures show that the idea of stigma does not hold up. It would be nice to hear from the Paymaster General why all that evidence was chucked out.

The married couples allowance is perhaps the most devastating of the fault lines. There is a clear shift in Government policy on aspects of the family and the relationship between family and children. In further reducing the married couples allowance, the Government are sending a signal that marriage is not important to them and that they are in essence indifferent to the structure within which children are nurtured and cared for.

The hon. Member for Leicester, West (Ms Hewitt), who often features in these debates, and certainly in the Social Security Committee, claimed that marriage "doesn't fit any more" in today's society. It is revealing that she should have said that: it shows that new Labour thinks that marriage is in essence an outdated institution. The Budget

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confirms that and puts into practice what has heretofore been simply a theory. Ruth Lister, a former member of Labour's Commission on Social Justice, congratulated the Government because the Budget

    "moves away from supporting marriage to supporting children and rightly so".

There is a debate to be had about that.

The previous policy, of reducing married couples allowance, was mistaken. By the time of the general election, it was changed. The previous Government decided that the policy was wrong and that the best way forward was to have transferable tax allowances to rectify the growing burden of the change in cost to families. We set a clear direction for ourselves.

The new Government have opened the gap and said that the concept of a married couple bringing up children in a family is no longer any more than a life style choice. The Government also plan to underwrite up to 70 per cent. of child care costs, up to a limit of £100 of eligible costs for families with one child, and £150 for families with two or more children.

The Chancellor claimed that he was being prudent with a purpose. I believe that the child care scheme is anything but prudent. The Government are attempting to regulate child care. Informal networks currently provide support for children and those informal arrangements will, by necessity, change following this proposal. The state will distort the existing patterns by promoting new ones. Following the change to the married couples allowance, that sends a further stark message to parents. The Chancellor is not just indifferent: he is saying to families where parents choose to stay at home, "You should put your child into care and go out to work--and here is an inducement." In essence, the Chancellor has become a persuader for child care: he is trying to persuade all parents, regardless of their position, to go out to work.

Financially, the Chancellor has failed to address the implications of the high take-up rate. When state subsidies are offered, experience dictates that they will be taken--and taken with a will. In other words, the Government are offering subsidies for child care and, in so doing, will be both meeting and creating demand. As the Institute for Fiscal Studies said yesterday:

It begins to look very much like the issue of housing benefit and the way that that tends to force up prices. I dare say that the Government will deploy the same arguments against it in their review in two years' time in an attempt to introduce a cap.

In Britain, we have a heady mix of the highest proportion of lone parents on benefit and the highest child care costs in Europe. According to the Daycare Trust, British families pay the highest child care bills in Europe. It follows that the Government are in danger of running up a substantial bill for child care.

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