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Mr. Hope: Will the hon. Gentleman give way?
Mr. Duncan Smith: I shall give way in a minute.
That bill will inevitably be passed on to taxpayers--although the Government do not want to tell them at this stage. The taxpayer will foot the bill. That reasoning is
reflected by calculations from the IFS, which claims that the cost will rise as high as £4 billion--not the £1 billion that the Government have allowed for in the Budget.
The Government's calculations do not add up. Even taking only the current number of children who are likely to take up provision, the cost will rise way past the £1 billion mark. So the IFS's £4 billion figure begins to look very reasonable. In those circumstances, taxpayers would incur the equivalent of an extra 3p in the pound on the basic rate of tax. That is yet another little broken pledge that the Government have quietly hidden away while seeking to increase the burden on the taxpayer.
Mr. Duncan Smith:
I have already given way and I shall do so again in a minute.
The details of how this credit will operate have yet to be fully spelled out. If the Government rely on a scheme in which the costs are reclaimed, the bureaucracy involved will be enormous. Such a system would have to be monitored closely to avoid fraudulent high claims.
When children are involved, it is not simply a question of life style choices; it is a question of the structure within which children are brought up. It is wrong to view children in competition with marriage in this context. It is wrong to fund a higher level of child benefit by cutting another element in the tax system: the married couples allowance.
Family structure is very important. That fact is confirmed endlessly by research both here and across the Atlantic. A little publicised British project, the national child development study, showed how the "quite remarkable" difference in family situations of children who had done well by age 23, particularly educationally, despite the worst backgrounds in terms of income and housing, was associated with the fact that almost all had stayed with two original parents. American studies have shown the same thing.
The study is not a condemnation of the fact that some children are brought up, for whatever reason, in single-parent families, but it is an observation that, where possible, the two-parent family--and, in this case, the family with married parents--provides extra balance and structure that defines a child's upbringing. In this Budget, the Government are moving in the opposite direction: they have said that there is no difference and that therefore it is simply a life style choice.
Kali Mountford:
The hon. Gentleman began by talking about the choices that families may make. What choices did families have under the previous Government, given that their child care record was the worst in Europe?
Mr. Duncan Smith:
I must inform the hon. Lady that this is her Budget and this is her Government. If she does not want to discuss the Budget, that is fine--but I wish she would tell the Chancellor not to bother to produce a Budget every year. The hon. Lady must understand what is in the Budget. In my view, and in the view of many commentators, this is a retrograde step that will produce greater difficulties and lower the quality of child care.
Mr. Duncan Smith:
I have just given way, so I shall move on.
A leading liberal academic in the United States, Sarah McLanahan--who is in this country at present and has been feted by new Democrats and by new Labour--has reached exactly the same conclusion. She has spoken at length about the link between the demise in marriage and the demise in civil attitudes. In the United Kingdom, Melanie Philips has written about exactly the same concerns. The point is that the Government have chosen to move in the opposite direction. That is their position, so they must defend it and not pretend that it does not exist.
This Budget fails to redress the balance and, as a result, the situation will worsen. As my right hon. Friend the Leader of the Opposition said yesterday in response to the Budget, the Government had a chance to redress the situation. He offered the Government the opportunity to make the tax allowances transferable, but the Government have thrown that away. Therefore, the tax structure still bears down disproportionately on two-parent families, and particularly on married couples bringing up children.
In Britain, the income tax threshold for a married man with two young children fell from 101.2 per cent. of average male manual earnings to 34.9 per cent. between 1950 and 1993-94. To that extent, the burden has increased on married couples bringing up children and this Budget does nothing to rectify that situation--although it needed attention more than other measures that are in the Budget.
Mr. Malcolm Wicks (Croydon, North):
The hon. Gentleman raises some interesting ideas about the relationship between the state and marriage. Has he reflected on why marriage rates in this country have declined significantly in the past 18 years--arguably partly because of joblessness among young men? Has he also reflected on why, in the same period, the divorce rate in Britain has increased to the point where 40 per cent. of marriages now end in divorce? By the end of the Conservative years, Britain had the distinction--if that is the word that I am seeking, which it is not--of topping the European divorce league.
Mr. Duncan Smith:
The hon. Gentleman always makes an interesting point. The number of marriages producing children has fallen from 81 per cent. to just under 70 per cent., so three quarters of all children will still be brought up by married parents. That is an important factor, although the number has fallen. The hon. Gentleman has supported my argument. I had hoped that this Government would do something about the problem of divorce rates. The experience is by no means unique to Britain--it is even worse in the United States. The problem is not quite so bad in parts of Europe, but that is changing. It is time for Government to act. The point is that the Government should have addressed that issue in the Budget, but they have moved in the opposite direction and are likely to exacerbate rather than ameliorate the problem.
Families have funded benefits and the expansion of the welfare state through higher tax. The Chancellor has reduced the married couples allowance partly to buy off his Back-Bench critics and partly to redress the changes to lone parent benefit for which he voted in December. It is worth addressing that point. The Prime Minister denied that that would take place. He told the House that the leaked stories that appeared in The Guardian were "wrong", but the stories about child care credit turned out to be very accurate. The articles about redressing the lone parent benefit changes also reflect the final package that appeared in the Budget.
According to the IFS, the Budget changes do not just redress the balance politically but go some way towards redressing it financially. It claims:
On Tuesday, the Chancellor proclaimed that he had found a new faith in the increases in child benefit. Notwithstanding his desire to tax or means test them, suddenly he discovered this great element. New Labour has never publicly expressed faith in such rises. However, under fierce criticism, the Chancellor suddenly claimed:
Will the Secretary of State guarantee that no further cuts will be made to the married couples allowance, that no cynical device will be used in future and that it will be held at least at its present level?
New Labour says one thing and does another. This is a spin doctors' Budget. They have enjoyed it from start to finish. They have done their level best to spin and they continue. Labour claims that we should take it at its word, but we can do that only if we look at its words and reverse their meaning. The soundbite and sentence become the weather vane in the opposite.
New Labour came to power claiming that the tax burden on middle England was too high and that it had no plans to increase taxes. New Labour also claimed that it would encourage savings and security in retirement. How many of my right hon. and hon. Friends remember those words that were thrown at them during the election? New Labour has broken every one of those pledges.
"many existing single parents with children under the age of 11 will be more than compensated for the cuts in lone parent benefits".
The measures have a political element that has gone unmentioned. The child benefit increases amount to a cynical move fuelled by political pressure and they are not necessarily part of a rational package of welfare reforms.
"Child benefit remains the fairest and most efficient and cost-effective way of recognising the extra costs and responsibilities borne by all parents. Raising it allows us to do more for mothers who choose to be at home, working at home bringing up children."--[Official Report, 17 March 1998; Vol. 308, c. 1107.]
If this is such a valuable benefit and raising it at the suggested rate is vital to creating a fairer society, why did the Chancellor fail to mention whether the increase will now be index linked and made annually throughout the Parliament?
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