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Mr. Duncan Smith: I am listening carefully to the hon. Gentleman. Is he assuming that if the main breadwinner does not agree, the tax credit will stay in the wage packet instead of going to the non-breadwinner, or does he wish, like me, that the Government would explain the matter?

Mr. Rendel: I was tending to assume that that may happen. I should be delighted if the Government assured us that a detailed mechanism will be introduced to overcome the problem, although it seems clear from the remarks of the Secretary of State that, so far, they have not found such a mechanism. That worries me.

There are other anxieties about the working families tax credit. The Chancellor must ensure that this country does not suffer from the high number of frauds that have occurred in the United States, with employees and employers colluding over the amount of working families tax credit that is due. It would be wise for the Government to study carefully the Canadian Government's experiences with working families tax credit before introducing one. I understand that the Canadian scheme has been withdrawn, mainly because it was a disincentive to work for more people than the ones for whom it was an incentive.

The Institute for Fiscal Studies report, published yesterday, takes the Budget as a whole and shows that, although 1.1 million people will have an increased incentive to work despite still suffering from an average marginal tax rate of 71 per cent., 2.8 million people--more than twice as many--will suffer from a decreased incentive to work. The policy has advantages, so that may not be a reason for not going ahead with the policy, but it must be considered, and the Government have not properly dealt with it. If the figures are accurate and the Government do nothing to address the problem, the working families tax credit, which was intended to boost

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their new deal programme, could become the main cause of its failure. Liberal Democrat Members hope that those disadvantages will disappear as further details emerge. We wait with interest.

I must add a further warning about the Budget. The Government are right to introduce a tax credit for child care, but the quality of the child care provided must not be compromised. There should be a recognised standard, such as a kite mark, and such provision should be registered by the Government. The future of our nation's children is too important to allow child care provision to be driven by nothing other than market forces.

On behalf of my Newbury constituents, I want to mention the need for rural public transport to be high on the agenda. The £50 million that the Government have promised is a start, but that is all it is. The Government must ensure that the money is not the end of the matter, and not merely an attempt to appease the countryside marchers; it must be the beginning of much more investment in the infrastructure of rural Britain. I warn the appeasers, if that is what they are, that an appeaser is one who feeds the tiger hoping that it will eat him last.

My hon. Friend the Member for Somerton and Frome (Mr. Heath), whom I am pleased to see in the Chamber, said yesterday that the Budget had bypassed Somerset. We in Newbury know all about bypasses, and some are welcome. But the £50 million for rural transport will be spread thinly if that is all that it receives. I hope that I shall not have to echo my hon. Friend's remarks when the money is allocated, and say that the Budget has also bypassed Newbury--that would not be a welcome bypass.

There are good things in the Budget. Much of it heads in the right direction; indeed, it picks up ideas that have long been part of Liberal Democrat thinking. We welcome that, but where the Chancellor needed to be bold, he was timid, tentative and grudging. Let us hope that the Budget is merely a small first step, and that he will accelerate down that road next year.

6.6 pm

Mr. Terry Rooney (Bradford, North): The hon. Member for Newbury (Mr. Rendel) mentioned bypasses; my hon. Friend the Member for Shipley (Mr. Leslie) would not forgive me if I failed to say that the Bingley bypass should be included in the roads programme next month.

Before I was elected to the House, I spent 10 years as a welfare rights advice worker. The job gave a great deal of satisfaction, but brought me face to face with an awful lot of misery and pain. Between 1980 and 1986, my case load went through the roof, because I was dealing with the casualties of the previous Government's economic policies: all that they faced was a lifetime on benefit.

In 1986, that started to change. For the next three or four years, I spent my time telling people that they would be worse off if they worked, which was a tragedy for me, for them and for the nation. That is not sound economic policy.

Mr. Gibb: Was that the advice that the hon. Gentleman gave?

Mr. Rooney: If the hon. Gentleman wants to intervene, I shall gladly give way. He does not want to intervene, because, as usual, he does not know what he is talking about.

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The Social Security Act 1988, which introduced family credit and changed many rules, compounded the problems. For example, the children of people on family income supplement were entitled to free school meals, but that entitlement was removed under the new family credit. Before the hon. Member for West Chelmsford (Mr. Burns) gets excited, I point out that, yes, there was a notional adjustment in the value of the benefit, but it went out of the window the week after the benefit was introduced, because no account was taken of it. That was a major cost to people on low incomes who moved from unemployment into work. As a result of the way in which local government finances were handled in the 1980s and early 1990s, the price of school meals went up far in excess of inflation year on year. People also face the cost of child care, especially in school holidays. Lone parents with two or three children have enormous costs during the six-week summer holiday and have no assistance whatever.

In 1996-97--the last year of the Conservative Government--725,000 people claimed family credit. That was only 70 per cent. of those entitled. For whatever reason, 30 per cent. of the relatively poor families who are entitled to family credit did not claim it: £400 million was not claimed. It is the children who suffer as a consequence. The beauty of the working families tax credit is that there will be a 100 per cent. take-up, because it will be paid automatically. There may be no stigma attached to family credit, but 300,000 people who were entitled to it did not claim it.

The 725,000 people who received family credit in 1996-97 were getting an average of £57.04 a week. The tragedy is that their average gross wage was £112.81 a week. That is an indictment of the low-wage economy, and shows why we need the national minimum wage that the House voted for last week. Even on that miserable average wage of £112, people were paying £170 a year in tax. They were getting £57 a week from the state in family credit, but they paid £170 a year in tax and a massive £340 in national insurance. That bill will be halved as a result of the changes that the Chancellor has introduced; and quite right, too.

Why do high earners on the top rate of tax need incentives to go to work, whereas unemployed people do not? Why is a 97 per cent. marginal rate of tax for the unemployed valid, but a 40 per cent. tax rate for higher earners is not? That argument is nonsense. There should be incentives across the board, and it is about time they were directed more at poverty than at affluence.

The Labour party manifesto made much of our welfare-to-work proposals. In the 10 months since we came to power, that programme has unfolded. Welfare to work has two fundamental principles: one is that all those who can work should work, and the other is that work should pay.

I am pleased to say that I attended the launch of the new deal for my local authority area on Tuesday morning, when 170 employers turned up. They have signed up to the new deal. Employers and claimants are enthusiastic about it, and everyone will benefit from it. It was a superb event.

Welfare to work, the new deal and the national minimum wage interlock with the measures taken in the Budget to get people back to work. The aim of those

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measures is to bring dignity and respect to those families, and to provide them with an income that is commensurate with their family needs and circumstances, rather than the misery pay that they received during the Tory years.

I shall comment on the Chancellor's tax credit scheme for the disabled. For many years, disabled people in work have received the disability working allowance. The system is an absolute disgrace, because the allowance is claimed by 13,400 people--the vast majority of disabled people do not know about it, and even those who do have difficulties because it is complex, so they do not bother to claim. Under the new deal, there will be £185 million for people with disabilities who want to work. They should be allowed to work, and the money should be available to support them.

Child benefit has been frozen. The most valuable support that we can give to families with children has always been child benefit. That is why it was introduced in the mid-1970s, when we did away with the old child tax allowances and the family allowance. It is a tribute to the noble Baroness Castle. I hope that the increase in child benefit this year and next year will continue year on year. It will do more than anything else to relieve child poverty. That increase is the most radical aspect of the Budget.

I welcome the Budget and am very glad to support it.


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