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Mr. Bercow: Will the Minister give way?
Dawn Primarolo: No, I want to make some progress. I know that just mentioning the national minimum wage forces the hon. Gentleman to his feet, but I have been asked to explain how the system will work and I am about to do so.
The national minimum wage will ensure greater decency and fairness in the workplace by removing the worst excesses of low pay. From 1 April, all adult workers will earn at least £3.60 an hour, benefiting another 2 million workers, two thirds of them women. Opposition Members oppose that policy. They do not want to help the poor earn more despite the fact that last week they were claiming to be the champions of the poor.
We are increasing child benefit by £2.50 a week from April, in addition to the normal uprating for inflation. When the Conservatives were in government, they did not do that. They did not invest in children or address those issues. At £130 extra a year, it is the biggest ever increase in child benefit.
We are also reforming national insurance to remove the barriers to work for the lower paid. From April, we will cut the burden on all employees--a gain of more than £65 a year. We shall introduce a 10p starting rate of income tax when it is economically right to do so.
There is an increasing polarisation between working and non-working families. The proportion of households with at least one adult of working age out of work has doubled since 1979 when the Conservatives were elected. Those in workless households account for a growing proportion of those living in poverty.
The youngest in our society have often suffered most. A third of all children in Britain live in poverty and half of those live in households with no one in work. That is the Conservative legacy. They failed to address the issue and now try to stop us dealing with it.
The Government believe that the best way to tackle poverty is to help people into jobs. That is good for people and for the economy. Everyone in Britain has talents and potential, and we can all benefit from people being able to use their talents and fulfil their potential.
To help people into jobs, we must improve skills and employability. We must also reform the tax and benefits system that fails to reward work and does not enable people to climb the earnings ladder.
Mr. Bercow:
I thank the Minister for giving way and congratulate her on her recent promotion. Why has expenditure on the working families tax credit, which will be approximately £1.5 billion a year greater than the cost of family credit, been taken out of the mainstream Department of Social Security figures and instead listed under the Government's comprehensive spending review, under the heading "Accounting and other adjustments"?
Dawn Primarolo:
The Government's presentation of accounts is hotly pursued for clarity, and the way in which
Mr. Eric Pickles (Brentwood and Ongar):
Will the Minister give way?
Dawn Primarolo:
No. The hon. Gentleman will have the opportunity to speak from the Front Bench later, when I am sure that he will make his points forcefully. I must make some progress.
The unemployment trap means that those in work can earn little more than those out of work. The system fails to recognise the costs of child care. It imposes marginal tax rates on more than 70 per cent. of 750,000 families and it puts a ceiling on the aspirations of men and women wanting to work their way up. The working families tax credit is central to overcoming those obstacles.
The working families tax credit will replace the existing family credit benefit. Under the working families tax credit, those with families who are on low incomes working at least 16 hours a week will be entitled to a basic tax credit, and an additional credit for each child. A credit will also be given for working more than 30 hours a week and, to help with child care costs, there will be a child care tax credit of up to 70 per cent. of a maximum of £105. We have increased the threshold at which the tax credit is withdrawn from £79 to £90. We have cut the taper so that the tax credit will be withdrawn more gradually, easing the transition for those moving from unemployment into work and up the earnings ladder.
The disabled persons tax credit builds on the disability working allowance in the same way as the working families tax credit builds on family credit, and contains a new child care tax credit. These are provided for within the Bill and the detail of the regulations.
Mr. Steve Webb (Northavon):
The Minister has described the new structure. Could she confirm that the 300,000 poorest recipients of family credit who get the maximum amount will not get a penny extra unless they have child care expenditure?
Dawn Primarolo:
The hon. Gentleman will know that the change in the taper means that the withdrawal is more gradual, and helps more families claiming the benefit. [Interruption.] Madam Speaker, I am answering the question from the hon. Member for Northavon (Mr. Webb), and it is very difficult with a constant barrage from the Opposition. However, I will do my best.
Madam Speaker:
I understand. I am sure that Opposition Front-Bench Members will bide their time until they get to the Dispatch Box. I look forward to hearing what they have to say.
Dawn Primarolo:
As the hon. Member for Northavon will know--and as Opposition Front Benchers would know if they listened--the working families tax credit means that as people earn more, they will be able to keep more. That is the whole point of having a work incentive--to encourage people to work.
For many families--especially lone parents--the costs of child care are a major obstacle to work. In the past, that has been recognised by the Conservative party. Apparently, however, the party no longer wishes to recognise that fact. In the past, the problem of cost and access to good quality child care has denied many parents the opportunity to rejoin the work force. Not only has that had an effect on parents' confidence in their own abilities, it has denied Britain a major pool of talent and potential.
The previous Government accepted the principle of providing help with child care costs for those who go out to work. The former Secretary of State for Social Security, now the deputy leader of the Conservative party--the right hon. Member for Hitchin and Harpenden (Mr. Lilley)--said in his first Spectator lecture on30 March 1994 how important it was to reduce the disincentives for people to return to work and how important a child care disregard was in assisting with child care costs.
In his press release announcing the child care disregard, the right hon. Member for Hitchin and Harpenden said:
We are determined to ensure that no one is unable to take up work through lack of access to affordable, quality child care, and we are determined to help parents better balance work and family responsibilities. We are introducing a child care tax credit, combined with the national child care strategy. It is designed to make child care support more generous and transparent by providing up to 70 per cent. of the eligible child care costs, up to a maximum of £105 a week for those with two or more children. I am grateful to my hon. Friends, and especially women Members, who have emphasised strongly the importance of child care provision so that women who want to return to paid employment have that route open to them.
Mr. Pickles:
I, too, congratulate the hon. Lady on her new post.
Why is it necessary for the Inland Revenue to make the payment, rather than paying it directly through the Department of Social Security?
Dawn Primarolo:
That is the point of the Bill. It is an in-work incentive, designed to encourage people to return to work, to remove the stigma associated with the current system and to ensure that we can provide a tax credit. I thought that that was clear to the hon. Gentleman.
Mr. Geraint Davies (Croydon, Central):
Do not the two most recent interventions clearly illustrate the fact that the Opposition cannot distinguish between a tax credit, investing in opportunity and work, and a social
Dawn Primarolo:
Conservative Members do not like to discuss whether they failed to provide in-work incentives, the consequences of their failure to help those in paid work on very low incomes, or their failure to tackle the poverty trap or the unemployment trap. I am not surprised that they do not want to discuss the child care tax credit, because they know that it has been widely welcomed by child care groups and women's organisations. It is an example of how the Government are not only talking about helping children, but delivering help where it matters.
The working families tax credit supports families on low incomes and provides them with a real incentive to work. Working families in full-time work will have a guaranteed income of at least £190 a week, and no family with a wage packet of less than £220 a week will pay any net income tax. That is the highest effective starting point for income tax in 30 years.
The working families tax credit will cut by two thirds the number of families facing marginal tax rates of more than 70 per cent., and it will remove the last grotesque inheritance in this field from the previous Government--instances in which 100 per cent. effective tax rates were imposed on the very worst-off in our communities. The new system will encourage families to try to earn more, as they will get to keep more of what they earn. That is a crucial element in encouraging people into working.
The working families tax credit will retain an additional tax credit for people working more than 30 hours a week, which will encourage those who are employed to move from part-time to full-time work and so move up the employment ladder.
The disabled persons tax credit will help people who have an illness or a disability to find or keep a job. It is more generous than the existing disability working allowance, to ensure that people are better off moving from benefit to work.
"These measures will provide a real incentive to encourage parents to return to the job market."
He also said that lone parents, in particular, would also benefit from the maintenance disregard. Unfortunately, the high hopes for that provision never materialised. Yet the Opposition are now saying that they do not support an improved scheme. Having designed a policy that failed, they are not prepared to support a policy that will succeed.
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