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Ms Karen Buck (Regent's Park and Kensington, North): Is not the hon. Gentleman aware that there is plenty of evidence that employers advertise jobs as suitable for claimants of family credit? The point that he is making is equally true of the existing system.
Mr. Webb: It is not true, because firms like people on family credit, as they can pay them low wages without the administrative burden of the tax credit. They will certainly not advertise for people on the tax credit. The question was asked how prospective employers,
when choosing between two candidates, would know whether one was entitled to the credit. In an informal conversation with job applicants, any shrewd employer will be able to ascertain whether they have kids; it will not be difficult.
The Bill is a missed opportunity to reform the in-work benefit system. Martin Taylor was asked to consider the integration of tax and benefits. His report said that he had not considered the tax credit in any detail because it was a given fact and he knew that the Government would introduce it. The task force was not asked to think the unthinkable or come up with a good scheme; it was told that there would definitely be a tax credit.
Instead of integrating tax and benefits, we could first have integrated in-work benefits one with another, integrated out-of-work benefits with in-work benefits and then, having done all that, thought about integrating a unified benefit system with the tax system. Instead, the Government went crashing ahead with the tax credit and said that housing benefit was too complicated to deal with. They said that that benefit was a nightmare and they would not touch it or do anything about mortgages; but the evidence is that the lack of help with mortgages for the low paid is one of the biggest genuine disincentives to work.
We have heard that there is not much evidence on incentives, but research by the Department of Social Security cited loss of help with housing costs on taking a job as one of the biggest barriers--much bigger than child care--to moving off income support. If the system had spent the same amount, focused on the lower-paid, with some help, for example, for people with mortgages, it would have done much more for incentives.
The child care subsidy reaches a long way up the income scale. People on the minimum wage of £3.60 an hour, working 30 hours a week, will pay income tax, but people on higher-rate tax will get child care subsidies. Has not the world gone wrong somewhere? Is not that a crazy system? Incentives are essential to the whole argument. Where is the evidence?
Yvette Cooper:
I accept the point that the research is limited, but the most reliable research on work incentives has been carried out by David Card in the Canadian system. One group of lone parents was given extra help--a credit at a similar level to the working families tax credit--and another group was not. The group that was given the credit had an employment rate of 25 per cent., as opposed to 12 per cent. in the other group. Is not that pretty substantial evidence in favour of work incentives?
Mr. Webb:
The hon. Lady is knowledgeable on those matters and will know that the Canadians scrapped the scheme--
Mr. Webb:
Well, I look forward to hearing the details.
As far as I know, the only empirical research done on this scheme--not the Canadian model, with its very different income distribution, family structure, employment patterns and all the rest--by my former colleagues at the Institute for Fiscal Studies, shows that it would have little effect. That is the only evidence that we have to go on.
The taper has come down from 70 per cent. to 55 per cent, which brings in people further up the income distribution scale. The Paymaster General says that that is good for incentives. What about the person who works overtime to make ends meet--as many families do--and who starts to receive working families tax credit? He or she will have more income for working the same number of hours. What would any hon. Member do if he or she were faced with working overtime, possibly to the detriment of family life, and then could suddenly get the same income by working fewer hours? Any person would give up on the overtime and cut the number of hours worked. That may well be a desirable outcome, but it is an example of one group of people who may cut their hours in response to the tax credit. In other words, lower tapers do not make people work more hours; they may make them work fewer.
Fiona Mactaggart (Slough):
What surprises me most about the hon. Gentleman's argument is that, in the country that works the longest hours in Europe, he is suggesting that it is good to promote the idea of mothers and fathers working longer hours. That is a peculiar suggestion and I hope that he can reassure me that he is not saying that. Does he not think that it would be a benefit to have a system that reduces the incentive for people to work excessive hours, so that they can spend time with their children?
Mr. Webb:
The hon. Lady knows that she is misrepresenting my argument grotesquely. I picked the example of overtime because those hours are discretionary and can be changed at fairly short notice. Other labour market choices will result from the changed tapers and they will mean people working less, particularly second earners. I suspect that the hon. Lady supports second earners and believes that married women, for example, should take paid employment given the opportunity. The measure may have beneficial effects for people who are unemployed, but it will be a disincentive for existing workers, in particular second earners, and I was not aware that it was Labour party policy to return to the traditional working family.
Mr. Bercow:
Does the hon. Gentleman agree with the view expressed by the right hon. Member for Birkenhead (Mr. Field), if I remember rightly in August 1998, when he observed that the family tax credit venture could take the pressure off improving productivity and thereby the scope for increasing real wages?
Mr. Webb:
My argument this afternoon has been that the £1.5 billion should be spent, but not in that way. We want to assist people who are in low-paid work by providing the floor of the minimum wage, which is where we differ. That floor would stop employers from depressing wages and a subsidy would enable people to stay in their jobs, perhaps helping with the mortgage or giving cash help towards child care. I am not particularly concerned about the hon. Gentleman's point.
Drawing my thoughts together, all the welcome aspects of the tax credits could have been achieved through family credit reform. Nothing in the Bill was necessary and nothing in it could not have been done through such a reform. We support the extra cash, but not to be spent in that way. Surely it is legitimate to point out that an
addition to Government spending could have been spent more effectively. That is not an unreasonable argument and it is not one that the Paymaster General should parody.
The measure has been introduced in a hurry, without considering housing benefit and the linkages--
Ms Moran:
Will the hon. Gentleman give way?
Mr. Webb:
No, I must conclude and give other hon. Members a change to speak.
Lorna Fitzsimons (Rochdale):
I was surprised at the opening remarks from both Front-Bench spokesmen for the main Opposition parties because I thought that the one thing they would acknowledge--the Liberal Democrat spokesman, in particular--was that it is better to make work pay if one is trying to help families and children in poverty. All the evidence shows that in-work benefits alleviate poverty. That must be endorsed in the first place.
Secondly, we must be encouraged by the Government's work on the tapers in implementing the working families tax credit. Every Select Committee report acknowledges that it is tapers that clobber people in much of the benefit system.
As for our guided tour of the Grundy family, I am glad that the hon. Member for Brentwood and Ongar (Mr. Pickles) listens to "The Archers", because there was not much other substance to his speech. We did not learn whether his concern about the complexities of the child care tax credit stemmed from his wanting it to work or whether he acknowledged that the barrier--primarily for women but also for families--to accepting work is being able to find good-quality, affordable child care. Perhaps when the hon. Gentleman returns he will answer the question that he was not courteous enough to allow me to ask when I tried to intervene on him. Since the working families tax credit was first introduced by the Chancellor, the Government have spent a long time developing, through extensive consultation, a model that will advance the quality of life of working families.
Many have argued that the new credit will disfranchise women. There is a serious point about disparity of access to income in the home. However, given what has happened since we last discussed that, we should congratulate Ministers on how far they have gone to alleviate concern about the problem of moving income from the purse to the wallet. The Treasury team's work demonstrates the advantage of having more women Members. I congratulate the Treasury team on the fact that it includes a record number of women. The advantage of having so many women in the team is shown by the advance they have made in choice and in safeguarding the position of women in the transfer from family credit to the payment of working families tax credit.
I want to draw the House's attention to several points that I hope will be elaborated on; my hon. Friend the Paymaster General touched on some of them. Much has
been made, certainly in the headlines, about the number of women involved. Most people who receive family credit are women because they are single parents. We are talking about a minority of people, who, without the diligent work of Ministers and officials, could have suffered from a transfer from the purse to the wallet.
Currently, in the small number of cases involved, if the form is not signed by the man, the woman cannot receive family credit no matter what she does. The work done on the working families tax credit means that the Inland Revenue will operate a three-stage approach. That will mean that there is a chance that women, if the information on the form can be verified, will be able to receive working families tax credit even without the male partner's signature. Women who have problems in the home--domestic violence has been mentioned--will have a greater chance of accessing the money than they do now. If the form is not sent back to the Inland Revenue, it will be followed up with a phone call and, in some cases, a visit. That will mean a better chance of targeting help at poor women and children in difficult relationships than ever there was under family credit. I welcome that step forward to making work pay and alleviating the poverty of children and women. Along with the Government's historic increase in child benefit, it represents a dramatic change in the existences of people in poverty.
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