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6.13 pm
Mr. Chris Pond (Gravesham): It is a pleasure to follow the hon. Member for Arundel and South Downs (Mr. Flight). He is a fellow member of the Select Committee on Social Security, albeit one with rather quaint views about the role of women in the home and in the workplace. I was also interested to hear that many bad and crooked employers exist who will exploit the system: I should have expected the Low Pay Unit, for which I used to work, to argue that case.
I am pleased that the hon. Member for Brentwood and Ongar (Mr. Pickles) is back in the Chamber. He made a moving opening presentation from the Dispatch Box about "The Archers", and informed the House that the Grundys were a fictitious family. That may have been a revelation to the hon. Gentleman, but it was helpful for the rest of the House. If the Grundys are fictitious, so was much of the hon. Gentleman's speech.
Mr. Pickles:
If the hon. Gentleman is going to patronise me, he will have to do better than that.
Mr. Pond:
I shall certainly try to do better in that regard as I develop my speech. However, to bring the hon. Gentleman up to date, I should tell him that Walter and Grace have passed away.
The hon. Member for Brentwood and Ongar may have missed the point that the writers of "The Archers" were trying to make. The Grundys found themselves in a difficult position because, although on a low income, they tried to claim family credit--a system founded by the Conservative Government whom the hon. Gentleman supported. The Grundys found the system very complex, and we shall discover in future episodes whether, as a result, they end up as part of the 30 per cent. of families entitled to family credit who do not claim it.
In addition, the hon. Gentleman will know from the episodes that he has heard that Joe Grundy was not prepared to allow the family to claim family credit because, as he put it, he did not want them to "go on the parish". That is a major point.
Mr. Nick Gibb (Bognor Regis and Littlehampton):
Will the hon. Gentleman give way?
Mr. Pond:
I shall develop my arguments a little further, and then give way. It is important to note that family credit carries a stigma and is considered to be rather degrading. It also creates a poverty trap.
Mr. Pickles:
The hon. Gentleman is the one who has missed the point. What Joe Grundy was saying was that he did not want everyone to know that he was on the parish. The problem with WFTC is that everyone will know when a family is on the parish.
Mr. Pond:
I am rather pleased that I gave way on that point, as it will at least amuse the House. Employers are of course well aware of their employees' circumstances and know when people receive family credit.
However, the hon. Member for Brentwood and Ongar has missed a more important point that renders inappropriate his reliance on "The Archers" as a vehicle for his opposition to this Bill. The great majority of low-income working families with children who will benefit from the working families tax credit bear little resemblance to the Grundys, and certainly not to Eddie and Joe. The real families involved want to do the best for their children: they are prepared to work hard but often their circumstances mean that it is difficult for them to do so.
During my years with the Low Pay Unit, before I became a Member of Parliament, I met many thousands of such people--hard working, wanting to take advantage of the available opportunities but too often, under the previous system, trapped in poverty and faced with the stigma of the means test. Is it not shameful that, under the previous Government, the largest single group among the poor comprised working families, in many of which the head of the household worked full time? The previous Government regarded those people not as the result of the failure of social policy, but as the instrument of economic policy.
Many of those people struggling to make ends meet also face the problem of the very high marginal tax rates built into the current system. The highest paid people in our society would never tolerate such rates, but those on the lowest incomes are expected to accept them as part of everyday life. I therefore welcome the Bill's proposals. I am also a rather enthusiastic supporter of the national minimum wage, and I cannot accept the suggestion made by the hon. Member for Arundel and South Downs that it will cause millions of jobs to be lost. The evidence, both here and abroad, is that it will help to create employment.
Mr. Flight:
Will the hon. Gentleman give way?
Mr. Pond:
I will give way in a moment. The national minimum wage will ensure that people in employment have a decent income that will give them dignity.
Mr. Flight:
With respect, my point was that, if the minimum wage is set too high, millions of people get
Mr. Pond:
I thank the hon. Gentleman for that intervention, but he should study the statistics. In the period during which this country pursued low-wage, sweatshop policies and reduced wages and employment rights to a level that would not have been acceptable elsewhere in Europe, proportionately fewer jobs were created here than in many other European countries.[Hon. Members: "Rubbish."] Conservative Members have bought the propaganda that this country's sweatshop economy somehow created jobs. That was not the case, and I shall be happy to give them the details later.
In combination with the national minimum wage, the changes to national insurance contributions and themove towards a 10p starting rate for income tax, the Government's package of measures will mean that the lowest paid will for the first time in many years have the opportunity to have a decent basic level of income.
The working families tax credit will provide well-targeted assistance for those on low incomes. I recognise the expertise of the hon. Member for Northavon (Mr. Webb), but I believe that he is wrong on that matter. Virtually none of the benefits of the working families tax credit will go to those in the higher deciles of distribution, or even to the top 50 per cent. The credit will lift many working families out of the poverty trap, and it will lift the stigma associated with that.
Mr. Gibb:
The hon. Gentleman talks about stigma, and about the 30 per cent. who do not claim family credit, a figure that I assume he has drawn from case loads. What does he expect the take-up rate to be of the working families tax credit on the basis of both case load and expenditure?
Mr. Pond:
I cannot give a percentage.
Mr. Pond:
I believe that the take-up will be lower. [Hon. Members: "Lower?"] I correct myself: the take-up rate will be higher under working families tax credit because the stigma will be much less than it is under family credit. Any Conservative Member who doubts that should ask what is the take-up of tax allowances in general; take-up is very high because there is less stigma attached to allowances than to social security benefits. Working families tax credit is another form of tax allowance.
My right hon. Friend the Member for Birkenhead (Mr. Field) spoke of the importance of the proposed 10p tax band. He talked of "clever people" who argue that the money would be better spent on increased allowances. The Institute for Fiscal Studies has argued that revenue can help the poorest most if it is spent as allowances. However, that is not so clever: the incentive effects of tax reductions are far more effective if acting on the marginal rate of tax than if given as tax allowances. Tax allowances are poorly targeted: they give most cash to the highest income groups, and no help to those at the very bottom
who pay no tax. The value of the working families tax credit is that it is one tax allowance that is effectively targeted at those on low incomes.
Mr. Bercow:
We do not yet know how effective the working families tax credit will prove to be, but the hon. Gentleman's analogy with tax allowances is misguided. Does he agree that the point about allowances is that they are universal among those of the population who are in work? The new tax credit introduced by the Bill will not be universal. The same considerations simply do not apply.
Mr. Pond:
The working families tax credit is not universal in the sense that it is intended to assist low-income working families with children, just as family credit is. My comparison was between family credit and the working families tax credit, which, because it is a form of tax allowance and associated with universal provision through the tax system, will have a higher take-up rate and less stigma.
Working families tax credit will provide a real incentive to make the transition into employment. The majority of people on low incomes desperately want to work, and I defy any Conservative Member to suggest otherwise. Under current arrangements, those people--and their children--pay a heavy price for making that transition and for pursuing the work ethic.
The Select Committee on Social Security examined proposals for the working families tax credit with some seriousness. The response of my right hon. Friend the Chancellor to our report was published earlier today. The Committee welcomed the attempt to provide greater help to low-paid working families, but it expressed concern about the purse-to-wallet issue, suggesting families should have the option of having the credit paid to either partner as a matter of choice. I am pleased that the Chancellor has made it clear--as did my hon. Friend the Paymaster General--that that choice will be available.
The Social Security Committee also recommended that free school meals should be extended to families who are awarded working families tax credit or the disabled persons tax credit. The Chancellor does not feel able to accept that proposal at present, but I hope that it will be further considered as the Bill goes through Standing Committee.
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