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Mr. Paterson: My hon. Friend has touched on a point that brings together both of her arguments. In America, many new businesses--small businesses, employing fewer than five people--have been created by families. The Bill, by imposing time-consuming extra regulation on hard-pressed entrepreneurs, will hit both families and businesses in this country.
Miss McIntosh: I shall have to ask my hon. Friend to help me with my next speech. He has provided a positive argument which does indeed neatly bring together my two arguments. In North Yorkshire, 95 per cent. of businesses employ fewer than 25 employees, so any business employing more than that number qualifies as a large business in that area. The point is that the Government's tax credit policy will hit 95 per cent. of the businesses in North Yorkshire. I thank my hon. Friend for helping me with that argument. The Bill is a bad one and I shall vigorously oppose it on Second Reading.
8.30 pm
Ms Beverley Hughes (Stretford and Urmston): We have had a wide-ranging debate and many hon. Members on both sides of the House have made their points ably, from differing points of view. However, as this is a Second Reading debate and because many of the points made so far have dealt with hon. Members' views on the detailed implementation of the Bill, I intend to return to the starting point and to the principles that the Bill is designed to address.
My hon. Friend the Member for Pontefract and Castleford (Yvette Cooper) spoke eloquently about a serious problem that has persisted in this country for some time: the problem of children living in poverty. Children of low-income families suffer the long-term and multiple effects of relative social and economic deprivation. That has knock-on effects on their health, housing, aspirations and achievement. My hon. Friend made it clear that, if we are to address those fundamental problems and achieve a sustainable improvement in the condition of those families, we have to introduce radical measures. I agree, and that is my starting point.
The current welfare system as it relates to work and tax does not help families to improve their lot. Our income support systems trap such families in a culture of dependency. Our family credit and tax systems keep people earning low wages, because punitive tax rates and tapers ensure that they have to take a giant step in terms of additional income if they are substantially to improve their lot. It is important that we develop a radical approach to such problems and so crack the cycle of deprivation.
The only sustainable approach is to direct additional resources to the heart of those families and, simultaneously, to help them to establish a sustainable
position in work over a long period. Those twin approaches are essential if we are to enable such families to achieve a sustainable improvement, with all the benefits in future years that such an improvement carries with it. The working families tax credit embodies those twin approaches and makes possible, albeit not inevitable, a sustainable improvement in the lot of some of the poorest people in our society.
We need a proposal that is based on certain principles and embodies certain characteristics. First, it needs to contain a minimum income guarantee which will give families the certainty that their income will not drop below a certain level as a result of the legislation.
Secondly--I have heard various views expressed on this point--we need also to link assistance with employment; in other words, to link the measure with the rewards that people get from work. We have discussed income a great deal, but it is not only income, important though that is, that people receive from work. Being in work changes people's life styles and aspirations and the way they feel about themselves. It enables them to develop an approach to life that emphasises moving forward and having routines and disciplines. All that has an impact not only on parents in work, but on their children.
Mr. Swayne:
I entirely agree with the hon. Lady, but does she accept that concern about the Bill, certainly among Conservative Members, relates not so much to a minimum income guarantee, but to the fact that a means-tested benefit will be available to more families, up to and including those who are relatively well to do, which can only have a corrosive effect on society?
Ms Hughes:
No, I do not share the hon. Gentleman's view. The mechanism for the delivery of the benefit as a tax credit rather than the current welfare benefit--which is separate from the wage packet and the world of work--will make a crucial difference to the way in which people perceive it. The stigma that many people feel is attached to receiving benefits will be significantly reduced, if not eradicated. That is an important element of the proposal.
The attempt in the Bill to inculcate a psychological change was one of the features that Martin Taylor specifically referred to when he reported on proposals to introduce a tax credit. He thought that it was important to have a tax credit system because
Thirdly, we need a system that is more generous to families at the low end of the income scale than at present. We need an arrangement that enables them to keep more of their pay.
Fourthly, as my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) clearly pointed out, we certainly need a much more generous and
effective measure for child care assistance than the child care disregard on family credit, which is particularly ineffective.
Fifthly, we need to give help to those already in work, but we need also to make work more worth while for those families who want to work. We need a child-centred approach which provides assistance directly to the heart of the family. Delivering help through the wage package does that.
Mr. Swayne:
I thank the hon. Lady for showing me her customary courtesy in giving way a second time. Does she accept that the advantage to which she refers will be confined to single-parent families, and that the fact that the same help with child care costs will not be available to two-parent families in which only one parent works will at least give an impression of setting those families at a disadvantage?
Ms Hughes:
I have listened carefully to the argument advanced by Conservative Members that the Bill goes against the traditional idea of the family. I have been bemused by it because, as far as I can assess from the detailed documents that I have read, the notion that the Bill will penalise families in which one parent stays at home to care for children is false. The Bill will be neutral in that respect.
Mr. Ruffley:
Will the hon. Lady give way?
Ms Hughes:
I shall finish this point first. Under the working families tax credit system, the parents in a two-parent family who do not pay for child care because they choose to have one parent staying at home to provide that care will benefit, as the member of that couple who goes out to work and earns an income will be eligible for the adult credit and the child credits, but not for the child care credits. However, that will not be a penalty, as that couple will not be paying for child care.
In contrast, when both parents in a two-parent family work--and they usually do so for low incomes--they will get an additional credit to help with any child care for which they pay. However, that additional credit is worth only 70 per cent. of the cost of the care, so the argument that the scheme penalises one-parent working families is based on a false premise and is an incorrect analysis of the information that we have received so far.
Mr. Ruffley:
I am grateful to the hon. Lady for letting me intervene in her interesting speech. She argues that the effect will be neutral, but the empirical evidence from America about systems such as the working families tax credit system does not support her. The American research shows that, when a two-parent family cannot take advantage of a child care allowance, the incentive is for them to break up to take advantage of the child care provisions for single parents. I should be interested to hear the hon. Lady's analysis of that evidence. If that is what happens in America, why should it not happen here?
Ms Hughes:
I am not familiar with that research and so am not able to comment on its validity. Even if itis valid, I am not sure whether the conclusion can be transported to this country. However, I should be astonished if the hon. Gentleman were to contend that couples would break up their families and subject their
"it would associate the payment in the recipient's mind with the fact of working, a potentially valuable psychological change".
Hon. Members have commented on the relative paucity of research on the direct relationship between the psychological effect of a change in delivery of a benefit and an incentive to work, and I acknowledge that paucity. We are dealing with the unknown, but I suggest, particularly to Conservative Members, that it is common sense that a benefit that is firmly attached to the rewards of work is much more likely to provide an incentive to work by making work more rewarding than it is to have a neutral effect or to act as a disincentive.
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