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Mr. Pickles: It is a pleasure to follow the hon. Member for Northavon (Mr. Webb). His arguments were persuasive, although I do not think that they will affect our vote this evening.
At times, the three weeks that we spent going through the Bill felt like performing "Hamlet" without the Prince of Denmark. We cannot come to a reasonable decision about the effect of tax credits without a good understanding of how housing costs will be affected. The success of the tax credit system--the declared aim of which is to ease the gap from dependency to work--will
largely depend on the relationship between housing costs, working families tax credit and disabled persons tax credit.
We are fortunate to have the guidance of the Select Committee on Social Security in its report "Tax and Benefits: Implementation of Tax Credits". We see from the report that a succession of groups pointed out that marginal tax rates are likely to be fairly limited in respect of people who claim housing benefits. The Institute for Fiscal Studies has calculated that, following the introduction of working families tax credit, people subject to tax and national insurance reductions and receiving family credit, housing benefit and council tax benefit will see their marginal tax rate reduced by only about 1.5 per cent., to around 95.3 per cent.
Under the Bill, working families tax credit will be treated as income for housing benefit and council tax benefit. As the hon. Member for Northavon said, there is no in-work benefit to help housing costs for those with mortgages, and about half of those entitled to working families tax credit will be owner-occupiers.
Professor Stephen Wilcox, of the centre for housing policy at York university, told the Select Committee that only those with a very small mortgage will be better off as a result of working families tax credit or disabled persons tax credit. He added that the great weakness of the proposed reform was that, for many households, the higher rents and confusing overlap of the different in-work benefits will remain in place. Such households, as a result, will be no more likely to take account of the potential for housing benefits to boost their in-work incomes than they are now. For high-cost households, the message will not be effective.
It is little wonder that the Select Committee thought it necessary to issue a stern warning that the Government's reform of tax and benefits would be jeopardised unless housing benefit was fully taken into account. We know from the Chancellor's statement last week that he is actively considering incorporating housing benefit into the working families tax credit to ensure that people in rented accommodation, and owner-occupiers, benefit.
The hon. Member for Northavon referred to leaks in The Guardian. He is a sensible chap, and I am sure that he ignores the Sunday newspapers. However, the leaks to which he referred were repeats of previous leaks in Sunday newspapers. The Independent on Sunday said:
Is it the Government's intention to offer cash incentives to attract younger people? It was suggested in the newspapers that nurses and young professionals could move to run-down estates. We might find the yuppies moving into a badly run Labour authority. That will not bring redemption. Is this the final break with the past and with the Labour municipal housing policies that have characterised post-war Labour Governments? The Government have a duty to explain themselves. I am giving the Financial Secretary an opportunity--I know she is a decent person--to come clean, to bare all and to tell us the truth.
Mrs. Roche:
It is a pleasure--I use the word advisedly--to appear with the hon. Member for Brentwood and Ongar (Mr. Pickles) again. In future, appearing in Committee or a debate will, for me, be like seeing a performance of "Hamlet" without Rosencrantz and Guildenstern.
Mrs. Roche:
Only at the end of the play--unless one has seen the shortened version.
I am clearly going to disappoint the hon. Member for Northavon (Mr. Webb), although I think that he tabled his new clause merely to probe our intentions. He referred to a discussion with my officials on the subject. It was a useful and helpful discussion, and we thank him for coming in. We understand his expertise, and he is responsible for some of the academic work in the area.
The House will appreciate that the interaction of benefit tapers with the two tax credits produces high marginal deduction rates. That is borne out by some of the work done by the hon. Member for Northavon. However, the new tax credits do two things to help in this area. First, the more generous help that the credits give will help float more people off housing benefit--to use the words of the hon. Gentleman--as a direct result of the measures announced in the Budget. Secondly, the lower taper within the working families tax credit and the disabled persons tax credit will mean that fewer people will see high marginal deduction rates.
As the economic and fiscal strategy report made clear, the Government believe that Britain's current housing system is failing those in need. Our ambition is to modernise housing policy to make the housing market and the labour market fairer to all concerned. In his Budget statement, my right hon. Friend the Chancellor indicated that, over time, he wants the Government's better deal for work to include help with housing costs for renters and home owners going back to work.
The House will realise that personal housing support will need to be reformed gradually. The current system of housing benefit is too complicated to be integrated with the working families tax credit and the disabled persons tax credit. Even if personal housing support were
simplified, the systems for administering an element for housing costs in the new tax credits would take the Inland Revenue many years to install. Furthermore, the current structure of social rent would need to be reformed before we could move in that direction.
The Government have begun working in partnership with local authorities to develop proposals for the simplification and improvement of the existing system of housing benefit. For the future, the Government are looking at options for strengthening the link between social rents and the size, location and condition of properties. The Government will consider further reforms over the coming months, and will announce details in a Green Paper on housing policy later in the year. Of course there will be extensive consultation with all concerned.
I hope that, given what I have said, the motion will be withdrawn, but if it is pressed to a vote, I ask the House to reject it.
Mr. Webb:
I am grateful to the Financial Secretary for her generous comments, but I am not convinced that she responded to what I said. I pointed out the discrepancy between renters and home buyers, and she did not suggest anything to remedy that. In fact, the Budget took mortgage tax relief away from buyers, so the Government missed an opportunity to give low-income buyers some assistance.
The Financial Secretary said nothing to reassure me about the continuing and absurd overlap between housing benefit and the working families tax credit, to which the hon. Member for Brentwood and Ongar (Mr. Pickles) referred. She said that the structure of social rents did not allow the Government to do as we suggested, because it was a mess. I accept that it is a mess, but my proposal is that not actual rents, but an average amount for a family of a particular size and composition be matched with the working families tax credit. If people were paying over the odds, the system would not have to subsidise that.
For all those reasons, my colleagues and I feel that the new clause has merit, and we want to press the motion to a vote.
Question put, That the clause be read a Second time:--
The House divided: Ayes 39, Noes 303.
"Poorest families to be forced to move".
The Sunday Telegraph said:
"Housing benefits to be axed and council rents raised".
We understand that a Cabinet Committee--involving the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Social Security--is determined to cut the £12 billion housing benefit bill. If the Government are sufficiently ready to leak in advance their plans to national newspapers on a Sunday--and to repeat those leaks to other newspapers on a Monday--surely they should have sufficient confidence to bring those proposals to the House today so that we can assess them.
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