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Mr. Webb: Surely the Government have been very consistent in their fraud.
Mr. Pickles: I got carried away, and the hon. Gentleman is quite right to pick me up. I am so disgusted by the Government's lack of attention to fraud and to recovering the money that is robbed from taxpayers that I got emotionally carried away. I am grateful to the hon. Gentleman for reminding me of that.
The reason why the Paymaster General suggests that the Liberal Democrats are on our side is that the Bill is such an appalling measure. The Government have simply taken the key elements of the previous Conservative Government's measures, made matters worse, put a spin on them, put them in a different package and then pretended that something has happened.
There can be no excuse for what has happened because we had the benefit of a Select Committee report. Select Committees have been the subject of much comment in the Chamber in recent weeks. I have in front of me the Select Committee report about tax and benefits and implementing tax credits. So far as I can see, it has not been nobbled: it seems to be a good, hard report. If the Government had taken heed of that document, we would not be faced with this mess.
There was a time when the Government could have pulled back. It is clear from the evidence that, until quite late in their deliberations, the Government thought that changes could be made through the tax code. If the Government had chosen that option, I do not think our opposition would be quite so strong. We would still have many problems with the legislation, but I suspect that we could be much more helpful. As soon as it became clear to the Select Committee that there could be no regulation through the tax code, the Government should have abandoned the whole idea. However, they could not abandon the measure because it is a flagship.
Hon. Members will remember that I referred to some concerns about the Bill expressed by the Minister of Agriculture, Fisheries and Food and the Secretary of State for Trade and Industry. An unnamed Minister talked about the Chancellor and his flagship in The Sunday Telegraph, and said:
From that point on, tax credits became an administrative burden on business and embodied the pursuit of a social agenda through stealth. Thanks to the Chancellor, the low paid will receive extra benefits in their pay packets so that they can pay extra tax. The cost--an extra £1.5 billion--will be felt further up the income scale.
I do not believe that that was the Government's intention. I was not invited to the Labour party gathering at Church house--I did not need to be there as the Prime Minister's comments on that occasion have been well reported. He said:
The Bill is about an increase in dependency by pushing means testing further and by catching people firmly in the means test dependency straitjacket--a full metal jacket, if you like.
Perversely, the proposals' effect on marginal tax rates may create a disincentive to work. According to the Institute for Fiscal Studies, almost 1 million men and women in two-earner couples will find that their financial returns from employment will fall directly as a result of the working families tax credit.
We have dealt at length with stigma. We understand that family credit is popular and virtually stigma-free, and has a high take-up rate. It is viewed by many as an extension of child benefit. As interventions on the Paymaster General have demonstrated, there will be greater knowledge in the workplace about who is claiming tax credits. On Second Reading and in Committee, there seemed to be a misunderstanding of how family credit worked. We were repeatedly assured by Ministers that there would be no difference whatsoever between family credit and working families tax credit concerning confidentiality in the workplace.
As my hon. Friend the Member for Bognor Regis and Littlehampton will recall, we clearly demonstrated that once an employment record has been established, pay-slips are acceptable under family credit, but that will not be the case under working families tax credit. Every six months, employers will be reminded that their employees are beneficiaries of working families tax credit. That will undoubtedly increase stigma.
As we were beginning to realise during earlier consideration of amendments, the proposal will be intrusive. Employers will be placed, without wanting to be, in the same position of patronage as 19th-century mill owners in that they will know exactly what is going on in their employees' families. Employers and senior staff will know how many children there are in those families, who is sleeping with whom, who is about to get divorced, who is getting another job, who is engaged and who is moonlighting. The Chamber should not impose obligations on employers or invade the privacy of our citizens.
We know that the measure will impose on businesses set-up costs of £43 million a year, and recurring costs of £103 million a year. There are many reasons to oppose the Bill. Money will be frittered away further up the
income scale. People on higher incomes will be pulled down into dependency. People will be stigmatised. There will be an enormous increase in the opportunity to commit fraud. The right hon. Member for Birkenhead (Mr. Field) said that the measure will offer a huge bonus to dishonesty. It will strengthen employers' hand over working people. It will draw employers into a web of dishonesty and corruption and reward those who pay low wages.
Mrs. Louise Ellman (Liverpool, Riverside):
The Bill must be supported because it is a significant step towards alleviating poverty by giving help to working families on low incomes in a way that removes stigma. The first and foremost thing to note about the Bill is that it will assist more people. In fact, 400,000 additional families in need with children will be assisted by it.
The Bill is part of an important package of help which increases child benefit by record amounts and to record levels, and which introduces a national minimum wage. Taken together, that package means that there is now, or there will be, a guarantee of a minimum income to working families of at least £200 a week, and no family earning less than £235 a week will have to pay tax. The package is a significant move away from the disgrace of families working for low pay being required to pay tax.
Child care tax credit is an important part of the Bill. It delivers real and significant benefits of up to £100 a week for the first child and up to £150 for two children, and more than that. These elements put together--significant cash support for families with low income and significant assistance with child care--mean that the Bill will be delivering real and significant help to those who need it most. Indeed, it has been calculated that the average family receiving support through these measures will be about £17 a week better off. That is real assistance which will make a real difference.
According to the Library, it is estimated that there will be an increase in take-up by families of about 27 per cent., and for disabled people an increase of between 10 and 15 per cent. That is extremely important in terms of increased benefits for those already receiving them at a lower level, and important for those who are not receiving benefit now but who will be able to receive their credits through the new system.
The method of payment is also important and part of the new move by the Government to recognise support for those in need as a matter of right and to try to remove stigma as far as it is possible to do so. That is what lies behind the policy direction in favour of tax credits rather than benefit.
The suggestion that there should be tax credits comes from the report on tax and benefit systems by the tax and benefits task force, which was chaired by Martin Taylor
and which considered these matters in depth. The decision to go ahead with tax credits in this instance stemmed from that report.
It is important that work be rewarded, that it be seen to pay and that it does pay. The linking of credit with work, particularly work that is lower paid, is extremely important. It is important, too, that the minimum wage is part of the package. I note that the Conservatives opposed the minimum wage as much as they oppose the tax credit system.
I have listened this evening, and before in Committee, to the views expressed by Opposition Members. I say to the Conservatives that I rather think that they protest too much. I feel that they shed crocodile tears when they express their concerns about how the scheme will be implemented and how they think it will make things worse, along with their concerns for business. That is rather hard to swallow from the Conservative party, which when in government cut the standard of living of those who needed help most and rewarded most those who needed help least.
Conservatives tell us that they have decided to repent of their past. Perhaps their statements now, and even those before their public pronouncements of repentance in Committee, are part of their effort to reconstruct the past and become new people and a new party. I doubt very much whether they will be successful in that effort.
The Conservatives should remember the Lawson Budget of 1988--the famous tax-cutting Budget--as a result of which 50 per cent. of the tax cuts went to the richest 10 per cent. of the population, and compare it with what has happened in the first three Budgets of the Labour Government. The main beneficiaries have been the bottom 5 per cent. of the population--a significant difference which, perhaps, marks out the two Governments.
The Liberal Democrats seem to have got caught up in their own cleverness. It was not long ago that the attempt to unify tax and benefit was a Liberal Democrat policy. It was seen as the way forward, by removing stigma from giving support to those who needed it. However, as soon as there is a proposal to move forward on tax credits, the Liberal Democrats, so anxious to find something wrong with almost everything that the Government do, align themselves with the Conservative party to vote against it. Not only are the Liberal Democrats not to be trusted; they cannot see where they are heading.
The Bill is greatly to be welcomed. It is part of a significant package of support for those who need it most, especially working families on low pay. It rewards work for low pay and provides support in a way that is stigma-free, will increase up-take and brings benefit in the form of credits that translate into cash. It provides support for child care in a way that will change people's lives for the better.
I hope that the Bill is the first in a series of measures that will be introduced in future years to show the Government's concern for those who are struggling, often against the odds, to earn their living and to build a good life for their family. We must support the families who struggle day by day in work to make life better for themselves and their children.
"The trouble is Gordon has got to realise that even flagships have to obey the rules of the sea."
It is painful to me to hear the Chancellor referred to so discourteously behind his back, but it is a sentiment which I endorse entirely.
"I have asked the Ministers at the Department of Social Security to look in detail at how we can make far-reaching reforms that will tackle insecurity and poverty as well as reducing social security bills."
Yet Treasury and Social Security Ministers are running amok and reneging on the Prime Minister's promise. The child care element will ensure that social security bills rocket. Who will benefit? It is likely that there will be no significant increase in the job market. That is the reported view of both the Bank of England and the Institute for Fiscal Studies--two very respected organisations. Julian McCrae, an analyst with the IFS, has said:
"in terms of cost per job it does not look very sensible."
I am sure that he is right.
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