House of Commons Hansard Debates for 17 Mar 1999 (pt 44)

9.18 pm

Mr. Webb: I beg to move,

That this House, whilst welcoming additional money for lower paid workers and for disabled people, declines to give a Third Reading to the Tax Credits Bill because it considers the proposed Working Families' Tax Credit to represent a highly inefficient way of spending public money; believes that the Government has provided no evidence that paying the credit through the paypacket will bring benefits commensurate with the £100 million annual cost which will be imposed on businesses; believes that payment through the paypacket will adversely affect recipients at times of family or job change and will increase the scope for fraud; believes that the Bill represents a missed opportunity to tackle the particular incentive problems faced by low-paid homebuyers; and believes that the proposed childcare tax credit is poorly targeted.

I shall begin by responding to some of the points made by the hon. Member for Liverpool, Riverside (Mrs. Ellman). She said that in the past the Liberal Democrats and predecessor parties had supported tax credit schemes. Indeed we have, and if we were offered one, we might well support it.

However, the Government's proposal, far from being a tax credit, is not even integrated into the PAYE tax code. It is simply social security as a line on a pay slip. It is in no sense integration of the income tax and social security systems. It is not a genuine tax credit scheme at all. The Government are famous for using labels that bear no relation to reality. That is why we oppose the Bill.

The hon. Lady opposed the Lawson Budget of 1988. She seemed to object to a 40p top rate of income tax and a 25p standard rate of income tax. Are we to infer that she will vote against the Chancellor next year, when he cuts the standard rate to 22p? Are we to infer that she has had a private audience with him, in which she told him that 40 per cent. is too low and that she wants it raised to 60 per cent., as it was before the 1988 Budget? I think not. The hon. Lady makes a cheap point about 1988, but has no desire to return to it.

Mrs. Ellman: I am surprised that the hon. Gentleman thinks that it was a cheap point to emphasise that Conservative Budgets gave most to those who were already the best-off.

Mr. Webb: I think that the hon. Lady was saying that there is something wrong with giving large tax cuts to those on the highest incomes, which is what the 1988 Budget did, but she has no proposals to reverse those measures.

I had hoped that the reasoned amendment would get me off the hook with my colleagues, but I have had some complaints. They have asked, "Why do we have to keep voting with the Tories all the time?" I said, "You don't have to worry. At 10 o'clock I am sure that we will be

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able to sort that out for you." I was rather taken aback, therefore, when the hon. Member for Brentwood and Ongar (Mr. Pickles) said that we will renew that close companionship at 10 o'clock. None the less, it is very welcome.

We covered some specific areas on Report, but in this more general discussion of the Bill I want to raise no fewer than half a dozen issues that remain outstanding following our deliberations and on which the Bill falls down. First, and most important, are the Bill's effects on children. All the rhetoric assumes that the Bill is good for children, but it will take money away from mothers and give it to fathers.

The Government keep assuring us that, somehow, that does not matter, but they have blown the gaff, for two reasons. First, I knew that if I tabled a question to the Treasury, I would receive a holding answer and then a further, rather evasive answer about a month later. Instead, I tabled a question to the Department of Social Security, which tends to answer questions. I am sure that it will get into trouble for that and will soon change things.

I asked why there is a presumption that child benefit will be paid to mothers rather than to fathers. The answer was that

"where couples live at the same address a wife has priority over a husband".--[Official Report, 12 March 1999; Vol. 327, c. 392.]

Why does the Department of Social Security presume that, in a couple, the wife should have priority over the husband? Because it knows that money is more likely to get through to the child if it goes to the mother. If that Department thinks that it is better for money to go to mothers rather than to fathers, why does not the Treasury think that? There is some disagreement, I feel--but it gets worse.

Secondly, I was browsing through the Red Book, as one does. After browsing for some while and reaching page 68, I came across a rather astonishing diagnosis of where the Government are heading in the medium term with their tax credit strategy. They are moving from the rather messy system that they propose, involving child tax credits, child care tax credits, child benefit and the working families tax credit--no fewer than four different mechanisms for supporting low-paid families--to what they describe as a single, seamless system. That system is called--wait for it--an integrated child credit--but it gets worse.

The Red Book states:

"Such an integrated child credit, for those in and out of work, could be paid to the main carer, complemented by an employment tax credit paid through the wage packet to working households, with or without children."

In other words, the Government's big vision for the future is a world in which all the support for children goes not through the wage packet, but to the "main carer", which is as it should be. However, if that is where they are heading, and if that is desirable and for the benefit of children, why do we have to go through the messy business of taking the money from the mothers--and, hence, from the children--before giving it back to them?