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6.45 pm
Mr. Webb: It is interesting to follow such a well-informed and thoughtful contribution from the hon. Member for Dagenham (Jon Cruddas). It is a shame, in many ways, that we did not have the benefit of those and other insights from him in Committee. That is perhaps a shortcoming of our proceedings.
On Second Reading, we gave a broad welcome to the Bill's aim to streamline and focus extra resources on families with children. We have not changed our position. As the Minister said, the Committee debates were instructive, and hon. Members from both sides contributed thoughtfully and helpfully. The Committee process highlighted the difficulty of debating such Bills in the absence even of draft regulations. I hope that the import of what the Minister said a few moments ago is that their lordships will have sight of the regulations early in their deliberations. I am reassured by her nodding in response. That will make a big difference.
It is important to put on record one or two reservations that survived the Committee's scrutiny. As the Minister is aware, my principal reservation is about what the working tax credit is supposed to achieve, as distinct from other support for low-income childless people. I tabled two written questions to pick up on the Government's two
justifications for the strategy. Both were for answer today and they were submitted in good time, but neither has been answered.One question relates to the Government's statement that poverty also affects childless people—they cite 1 million childless people in poverty. I simply asked how many of those people would be entitled to the working tax credit. In other words, how many are over 25 and working 30 hours a week? Very few, I suspect, but answer came there none. The argument that we need the working tax credit to relieve poverty is open to question.
I asked about the incentive argument—an unemployment trap exists because a childless person who takes low-paid work does not get much reward. Clearly, there is not much reward for a renter, but there is a much greater incentive for a person whose mortgage is not paid for by work and whose help is not taken away when he gets a job. The anti-poverty and unemployment trap arguments for the strategy are weak and it is regrettable that we did not discuss the meat of that in Committee.
The practicalities for our constituents of claiming these tax credits still worry me considerably. If authorities are to decide whether they will be assessed on this year's income or last year's, that requires an estimate of this year's income. Therefore, if 1 million-plus people must estimate income and if some get that or their hours wrong, there could be serious over-payment problems. Without being patronising, some members of that client group are simply not used to such calculations, so we may be storing up troubles ahead.
The strategy is a difficult mix of the tax and benefits systems. In some cases, the benefit route has been chosen, as in the example of joint assessment, while in others the tax route has been taken. In particular, the appeals process, which we raised briefly, still gives me real cause for concern. I am worried that, instead of appeals going through the effective tax credit appeal procedure, a whole new tax appeal process will be created.
We welcome the additional support for families with children and the attempt at streamlining, so we support the Bill.
6.48 pm
David Cairns: I am pleased to speak in this debate. Unfortunately, I could not take part in the discussions on Second Reading or in Committee. However, I have followed the debate in the Official Report, and it has been fascinating, instructive and, of necessity, very technical. It is important to step back from the technicality and consider the broader picture of the range of Government strategies aimed at alleviating poverty and making work pay for those who are in work but, for whatever reason, inadequately remunerated for it.
The Government's commitment to poverty alleviation is strengthened by the Bill, which builds on the success of the working families tax credit, which in turn currently benefits 1.3 million families, including 1,893 families in my constituency. That is a large number in what is, even before the boundary changes, a relatively small constituency. Across Scotland, 119,000 families are benefiting in a very direct way from the measures.
Incidentally, it is a disappointment to me that no member of the Scottish National party, which is alleged to stand for Scotland, has sought to take part in or even
be present at most of what is an extremely important debate for Scotland. Now I shall move on, before I am called to order.We have heard about the minimum wage, the children's tax credit and the increases in child benefit, but no one has mentioned another important element in the strategy—the Jobcentre Plus initiative. I thought that my hon. Friend the Member for Dagenham (Jon Cruddas) might mention it, but perhaps time constraints got in the way. In my district authority alone, £3 million has been spent on modernising jobcentres, giving them excellent computer connections and making them better and friendlier places that can help people to move from welfare into work. The programme has been tremendously important throughout the country.
It was said on Second Reading and in Committee that the fact that we are introducing this measure to build on the working families tax credit is an admission that we got it wrong. That is baffling. The entire history of the welfare state—certainly the modern welfare state—is that measures are introduced and the world moves on, as my hon. Friend the Member for Wimbledon (Roger Casale) so tellingly said, so that we have continually to refine and improve on our systems. I hope that Ministers will not rest on their laurels and that they are already examining what further improvements can be made five or six years down the line. I am sure that they are.
It was said of Beveridge, perhaps wrongly, that he believed that unemployment, or idleness, was the root cause of poverty. Perhaps there was too much emphasis in the past on simply getting people into work and off benefits, with the assumption that they would automatically stop being poor. We know from constituency experience that that is not the case, and we need tailored programmes for people who are in work but remain poor.
I urge Ministers not to retreat one inch from the principle of delivering our programmes through the wage packet and the good offices of the Inland Revenue. We have had a good debate about the comparative stigma attached to the benefit book or the Inland Revenue approach, and I take on board the sincere points that have been made, but people in receipt of the working families tax credit who come to my surgery are very grateful for what they get and they want to explain all their circumstances to ensure that they can claim everything to which they are entitled. Stigma is not quite the issue that Opposition Members would have us believe.
There are undoubted benefits in incentivising work and allowing people to look at their pay slip at the end of the month and say, "I earned that by my own endeavours, by being disciplined and getting out of bed in the morning." That is a positive gain, and I hope that the blandishments to revert to a benefit book approach will be rejected.
We need only consider the difference in take-up between the working families tax credit and the systems that it replaced—family credit and so on—let alone the opportunities for fraud that the benefit book system introduced. If some of the amendments that we discussed earlier had been accepted, employers would have been printing their own order books and distributing them to their employees, and there would have been a great risk of fraud.
We have heard some criticism about a lack of flexibility with regard to changing circumstances; the hon. Member for Northavon (Mr. Webb) made some good points on that subject. It is true that the situation must be monitored closely, and the system must react quickly to people's changing circumstances—but that applies to the current system, including the benefits system, too.
A classic example, of which all hon. Members will be aware, is the position of school cleaners, who work fewer hours in the summer but get paid the same because their wages are aggregated and averaged over the year. I had a constituency case recently involving a school cleaner whose benefit entitlement was changed over the few months of the summer when she was working fewer hours. I am thankful to say that we got a result fairly quickly, so there is flexibility in the current system. It is not perfect, however; no system would be, and the hon. Gentleman was right to raise those issues. It is a flawed assumption that the current system is flexible enough. It must be improved.
Some hon. Members have talked about stigma, but one positive change that has not been mentioned on Third Reading so far is the fact that the disabled person's tax credit will now be focused on the working tax credit. There will be a focus on the work that disabled people do, by their own endeavour and efforts, and they will get the rewards of being in work. That is a positive step, and has been welcomed by those who represent disabled people. They are not being patronised or getting a handout for being disabled; the focus is on the work that they do, not who they are.
Much has been said about the effects on businesses. My hon. Friend the Paymaster General was too modest, in that she did not explain everything that the Government have done for business. That gives me the opportunity to mention that under the Labour Government we have the lowest inflation in Europe, the lowest interest rates in 30 years, favourable tax regimes for capital investment, the lowest corporation tax in many years for larger businesses—it is down from 33 to 30 per cent.—favourable regimes for research and development, and 1 million more people in work today than when we came to power in 1997. We must balance what some may call the burdens on business with the tremendous benefit to business of having a Labour Government who are friendly to business and understand and reflect its needs.
The Bill will also affect the work of the Inland Revenue, where there is a quiet revolution under way. If hon. Members have not been to their regional office lately to talk to the people who work there, I recommend that they go. North of the border, we were fortunate to be invited by the Minister of State, Scotland Office to meet the Scottish chief executive of the Inland Revenue, and we were told that as a direct result of the Bill, the work of calculating, assessing and collecting taxes will be a minority part of the Inland Revenue's business by 2003. That is a big change from the position a few years ago.
With its work on integrated tax credits, making sure that businesses comply with the minimum wage, administering student loans and so on, the Inland Revenue is undergoing a quiet revolution, and it is to be commended. When I have spoken to the people there I have been tremendously impressed by their vigour and their zeal for that approach to their work. They realise that there is a change in attitude towards them, because they are no longer seen as the bad guys of the piece but as
people doing something positive. The Inland Revenue now has a much more business-oriented approach. It is proactive, going out to businesses to explain the integrated tax credits and helping them comply with the new arrangements.On Second Reading the Paymaster General said:
- "By the mid-1990s, the United Kingdom had the highest rate of relative poverty in the European Union and the highest proportion of children living in workless households."—[Official Report, 10 December 2001; Vol. 376, c. 598.]
Bill accordingly read the Third time, and passed.
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