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Mr. Willetts: I recall, as I quoted them, the latest figures on the number of children in households on below-average incomes, on the measure of 60 per cent. below median income. I also recall a Social Security Committee report—I do not see the right hon. Member for Birkenhead (Mr. Field) in his place—that considered what had happened to the real value of benefits to people on the lowest incomes. That report showed that it had increased significantly during our period in office.
I would happily have a longer historical debate, but I want to challenge the Government on why they have not met the target that they thought they had met. It is not just that they have failed to meet it, full stop—I am genuinely sure that the Chancellor was not trying to mislead us when he said, during the election campaign, that 1 million children had been taken out of poverty. When he said that in the election campaign and put it in the manifesto, he thought that it was true. Why did he think it was true, then, when it is clearly not true, now, on his own figures? The explanation is very important. Instead of putting all this effort into redefining the target, he ought to be thinking about why what he thought had happened has not happened.
The reason for this failure is take-up. The modelling and the evidence that the Chancellor was using, to which he refers again in his Red Book, assumes that his benefits and his new tax credits were going to enjoy 100 per cent. take-up. We all see the marvellous captions and graphs that the Treasury puts into its Red Books—some of which appear in the newspapers and on the television—showing how much better off a family will be in various circumstances. Those illustrations assume that everybody receives those benefits and credits, but they do not. They do not do so because the Chancellor has made the system so complicated, and has changed it so frequently, that we face a catastrophically low level of take-up of his pet tax credits. That is why he thought that he had taken 1 million children out of poverty when, in fact, he had not; he had taken only half a million out of poverty.
I once asked the Paymaster General—I am sorry that she is not here—a simple question:
- "To ask the Chancellor of the Exchequer how many families . . . are eligible for (i) the working families tax credit and (ii) the child care tax credit."—[Official Report, 15 November 2001; Vol. 374, c. 842W.]
I am pleased to see that both the Chancellor and the Secretary of State are present, because I must tell the Chancellor that the Department for Work and Pensions provides much better information and explicitly investigates take-up of means-tested benefits in a way that the Treasury refuses to do. One of the problems is that, as the Chancellor gradually takes over these benefits, the level of public information, which enables us to assess take-up, declines. In fact, the only material that we have is a Department for Work and Pensions research report that suggested that take-up of the working families tax credit is running at an average of 62 per cent. among all eligible families. That is 10 per cent. lower than the take-up of the old family credit. It is running at an incredibly low 31 per cent. among eligible dual-earner couples, and at 49 per cent. among all eligible couples. In other words, fewer than half the couples eligible for the working families tax credit actually receive it. That is why the Chancellor thought that he had taken 1 million children out of poverty when he had not.
The gap in the Chancellor's strategy is that he has nothing to say about how he will increase take-up, apart from spending ever more money on the advertising budget. However, the real problem is not that the advertising budget is too low but the complexity and confusion for which he is responsible. He has imposed on families an incredibly complicated set of changes that go right back to 1999. That is when he proudly announced the working families tax credit—I now quote the normally sober pages of the Financial Times—assisted by
- "Dennis the Menace, Postman Pat and a Womble."
Between 1999 and 2003, we will have had the following: the abolition of family credit, the introduction of the working families tax credit, the introduction of the child care tax credit, the abolition of the married couples allowance, the introduction of an employment credit, the introduction of the children's tax credit, the introduction of a baby tax credit, the abolition of the working families tax credit, the abolition of the children's tax credit, the abolition of the baby tax credit, the introduction of a child tax credit, the abolition of the employment credit and the introduction of a working tax credit. That is what the Chancellor will have done between 1999 and 2003. It averages out as a new tax credit for families every six months.
Helen Southworth (Warrington, South): That is good, supporting families.
Mr. Willetts: The hon. Lady says that it is good, but how many of her constituents can find their way through the system that the Chancellor has created? That is why he has the problem of low take-up.
Further complexity was buried in the Red Book published yesterday. We thought that the changes would happen in April 2003, but that is no longer the case. Instead, the planned start is April 2003, and I hope that Treasury Ministers will give us a bit more detail about how the system is supposed to work. However, the child tax credit is no longer being introduced in one stage in 2003. Instead, we will have a process of migration whereby some people move on to the child tax credit in
October 2003 and others do not move on to it until April 2004. The Chancellor will be running two systems in 2003–04.At one point, the pension credit was supposed to be introduced in April 2003, but that will now happen in October 2003. The Child Support Agency was supposed to be introducing its reforms in April of this year—before that, it was supposed to be at the end of 2001—but those changes have been deferred with no new date given.
I do not know why the Government drove information technology experts abroad with IR35, because they will need them to introduce all the changes. The danger is that, between 2002 and 2004, we shall have nothing less than a total shambles as the Government try to introduce all the new schemes. The pension credit will be on the old computer and then it will be on a new one. We do not have a date for the Child Support Agency changes and the child tax credit will be phased in over three stages. Our constituents and poor people are expected to find their way through the system so that they can enjoy the increases in their incomes that Ministers have boasted about. The danger is that people will not be able to find their way through the maze that Ministers have created. That is the problem with their record.
Mr. Connarty: I can give the hon. Gentleman a figure. Some 1,881 families in my constituency will receive the increase in the working families tax credit that is coming in. He seemed to be suggesting—although he appeared to lose his way—that failures resulted from people's failure to take up the credit. However, he and his colleagues need to do what I am trying to do. Everyone who needs advice from me or from local authorities should be able to receive it so that they can fill in the forms correctly and take up the tax credits to which they are entitled. Will he assure me that he will campaign among his colleagues so that they will provide similar advice, thereby ensuring that their constituents receive the credits that the Chancellor is offering them? Or will the hon. Gentleman leave people in poverty because it suits his political ends?
Mr. Willetts: Of course I want people to receive the benefits to which they are legally entitled. I urge people to take up the working families tax credit. When that is abolished, as it will be in less than a year, and reappears in a different form, I will urge them to take that up as well. I will even put in a bit of effort to try to explain the Chancellor's changes. I ask the hon. Gentleman to do something in return, however. Will he table a parliamentary question that does not just ask how many of his constituents receive the working families tax credit but asks how many are eligible for it? Will he then come back and tell the House what he thinks about the take-up of that credit? We can then have a serious debate about the problem that I am trying to draw to the attention of the House.
The Chancellor has created a structure that is so complicated that we have a problem with take-up. If it were just a disaster for the welfare and social security system, we might be able to write it off as a tragic mistake. However, the same problem appears in a completely different area of policy that is the Chancellor's other great preoccupation. He is almost as interested in productivity as he is in creating new tax credits.
Lynne Jones: I do not know whether this will surprise the hon. Gentleman, but I agree with his concerns about
the complexities of the tax credits. But he has not said what he would do to increase work incentives and to assist poor families. Does he agree that it would be better to put additional resources into substantially increasing child benefit and to claw the money back from better-off families through a progressive tax system?
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