| Previous Section | Index | Home Page |
10 Apr 2003 : Column 460—continued
Kali Mountford: Will the hon. Gentleman give way?
Mr. Willetts: I have given way to the hon. Lady once, and I would like to make progress.
I am sure that the Chancellor will want to touch on tax credits during the debate—I hope that he will—because he loves his tax credits. I shall begin with some common ground between us: it is important to boost the incomes of people with low-paid jobs. If we are to have a flexible labour market, people, and especially those with family responsibilities, might accept wages on which we could not expect a family to maintain itself in a decent society. In such circumstances, it is right to top up families' incomes so that they are higher than their earnings. That is a shared principle that goes back to the early 1970s when Keith Joseph introduced the family income supplement. The principle was reflected in our family credit and, most recently, in the working families tax credit. I disagreed with the Chancellor about aspects of the working families tax credit. For example, I regretted the way in which he changed the system of payment so that rather than delivering the payment as a benefit to the parent—possibly at home—it was delivered via the pay packet. That was completely unnecessary, and the Financial Secretary and the Paymaster General probably persuaded him to see sense and return to the pre-2000 regime of delivering it as a benefit, which I welcome.
I am rather sorry that the working families tax credit disappeared at the end of last week because the new system is even worse than the one that it replaced. The new system is far more complicated and it is causing considerable distress to people throughout the country. If the Secretary of State for Work and Pensions or the Chancellor wish to intervene on this point, I would appreciate it. I talked to people at a citizen's advice bureau only last week and they told me about problems encountered by people who received the working families tax credit until last week and who will now need the child tax credit to form a significant element of their income. However, unless they had submitted the claim form by 31 January—I think that that was the deadline—there was absolutely no guarantee that the Inland Revenue could deliver the child tax credit. That will affect low-paid families. As the Chancellor has transferred responsibility from the Department for Work and Pensions—formerly the Department of Social Security—which had at least some understanding
of the issues, to the Inland Revenue, he is running the significant risk of leaving hundreds of thousands of families in considerable financial distress.
Mr. Kenneth Clarke (Rushcliffe): Is my hon. Friend aware that I asked my office to contact the Inland Revenue this morning on behalf of one of my constituents who applied in October to transfer her working families tax credit to child tax credit? She received no response to her application and was given an explanation that many applications had been lost in a warehouse. All inquiries to the Inland Revenue produced no indication of when child tax credit would be received by her or the many other poor families to whom the Chancellor boasts the credit will give such assistance.
Mr. Willetts: My right hon. and learned Friend is absolutely right. That is a serious problem that is arising throughout the country for a simple reason: the Inland Revenue uses annual returns of income—it works on an annual basis. People fill in tax returns, or are taxed using pay-as-you-earn, and necessary adjustments are made at the end of the year. The Department for Work and Pensions helps poor people who need money immediately—week in, week out. People on low pay need their income topped up and boosted this week. I do not believe that the Inland Revenue understood the need to get the money out promptly every week or that the child tax credit needed to be delivered to families with low earnings this week because they would otherwise have insufficient money to feed their children and heat their houses.
The Chancellor has decided—it is entirely his responsibility—that the Inland Revenue must operate as an alternative benefits agency. He might not believe in contestability of public services when it comes to health or education, but he certainly does when it comes to delivering benefits. The Inland Revenue now has responsibility to ensure that low-paid families receive a regular income. This is the first week in which it has had such responsibility and the indications are not good. They show that we will all have constituents whose families are not receiving the money that they expect and need. I know that the Secretary of State for Work and Pensions has shed responsibility for that, but if he can offer any comfort to the thousands of families who face such a considerable worry by tackling the problem, that would be welcomed by not only Conservative Members, but people struggling in citizen's advice bureaux throughout the country and hon. Members of all parties who have constituents with problems.
On tax credits, the Chancellor has been his own worst enemy. He has constructed a system that is so complicated and confusing that many people are unable to claim the benefits to which they are entitled. If everyone had claimed the means-tested benefits to which they were entitled, an extra £5 billion of benefits and tax credits would be paid each year to families and pensioners in the UK. Had that £5 billion a year been paid to them, it would have taken the Chancellor's public expenditure and borrowing limits above the 3 per cent. rule that he set himself. It is the final irony of this Chancellor's record that it is only the failure of his tax
credits and means-tested benefits to reach the people who need them that has enabled him to keep his public expenditure plans within those rules. That is why we oppose the Budget and the judgments behind it.3.44 pm
The Secretary of State for Work and Pensions (Mr. Andrew Smith): This Budget is for a Britain in which flexibility and fairness, enterprise and full employment go hand in hand. It champions economic strength and social justice, building on all that we have done to ensure macro-economic stability and to deliver high and stable growth.
I want to focus on our aims of greater labour market flexibility, full employment in every region and making work pay, and on the extra measures that we are taking to help pensioners and to build a fairer society for all. First, however, let me acknowledge the albeit tepid welcome that the hon. Member for Havant (Mr. Willetts) managed to give to at least one or two of our measures. In so far as there is a shared aspiration on asset-based welfare or asset-based democracy, there is also a clear difference. He may talk about it and give a bit of a welcome for the child trust fund, but Labour is delivering asset-based democracy with 1.1 million more homeowners and net household wealth up 40 per cent. since we came into office. The difference is that he can talk, but we can deliver.
If we look at the Budget in the round, it is clear that because of the tough decisions that Labour has taken over the past six years—making the Bank of England independent, bringing public finances under control—Britain is better placed than other countries, and better placed than it was in the past, to withstand the global downturn and to benefit when world economic recovery begins. We have the lowest inflation for 30 years, the lowest interest rates for 40 years and the highest levels of employment in our history.
The hon. Member for Havant made light of welfare to work and matching rights and responsibilities, accusing us of big headlines and little delivery. When it comes to welfare to work and progress to full employment, surely there is no bigger headline than the 1.5 million extra people who are in jobs thanks to a Labour Government and our welfare-to-work initiatives. Those achievements did not happen by chance. They certainly did not happen because we followed the advice of those on the Conservative Front Bench. After all, the Conservatives opposed Bank of England independence, the fiscal rules, the new deal, public investment and even the working families tax credit, the loss of which the hon. Gentleman lamented. It was clear that they have learned nothing. He and his colleagues should ask themselves why, when they were in charge in the early 1980s and early 1990s, Britain was first into the downturn and suffered the most and longest. When we have produced growth in every quarter for six years, why did they twice have the British economy in recession for five quarters in a row?
Mr. Andrew Hunter (Basingstoke): Some commentators said today that the greater part of job creation in the past 12 months has been in the public sector, not the wealth-creating private sector. The
private sector continues to suffer from belt-tightening and that trend looks set to continue. Will the right hon. Gentleman comment on that?
Mr. Smith: If the hon. Gentleman is saying that we should not be employing more teachers, more police officers, more nurses or more doctors, then he is confirming the shadow Chief Secretary's agenda of 20 per cent. cuts in public spending. The detailed figures relating to the 1.5 million extra jobs now in the economy show that whereas about 400,000 are public sector jobs, more than 1 million of the extra jobs that we have generated are in the private sector. The difference between Labour in government and the Conservatives in government is that, thanks to their mismanagement of the economy and the depth of those recessions, they cut not only public sector employment so that hospitals, schools and policing suffered, but private sector employment, too, so that unemployment rose to more than 3 million, which was enormously wasteful to individuals and to our society. I make no apology for employing more public servants to deliver front-line public services, but the success of our economic policies has resulted in more employment in the private sector as well.
Conservative Members should ask themselves why their Government had interest rates at more than 15 per cent. for a year, whereas we have them at 3¾ per cent. Whereas we have inflation at 2.5 per cent., they had inflation at 20 per cent. in the 1980s and 10 per cent. in the 1990s. We have a cumulative current surplus over the cycle. Although, this year, net borrowing is projected to be £27 billion or 2.1 per cent. of GDP, borrowing under the Conservatives reached a high of 8 per cent. of GDP—in today's terms, £83 billion of borrowing—in just one year. The hon. Member for Havant talked about the legacy the Conservatives bequeathed to us, but they left us debt standing at 44 per cent. of GDP. Yesterday's Budget stabilises debt below 34 per cent. of GDP, as far as the forecasts go—
| Next Section
| Index | Home Page |