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Miss Begg: If compensation is such an important issue, why have the Opposition not included it in their list of requests for the Government? Similarly, the motion does not refer to the deadline, which the hon. Gentleman raised in an earlier intervention on my speech. If those issues are so important, why come up with a silly motion on the social fund, which nobody believes is credible? Why do the Opposition not make their own suggestions?
Andrew Selous: I thank the hon. Lady for her comments. One of the luxuries of being on the Back Benches is that I am not personally involved with the drawing up of Opposition motions. However, my hon. Friend the Member for Havant (Mr. Willetts) dwelt at considerable length in his excellent opening speech on
the problem of the deadline and on the question of compensation for those who are out of pocket as a result of additional charges incurred after the introduction of tax credits. It is highly relevant that we are conducting our debate today—and it is one of the reasons why my hon. Friend called for it today—because it enables us to highlight the fact that the deadline occurs at midnight tonight and that many people will lose out on months of tax credit claims by failing to submit their forms by that time.I want us to think more about the philosophy underlying tax credits. I would certainly describe myself as a one nation Tory, and many of my hon. Friends are genuinely concerned to deal with the issue of poverty and low-income families. It is a common cause across the Chamber that those issues are important. However, speaking for myself rather than for Front Benchers, I want to raise a few questions about the philosophy behind tax credits. My worry is that the measure will be widely welcomed this year and in the immediate future as a result of the extra income that it puts into our constituents' and families' pockets, without taking account of a couple of difficult philosophical issues that relate to the question.
What, for example, will be the effect on the incentives of people in work, once they realise that there is virtually nothing that they can do by their own efforts to improve their financial position? That is a huge issue, which has not been touched on tonight and does not appear in the motion. People interviewed just after the announcement of the introduction of tax credits were understandably pleased about the boost to their incomes, but they were honest enough to say that they realised that there was nothing that they could do by the result of their own efforts to improve their family's position. I worry about that, because it amounts to an additional form of dependency, which will have a great effect on incentives and the working of our economy.
I also worry about the possibilities for fraud under the scheme. When family credit was introduced—under my Government—some firms set their salaries at a low level and in some cases employers drew out considerable amounts of cash. There was good evidence of collusion between the employer and the employee to ensure that the employer paid the minimum level of wages to staff: because of the payment of tax credits, the employer could then give a cash backhander to employees. There is a genuine worry that the system will be abused on a significant scale, but we have not heard anything from the Government about the plans that they have to prevent fraud.
Miss Begg: The difference between the introduction of family credit and today is that we now have the minimum wage, which acts as a floor. One of the ways of checking whether employers are paying the minimum wage is when the Inland Revenue calculates whether the figures add up. That is how it worked for the working families tax credit. Before the minimum wage, employers could pay any amount—and often paid very low wages.
Andrew Selous: The points that I am making relate to tax credits in general and are not specific to family credit, the working families tax credit or the working tax
credit. The possibility is that unscrupulous employers, in collusion with their employees, will be able to work the system.We need only look back at the introduction of housing benefit for an example. Members on both sides of the House widely and rightly welcomed the introduction of housing benefit. No one foresaw some of the unintended results of its introduction, which are now universally recognised. They included rising rents, increased corruption and hugely escalating housing benefit bills. Unintended consequences often occur. An innovation looks good from a short-term point of view and may be done for the best of motives—unlike some Labour Members, we at least impute good motives to the Government's actions—but it may run into the same problem as housing benefit did.
Perhaps we need a more universal system that is applied regardless of savings. We should consider a universal child allowance, and there are other ways to cope with poverty in low-income families. It is good that we have considered the issues tonight. A proposal may look good now, but we may have to revisit it in a few years' time because it has not been fully thought through.
9.23 pm
Roger Casale (Wimbledon): I am grateful for the opportunity to put on record my support for an important and substantial measure that the Government have introduced, which has already benefited many thousands of my constituents. In particular, it has helped to lift my poorest constituents, especially those with families, out of poverty. Although my constituency also has many people from the professional and managerial classes, I have been struck by the wide consensus that I have found, even among the small portion of the population who are not eligible for tax credits, that they are the right thing to do.
It is true that we have had some initial teething problems in introducing the new system, but in some ways that is to be expected when a major restructuring of the welfare state is undertaken. Those problems are being, and will be, resolved. While we must never lose sight of the human dimension of the early difficulties with the administrative system and the bureaucracy—behind the statistics are real people facing real difficulties—the system, even in its early stages, is delivering enormous and substantial benefits to many millions of people. We should remember that this Government introduced the system in the teeth of widespread opposition from the Conservatives, not when the Bill was introduced but at the last election.
Annabelle Ewing: The hon. Gentleman said that teething difficulties were to be expected. If that was the case, why was the system introduced in such a way that benefits were stopped on time yet top-up payments were not received on time?
Roger Casale: I do not know whether hon. Lady made that point in an earlier contribution to the debate. I am sorry that, owing to another commitment, I have been unable to hear all the speeches. I was making the point that we should not lose sight of the enormous benefit that tax credits are already bringing to millions of people.
We are all concerned with the welfare of our constituents and we all take up, daily or weekly, the difficulties that they may face in accessing their rights and entitlements. That is something on which we can agree in a cross-party spirit, as has been said. However, we must not forget that there are grave and deep policy differences. Whereas my point of view, and that of many Labour Members, is that administrative difficulties—inasmuch as they exist—should be ironed out as quickly as possible so that everybody benefits from the new tax credit, some Opposition Members would quite like those difficulties to remain unresolved. Their agenda is to undermine support for the tax credit system and to take us back to the old ways.
Mr. Andrew Turner: Can the hon. Gentleman tell us who those Opposition Members are?
Roger Casale: Let us start with the hon. Member for Havant (Mr. Willetts), who led for the Opposition. As I pointed out earlier, in the Financial Times weekend magazine of 12 May, the hon. Gentleman commented:
- "But most of all I want an end to the ludicrous tax credit system Gordon Brown has introduced, which was a failed idea from the 1970s."
Roger Casale: I hope that the hon. Gentleman is sincere in his support for tax credits.
Dawn Primarolo: The hon. Member for Havant (Mr. Willetts) made an interesting clarification, but when the current Leader of the Opposition was the shadow Social Security spokesman he was much clearer. He said:
- "We would cut the working families tax credit."—[Official Report, 19 October 1998; Vol. 317, c. 951.]
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