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Mr. Willetts: Let me make it absolutely clear in response to that sedentary remark that we are not proposing to take away from pensioners the winter fuel payment or what was announced on council tax. We endorse those policies, but we will in addition increase the value of the basic state pension and help pensioners with their council tax bills. Our proposals will stick with pensioners year after year.

Mr. Darling: The hon. Gentleman is telling us that he hopes to do more for pensioners, so let me come back to the shadow Chancellor's fascinating speech. The next paragraph is as revealing as the previous one that I mentioned. He said:

How, then, is the hon. Gentleman going to do all that he says he will under those "tough constraints"? His difficulty is that he does not have the money to do what he wants to do, and what the shadow Chancellor said rather bears that out.

Mr. Willetts: We have set out clearly how we will finance our pension proposals, and I am happy to debate them with Ministers. We have said that we will abolish the new deal for young people and other new deal programmes, which we believe are ineffective. That is why I pointed out that the number of young people who are not studying, working or training is higher than when Labour came to office in 1997. The new deal is not working, and the Government are failing to make any progress on bringing down unemployment.
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I shall refer to Labour Market Trends of December 2004 and quote the statisticians from the Office for National Statistics, who argued that

For all the huffing and puffing, all the welfare to work schemes, tough work-focused interviews and changes to the welfare system, all we have had in the past five years is an increase in employment growth essentially in line with trend. That is all that the Government have been able to achieve. We believe that we can do better by introducing programmes that are much more effective than the new deal.

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): Is my hon. Friend aware of Blair's forgotten millions? There are 1.1 million 16 to 24-year-olds who are neither in full-time education nor in work. Is not that a shocking waste of the energy and talent of some of the youngsters in this country?

Mr. Willetts: My hon. Friend is quite right. We now have one of the most extraordinary pieces of evidence about how serious the problem is: there are now more young people under 25 on incapacity benefit than on the new deal. Sadly, the figures went up yet again in yesterday's statistics, and there are now more than 160,000 young people under 25 on incapacity benefit—an increase of more than 50 per cent. since 1997. We know what has happened: many of these people are now moving off the new deal on to incapacity benefit, so the new deal has become a revolving door to being on benefits, not off them.

I want to question Treasury Ministers on what they say about tax credits. Once again, we need to look at the small print in order to establish the reality of what is being proposed. Page 193 of the Red Book reveals that the family element of the child tax credit is frozen for a further year at £535. That means no increase in the support that most families get from the tax credit system. The increase is in the child element of the child tax credit, which is means-tested, so the majority of families will not be helped. Will the Chancellor confirm, despite what he said yesterday, that of the 4.25 million families receiving child tax credit, about a half—more than 2 million—will receive only the family element and therefore no assistance? The Chancellor is putting his money into complicated means tests, not into the general payment.

The Chancellor sets great store by the child tax credit, but I hope that we will hear from the Minister who is responsible for the system something about what is really going on with tax credits. [Interruption.] Many families have found themselves in financial distress, after being chased—[Interruption.]

Mr. Deputy Speaker (Sir Michael Lord): Order. Let me make it clear to Government Front Benchers that if they want to intervene, they should stand up and do so in the customary way. The continual chuntering is not helpful.
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Mr. Willetts: I would welcome the Chancellor telling us about the child tax credit. I believe that its implementation is one of the main causes of financial distress to many families in our country.

Mr. Darling: Is the hon. Gentleman for or against the tax credits?

Mr. Willetts: We are not proposing to abolish the child tax credit, but we have a sensible proposal to tackle the problem. First, I would like to describe the problem briefly, and then I will tell the Chancellor and the Secretary of State how we propose to tackle it. The problem is that many families now find themselves in great financial distress because of the way in which the Inland Revenue first overpaid tax credits and subsequently tried to recover them. That is the problem, and if the Chancellor were at all concerned about the reality of the lives of many British families, he would do something about it.

I received on my desk only this week a report by One Parent Families on the new tax credit system. Let me quote the foreword by the chief executive of that organisation, who argued that the

For most of us in our surgeries over the past few weeks, one of the top five problems has been families who were overpaid tax credits, often through no fault of their own, now facing rates of recovery that have become one of the biggest financial problems that they face. That is the reality of life for many families—

The Paymaster General (Dawn Primarolo) indicated dissent.

Mr. Willetts: It is no good the Paymaster General shaking her head. That is what those families experienced. I do not understand why she continues to shake her head—[Interruption.] It is the practical experience of many families.

Mr. O'Neill: I am interested in the hon. Gentleman's comments about surgeries. My impression is that Havant is a fairly prosperous part of England, whereas I represent one of the disadvantaged parts of Scotland. There are about 6,000 families in receipt of child tax credit there, and I have to say that I receive very few complaints nowadays, so perhaps Labour seats are treated more favourably than Tory seats. I wonder how many families and people in his constituency are in receipt of tax credits and how many of them have faced difficulties.

Mr. Willetts: I do not particularly want to get into a competition with the hon. Gentleman over poverty and incomes in our constituencies. However, my constituency has an income below the national average,
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and my constituents' earnings are significantly below the national average. I tackle many social problems in my constituency, and I am speaking from direct personal experience. Sadly, there are high rates of pensioner dependency on pension credit and of family dependency on child tax credit. I know of many cases in my constituency where families have problems with their tax credits and have to manage on very low incomes. I am referring to their experiences, and I know that many of my hon. Friends—and, I suspect, Labour Members—have had similar problems. A lone parent came to my surgery the other week who had just £5 to help her and her child through the weekend. They had to manage on bread and milk because the tax credit payments had already been stopped. Those are the experiences that many families face.

Of course, the Inland Revenue statistics are scandalously inadequate—I hope that the Paymaster General will tell us a little bit about what is going on—but the reality is that the tax credits are not working. Surely all hon. Members on both sides of the House can accept that, because it is what the Citizens Advice Bureau has written to me about this week, it is what the report is about and it is what the Child Poverty Action Group talks about.

The problem is that overpayments were often made as a result of mistakes by the Inland Revenue, which the families questioned at the time. They were told, "No, you can pocket the money. Don't worry, it is accurate," and the Inland Revenue suddenly come along, six or nine months later, and say, "We are now going to take all this money off you." So a family that is struggling to make ends meet may well find that its income falls very dramatically.

We have a practical proposal, which has been put by other organisations, too, and it does not involve abolishing the child tax credit: we say there should be an amnesty on overpayments in the last financial year. We think that trying to do that adjustment after the financial year is a classic design of the Chancellor. What has happened is his fault; his design is the source of these problems and it is ironic—as he is sincere about wishing to tackle child poverty—that it is his attempt to use the annualised systems of paying child tax credits that has itself become one of the main sources of child poverty today.

The solution is an amnesty on year 1—to write off the situation in year 1—and at least try to make the system work from now on. Otherwise, there is a danger that the system could spiral into a Child Support Agency-type disaster. That is a practical proposal; it would help to make the system work; it is what many outside bodies have called for; and I am happy to have this opportunity to press it on those on the Treasury Bench yet again today. I hope that eventually they will see sense and do something about it, because otherwise they will find it very hard to make the system work. We look forward to tackling the problem.

The Budget, despite all the rhetoric, involves tiny changes in the benefits system for one year, which will not be sustained—it is vote now and pay later. What the Chancellor is offering is taxing oil companies to make a one-off payment for pensioners, after which their incomes will fall by £5 a week, as he takes away the benefits that he announced with such a flourish.
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We Conservatives have sustained proposals that will increase pensioners' incomes. We are going to help them by cutting their council tax bills; we are going to boost their pensions and help families by offering them an amnesty from the tax credit mess in which the Chancellor has trapped all too many of them. That is why we oppose the Budget judgment.

1.52 pm

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