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Edward Miliband: On a point of detail, the Australian system is not tolerant of changes in people's income, whereas the British system of tax credits allows for a £2,500 rise in income without any money being taken away from people.
 
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Mr. Laws: The hon. Gentleman is digging a large hole for himself. While he is correct that there is a disregard in the UK system, it has not dealt with the problems at all, because one third of awards are still overpaid. In Australia, which does not have the disregard, 39 per cent. of awards are overpaid. Here, it is 33 per cent., so there is not much difference. The Australians have had to continue tampering with their system and changing it with, for example, year-end corrections to deal with those problems. I know that the Government are not going to change their position today, but I urge them at least to investigate the matter and respect the findings of the ombudsman, who said that experience to date

"raises the fundamental issue . . . as to whether a financial support system which includes a degree of inbuilt financial uncertainty can truly meet the needs"

of this particularly vulnerable group of families.

Ed Balls: This is the nub of the issue. The hon. Gentleman can make a series of proposals to make the system work better but, by definition, the tax credits system includes overpayment because of the adjustment mechanism. We must consider how we deal with that. It is legitimate for him to say that the limit should not be £2,500 but a higher figure. Perhaps I would agree with that from experience. But does he support the current system of tax credits, or would he scrap it and introduce a different system?

Mr. Laws: I do not know whether the hon. Gentleman is seeking deliberately to misrepresent my comments. I indicated very clearly that there is a genuine problem with the way in which the tax credits system works and with whether our system is less effective than a system of fixed awards. In Canada, a focus group—something that the Government should favour—has been working with child tax benefit recipients. When those people were asked whether they preferred a fixed or a flexible system, their response was a unanimous and loud negative to the system favoured by our Government.

Edward Miliband rose—

Mr. Laws: I must conclude my speech, I am afraid, or I will try the Deputy Speaker's patience.

The Government should learn from experience. If they are not ready to do so, the new chairman of Her Majesty's Revenue and Customs, David Varney, is, because on 5 July the Financial Times reported that he said:

"We haven't had enough experience of the system to make a sensible judgment in terms of annularity; we need to run a few cycles to see how it works . . . If there are real problems in discharging the policy then you'll have to debate what the right policy is."

Dawn Primarolo: David Varney did not say that to the Financial Times. The interview was recorded, and I am happy to give the hon. Gentleman and the hon. Member for Tatton (Mr. Osborne) a copy of what David Varney said to the Financial Times and what he said to the editor about the way in which his comments were reported.

Mr. Laws: We would all be delighted to see a transcript of the interview. That would be beneficial.
 
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I noticed that a correction has not been published in the Financial Times, a reputable newspaper which, I am sure would correct any mis-statements.

Dawn Primarolo: I will the hon. Gentleman a copy of the letter that was sent for publication as well.

Mr. Laws: We will all be enlightened when we see that letter and look forward to the apology from the Financial Times.

Finally, I am concerned about the confusion among Ministers about the Government's tax credits policy. They and the Treasury are in denial about the problems that they have created. Until they come out of denial, they will not fix the problems that are causing of great deal of concern, discontent and poverty among many people on low incomes across the United Kingdom.

5.34 pm

Mr. Frank Field (Birkenhead) (Lab): I shall make a short contribution and, as best I can, bring some of my constituents into the debate. The figures clearly show that large numbers of people in Birkenhead have been beneficiaries of the new tax credits system, but those who have come to the advice surgery, phoned and written to me all share one characteristic: they are all fairly poor. The question to which the Paymaster General suggested we should address ourselves today is not whether we all subscribe to the abolition of child poverty. Of course we do. The question that I pose, which the Opposition spokesman was not willing to answer, was whether we are spending £15 billion of taxpayers' money every year in the system in the most effective way to deal with child poverty.

Ed Balls rose—

Mr. Field: For goodness' sake. We know that my hon. Friend has a vested interest. I will develop an argument, then I will happily let him in. I have not said anything yet for him to intervene on.

The question is whether the £15 billion is best spent. The question that has already been raised, which we need to address in the debate, is whether the system as it works for the poorest is salvageable, or whether there is something about the fact of being poor that makes it difficult to fit those people into the system. Now that I have set out my first point, I am happy to give way.

Ed Balls: I am grateful to my right hon. Friend. On a point of clarification, he said in his opening remarks that we all shared the goal of reducing child poverty. We consistently asked the shadow Chancellor whether he shared our goal of halving child poverty at the end of the decade, and he refused to answer. I fully accept that my right hon. Friend shares that goal, but does he agree that the hon. Member for Tatton (Mr. Osborne) did not?

Mr. Field: It is easy to sign up to the abolition of child poverty. Even though he did not make a clear statement, I would expect the shadow Chancellor to say so. The crucial issue is how we go about tackling child poverty and whether an alternative Chancellor would be prepared to marshal the kind of resources that the present Chancellor has marshalled to tackle child
 
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poverty. I question whether we use those resources most effectively, but I do not for a moment doubt the Chancellor's passion to do something about child poverty. Signing up to abolishing it is easy. I wanted, but failed to gain, a commitment from the Opposition that they would commit similar sums to that objective, however they spent it.

Mr. George Osborne: I think that I made it clear that we are all committed to reducing child poverty. On the second point, at the general election, when we produced comprehensive spending plans, we proposed to spend exactly the same as the Government on tax credits. We are entitled to ask whether, in the light of the ombudsman's report, we should review the structure of the tax credits and how they are administered.

Mr. Field: I hope that, before the end of the Parliament, the hon. Gentleman might be more radical than that, but it is early in the Parliament and the Government must know that they face not only a debate tonight, but debates on the system throughout the Parliament. They may be able to command the support of their Back Benchers tonight. I hope that it will not be a different matter—it might be—four years down the track.

The question that we have to address in our conversation with the Government this evening is whether the problems that we have encountered on behalf of our constituents are—the term has already been used—glitches or something structural. I hate the word "glitches". It is somehow cold, efficient, removed. All of us see what a glitch does to many of our constituents living on modest incomes. It is not a glitch; it is almost life and death. I have had families in my constituency who thought that moving them into work would be a godsend. The figures showed that they would be better off, but they found most of the money snatched away, without any explanation or understanding why it was being removed from them. Worse than that, the system is such a treadmill that one cannot get off it: once one has claimed the credit, it has to run for the duration.

One of my constituents comes quickly to mind. There was a mistake over his wife's earnings. His wife then became ill, and he was reduced to an insignificant sum of money on which the whole family had to survive. He could not afford bus fares to get to work and had to walk three miles to and from work every day. But because it was alleged that he had been overpaid, he could not sign off from tax credits and sign on for means-tested jobseeker's allowance as the office claimed that he had the money that took him over the eligibility threshold for the jobseeker's allowance. There was no escape for my constituent until the end of the claim period.

We have to decide whether these are merely glitches that will be ironed out or whether for the very poorest there is something basically wrong with the system.

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