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I agree with my right hon. Friend. When we are talking about people's lives, the word "glitches" is not appropriate. The central question that he is asking is whether the problem is structural or capable of being corrected, and what in particular needs to be done to answer that question. He is absolutely
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right. The House needs to concentrate on those points and will need to return to them time and again. I have no objection to that.
Mr. Deputy Speaker: Order. Front Benchers have taken a massive slice out of this debate. I am anxious to protect the interests of Back Benchers so as to allow them as much of the remaining time as possible.
Mr. Field: I do not want to provoke Front Benchers again, Mr. Deputy Speaker, but my heart sank slightly when the Paymaster General kindly said that we will keep returning to this issue. I hope that she will tell us tonight about the changes that some of us wish for and that the ombudsman's report calls for.
Let us be in no doubt about how important this benefit now is to our poorest constituents. More than a quarter of all claims are made by those on under £13,000 a year, who comprise a third of the difficult cases. The problemsthe miscalculations, overpayments, underpayments and automatic clawings backdisproportionately affect the poorest. We have to ask whether it is possible to run a system that operates over a time scale of 52 weeks while matching the needs of our poorest constituents, whose financial needs often change very quickly.
Decades ago, this House debated a tax credits system proposed in a Green Paper by the Heath Government. Those of us in the poverty lobby thought it unworkable, because we had seen from America that one cannot marry a benefit system that operates on a weekly basis and a tax system that is cumulative over 52 weeks of the year. The huge innovation in that proposed tax credits system was to abolish the cumulative nature of individual taxation so that, far from operating over 52 weeks, it would operate on a weekly basis, with last week's income relating to this week's tax credit. The question is whether, unless we are prepared to be that radical in changing the nature of the tax system, we can ever have a system that delivers for our poorest constituents, who can most benefit from the wish that the Chancellor clearly has to abolish child poverty as we know it in our society.
In moving towards that goal, there are three reforms in the ombudsman's report that I most want to hear the Government say that they have embraced. In the previous Parliament, I tabled an amendment to the Finance Bill that would have placed a duty on the Government to issue wage slips to everybody who draws tax credit so that they could understand how it had been computed. For one reason or another, the amendment was not called. If we are to empower our constituents, it is crucial that they know how their tax credit has been worked out so that they can quickly ring up when they think it is wrong.
Secondly, the Government must concede that they should not claw back until our constituents have had the right to dispute whether the clawback is correct. I was worried by the Chief Secretary because, in a moment's hesitation at the Dispatch Box, he muddled that with writing off the wrong payments. The Chief Secretary to the Treasury is one of the Government's heavy hitters. I would normally say that, if we were in difficulties, we would send him out to bat for us. However, as he reflects on the debate, which also reflects the Government's position, he will perhaps realise that he has not
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previously had a more difficult time on the Floor of the House, trying to defend the tax credit system, than he had today. I appreciate that he does not want to be in that position again. My guess is, therefore, that he will take more than a personal interest in the reforms that the Government propose.
The third reform that we greatly hope that the Paymaster General will outline is an independent system of appeal for occasions when both sides cannot agree on the facts or about whether the rate of clawback is fair.
I refer hon. Members to the last third of the last paragraph of the ombudsman's report. It makes chilling reading for anyone who understands the official code. The ombudsman, in reflecting on what has happened to the poor in the system, asks the fundamental question whether it can work adequately on their behalf. She goes on to say that she, as a mere official, cannot possibly comment or provide a conclusion on whether the system is salvageable, but she continues by saying that it raises the most profound policy issues. That means that her doubts are grave indeed.
I do not doubt that many people in my constituency rejoice that we have tax credits and that the system has worked well for them. However, the sad fact is that it has worked best for those who are richest, not those who are poorest. That is not the Chancellor's aimI have never doubted his seriousness about tackling child poverty. The Paymaster General should outline tonight the immediate reforms that she can or will propose on the Government's behalf to prevent the lives of our poorest constituents from being smashed as forces beyond their control damage their ability to balance their weekly budgets. We need to know what reforms we may have to lessen that effect.
At some stage, however, we must consider whether the tax credit system, as it is currently formulated, can ever deliver to those who are in the greatest poverty in our society.
Andrew Selous (South-West Bedfordshire) (Con): Like every other hon. Member, I have experience of many constituents complaining to me about the problems of administration of the tax credit system. I, too, have a constituent in a similar position to that of the hon. Member for Yeovil (Mr. Laws), who has received eight awards in the past nine or so weeks.
I shall be listening carefully to the Paymaster General to hear whether the Government will follow all the parliamentary ombudsman's recommendations. Her response will be the most important part of the debate.
I want to look at tax credits from a slightly different point of view from those of other Members who have spoken this afternoon. I salute the Government's objective of trying to use tax credits to reduce poverty. I use the term "poverty" in general because I am not sure whether the focus on child povertyto which tax credits are integral, so far as the Government are concernedis necessarily healthy. In many other European countries, the focus is on family poverty, and such a focus might have something to teach us in relation to the administration of tax credits.
The figures that the Department for Work and Pensions released on 30 March from its study of households on below-average incomes show that child
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poverty fell in 200304 by only 100,000. I say "only" because that was the year in which £2.5 billion was spent on tax credits, and all the analysts expected a much more significant fall in that year. Indeed, the figures show that, after housing costs were taken into account, child poverty remained static.
The figures also show that there was no reduction in the number of poor children living in two-parent or couple families in 200304. That is significant because 57 per cent. of children living in poverty live in two-parent families. There are serious and worrying anomalies relating to children living in two-parent or couple families. They make up the biggest cohort of children living in poverty. It is the task of the Government and the Oppositionindeed, of all of us in the Housewho are thinking seriously about how to reduce child poverty to ensure that, whatever system we come up with, these perverse unintended consequences are rectified. They are having damaging consequences for our country.
I shall illustrate that point with some specific examples. In 200304, a couple family with two children would have needed an income of £262 a week to get out of poverty, whereas for a lone parent with two children that figure would be only £182. Those are after-housing-costs and after-tax figures. To get the income necessary to get out of poverty, a single-earner couple in social housing paying rent of £53 a week would need to earn £336 a week, as opposed to only £86 a week after the implementation of the tax credit system. That is nearly four times as much, and it represents a very wide disparity.
The former senior Inland Revenue officers, Don Draper and Leonard Beighton, have released figures today showing that, for the tax year 200506, a couple with two children in social housing on half average earnings paying a weekly rent of £53 would be left £22 below the poverty line, whereas a lone parent family with two children in those circumstances would be left £66 above it. I am delighted that that lone parent family will be £66 above the poverty line, and no part of my proposals would involve taking money from lone parents in any way. I want to make that very clear to the House. Surely, however, that situation must be of concern. Most children who live in poverty57 per cent. of themlive in couple families, and according to the example that I have just given, they would be £22 below the poverty line. That is before any child support, which is disregarded for tax credit purposes. My concern is that the Government will not achieve their target of halving child poverty by 2010 because of some unintended, but very significant, flaws in the administration of the tax credit system.
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