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Edward Miliband (Doncaster, North) (Lab):
It is a pleasure to follow the right hon. Member for Charnwood (Mr. Dorrell). He is of course a distinguished Member of Parliament. He was also a distinguished Treasury Minister, and was, I believe, one
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of the Ministers in the last Government who did care about poverty issues. I therefore think that we should take what he says seriously. It is also a pleasure to speak in the same debate as my right hon. Friend the Member for Birkenhead (Mr. Field), who, as we all know, has a very distinguished record on tackling poverty both in the House and outside.
It would have been good if the start of the debate had featured a recognition by both sides of the context in which we are discussing tax credit administration: a context in which, under the Government of whom the right hon. Member for Charnwood was a part, child poverty increased from about 1 million to 4 million. I know that the right hon. Gentleman cared about child poverty, but it increased none the less, by 3 million. Many people were in dire need, but nothing was done. Since 1997 child poverty has fallen, by about 1 million. That is not a bad record: child poverty has fallen, after trebling under the last Government.
Of course it is right to acknowledge that there are problems in the system, and my right hon. Friend the Paymaster General has acknowledged that. I think that we need to ask five questions. Does the system tackle poverty? Does it encourage people to work? Is it properly taken up? Is it well targeted? Does it take the stigma away from claimants? I believe that those questions are relevant to a discussion of poverty and the means of tackling it.
I have already drawn attention to the impact of working families tax credit and its successors on the tackling of poverty. I am now speaking for the people who have had bad experiences with the tax credit system, but also for the people receiving tax credits—8,000 in my constituency—many of whom told me during the general election campaign that tax credits had had a huge and positive effect on their lives. If other Members are honest, they will say that their constituencies also contain such people. It would obviously be wrong to deny that there are people who face problems, but it would be equally wrong to deny that the lives of many others have been transformed by tax credits. Members need not take my word for it; they need only read the ombudsman's report. She said that the undertaking had been "broadly successful", and—this is on page 56—
"for the majority of the Revenue's six million or so tax credits customers, the system appears to have worked well."
Andrew Selous: May I tempt the hon. Gentleman to add a sixth question to the five that he quite properly raised earlier? It is the question that I posed in my speech. Is it right to operate a system that constitutes a huge financial disincentive for people who want to live together? They are penalised significantly if they do so, week by week.
Edward Miliband:
I do not believe that people marry, stay together or do not stay together on the basis of how the system works, but the hon. Gentleman made a well-informed speech, to which I am sure the Paymaster General and others paid attention. I agree with my hon. Friend the Member for North-West Leicestershire (David Taylor): if the hon. Gentleman wants to give those with partners a greater incentive, he must find the money from somewhere.
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Let me return to my five questions. I think that the system has worked well in tackling poverty. Obviously there have been significant problems, to which the hon. Member for Tatton (Mr. Osborne) drew attention. My second question was "Does the system encourage people to work?" I think that it has done that, and indeed the figures are there for all to see. We have seen 2 million jobs created, and we have seen the rate of single-parent employment rise.
I know that the hon. Member for Yeovil (Mr. Laws) favours a fixed system of tax credit awards, but that creates its own injustices. I do not think that the argument about a fixed versus a responsive system is particularly ideological. However, under an annual system basing awards on the previous year's income, those whose incomes had fallen for whatever reason would not be told "We will give you and your family more money." They would be told "We are sorry, but there is nothing we can do. You are stuck with the award based on last year's income." As the Paymaster General has said a number of times in the House, we can have a responsive system—a system that responds to changes in people's circumstances—or a fixed system.
Mr. Laws: Is it so obvious to the hon. Gentleman—and if so, why—that the system chosen by the Government is superior to a fixed system? Would it not make sense for the Government to review the evidence of the last two years to establish whether a fixed system could be better?
Edward Miliband: Time will tell, but I am still convinced that a responsive system is better, and I shall explain why shortly.
My third question concerned take-up. I am surprised that so few Members mentioned it. Take-up of family credit in the first year was 57 per cent.; take-up in the first year of this system was 80 per cent., which is pretty good going for a means-tested, income-related benefit. My right hon. Friend the Member for Birkenhead would know better than I, but I should have thought that it was unprecedented. Six million families and 10 million children have been helped.
One reason for that is the fact that the system is non-stigmatising: it is part of the overall tax system. There is a significant prize to be gained from not having a system aimed at the poor, providing an income top-up for the bottom third of the population or even fewer people. Under such a system, even those who are working must go to the social security office if they are to have a living income.
My fourth question was, "Is the system well targeted?" Members have mentioned how high up the income scale the tax credit system goes. In fact, 40 per cent. of the benefit goes to the bottom 20 per cent. of families, so it is a reasonably well-targeted system. The shadow Chancellor referred to people on £66,000 a year, but the people at the very top do not get very much money out of the system—if they bother to apply. They get the equivalent of the old children's tax credit, which is a maximum of £10 a week. The system is about lower and middle-income families. It is true that it is not for the small minority—I am rather in favour of the fact that these credits go to a larger proportion of the population—but no one can deny that this is a well-targeted system.
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My fifth question was, is the system de-stigmatising? For many years, we have had all kinds of social security benefits, but huge stigma has attached to them. We sometimes witness the same problem with the pension credit, which is in fact a social security benefit. Some elderly people say, "I'm not sure about claiming it because I do not want to have to claim benefits." People do not say the same about tax credits, so in that regard we have made a huge advance. In fact, in some ways it is a revolution. We have removed the division between the deserving and the undeserving poor: we have changed a system that required "deserving" taxpayers to pay for "undeserving" benefit recipients. In fact, doing so was the motivation behind the scrutiny of the system that took place in the 1970s.
I am surprised that this achievement has not been more greatly acknowledged during this debate. I do not want to live in a country in which people feel guilty about claiming a top-up for working. We could have introduced the minimum wage at the level to which tax credits raise people's income, but as Conservative Members would doubtless have pointed out, doing so would destroy jobs. Indeed, I find myself in a slightly ironic position. I nipped out earlier to have the pleasure of being involved in my first statutory instrument debate, which was on the national minimum wage. What did I hear in the Committee Room Upstairs? I heard great plaudits for the national minimum wage and for tax credits; indeed, there was a progressive consensus throughout the Committee on the role of both. However, I returned to this Chamber to hear diatribes from the Opposition against tax credits.
The tax credit system answers my five questions and works well. There are significant administrative and other problems, and we should of course apologise—as the Paymaster General has—for the hurt and distress that has been caused. But one thing struck me on listening to the shadow Chancellor's contribution. We heard from him a 26-minute diatribe against the tax credit system, and about all manner of cases, for which we have sympathy. At the end, we heard the clarion call not to abolish tax credits, but for a far-reaching review. I, too, am in favour of reviewing the system's working, but there is a very good reason why the shadow Chancellor did not commit to abolishing tax credits at the next election, which he could easily have done, given his diatribe against them. He knows that, fundamentally, the system is popular with the majority of recipients—the majority of recipients in my constituency, for example. That is why he has not committed to abolishing it.
The Government have a responsibility to sort out the problems in the system, but we should all acknowledge the advances that have been made under it. Let us have a rational debate about the way in which it works, but let us please do so in the proper context. This Government have made work pay and tackled poverty—something that was never achieved in 18 years of the previous Conservative Government.
6.24 pm
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