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Tax Credits

3. Mr. Philip Hollobone (Kettering) (Con): What estimate he has made of the number of people entitled to claim tax credit who do not do so. [35533]

The Paymaster General (Dawn Primarolo): Analysis of the number of those entitled but not claiming tax credits is ongoing and will be completed by the end of 2005–06. Initial estimates are that 80 per cent. of those entitled to the child tax credit in the first year claimed it. That compares with a take-up of 57 per cent. for family credit and 62 per cent. for working families tax credit.

Mr. Hollobone: I thank the Minister for her answer. Although it is encouraging that the percentage take-up is improving, does she share my concern that up to a fifth of potential claimants—some of them the most vulnerable members of our society—are not getting to the tax credits to which they are entitled?

Dawn Primarolo: I assure the hon. Gentleman that take-up of tax credit appears to be across the board, particularly focusing on those in the greatest need; for instance, 1.4 million receive an average entitlement of £5,795 a year. In his constituency, about 8,800 families are benefiting from tax credit. Even with take-up of child tax credit as high as it appears to be, it is important that we focus on ensuring that we continue to advertise it and to encourage people who are entitled to apply for it. I hope that he will campaign for that and support tax credit, to ensure that it is welcomed and supported.

Mr. John McFall (West Dunbartonshire) (Lab/Co-op): My right hon. Friend will be aware that at the Treasury Committee meeting yesterday we asked her officials for a paper on the implications of the latest changes in tax credits. Although the disregard on earnings from £2,500 to £25,000 is a huge step forward, will she inform us whether it will be revenue neutral, and before her next appearance before the Committee will she work with her officials to ensure that innovative ways are found to increase that 80 per cent. take-up?

Dawn Primarolo: My right hon. Friend refers to specific issues and discussions about the package of measures announced on Monday for reform of tax credits, ensuring flexibility but also greater certainty for claimants. He will know that the package as a whole was scored in a particular way in the pre-Budget report statement. I will ensure—I think that my officials gave this undertaking to the Treasury Committee—that a detailed answer specifically on costs is not only made
 
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available to the Committee but that it is put in the Library so that all Members can see how the entire package fits together in terms of the total costing.

Mr. David Laws (Yeovil) (LD): When did Ministers first become aware of organised attempts to defraud the tax credit system? How many Department for Work and Pensions staff have been affected by that to date, and can she tell us how much that organised fraud of the tax credit system has cost the taxpayer?

Dawn Primarolo: The hon. Gentleman will be aware, because I have answered him both in parliamentary questions and in letters, that the potential committing of fraud against the tax credit system is taken seriously by officials. He will also be aware that at the end of the first year, 2003–04, specific figures, which are being prepared, will indicate the success of the policy in deterring fraud. Because of the announcement, he will be aware that there are specific investigations into fraud against the tax credit system involving the DWP. A criminal investigation is going on, so it would not be appropriate for me to comment further, but I assure the hon. Gentleman that I shall keep him and the House fully informed of developments.

Helen Goodman (Bishop Auckland) (Lab): Will my right hon. Friend tell the House what her estimate is of the number of children who would fall back into poverty if the tax credit system was abolished?

Dawn Primarolo: The combination of measures through the tax credit system has contributed to about 1.4 million children being lifted out of poverty. That is crucial and a central part of the Government's measures to eradicate child poverty, especially the record level created under the previous Conservative Government. Without the presence of tax credits, should the hon. Member for Tatton (Mr. Osborne) feel tempted to abolish them, as the Conservatives say they will do, we would see a massive rise in child poverty.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): Let me try to help the Paymaster General with the question that the Chairman of the Treasury Select Committee asked. At the same time as the announcement on Monday that the disregard of increased pay would be raised so that people earning more than £90,000 could continue to receive their tax credits in full for up to 12 months, the pre-Budget report showed that the Government intend to spend £200 million less on tax credit in 2007–08. If people whose income increases will be better off, and the Government plan to spend less on the total package, who will be worse off?

Dawn Primarolo: I will send the hon. Gentleman another copy of the statement that was released as part of the pre-Budget report that was announced by my right hon. Friend the Chancellor on Monday. Let me help him by reminding him that there were a series of reforms that were in favour of claimants because they made the system more flexible. One part of that was the increase to the disregard. There were reforms to speed up the reporting of changes in circumstances to ensure that it would be less likely that overpayment would
 
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occur. There was a reform to change the period for verification—the renewal period—from six months to five months. Those are but three of the measures. Taken together, they give claimants greater flexibility while reducing the risk of overpayments. That is how the entire package hangs together and how the costings are developed. If the hon. Gentleman wants to read the statement again so that he understands it, I will be happy to clarify any further confusion that he has.

Inflation

4. Mr. Geoffrey Robinson (Coventry, North-West) (Lab): If he will make a statement on his policy on inflation. [35534]

The Chancellor of the Exchequer (Mr. Gordon Brown): Inflation, which averaged 8 per cent. for the years 1970 to 1997, has been at or around 2 per cent. in recent years. It is forecast to be 2 per cent. this year and next year. It is because of low inflation that interest rates in Britain have averaged 5.5 per cent. since 1997—half the level of the previous 18 years.

Mr. Robinson: Is my right hon. Friend aware that the Organisation for Economic Co-operation and Development has called the British economy under his stewardship a paragon of stability? Is he further aware that central to that success has been the control of inflation, and that that control of inflation, in turn, has led to the lowest mortgage rate since the late 1950s, which has meant that in my constituency—and, indeed, throughout the country—the average mortgage holder has saved £4,000? Will he tell the House what the effect would be of returning to the Conservative party's policy of 10 per cent. inflation?

Mr. Brown: I am grateful to my hon. Friend. The number of home owners has increased by 1 million since 1997. That has been possible because interest rates have been half what they were under the previous Government and mortgage rates have also been half what they were in the 18 years of the previous Government—[Interruption.] I would have thought that there would have been all-party support for the stability that has been achieved. In fact, the shadow Chancellor has been making speeches in support of our macro-economic policy, but unfortunately he has made them not in the House, but outside the House, where he hopes that his party will not hear what he says.

The OECD commented on our economy by saying:

"The United Kingdom is a leader in the quality of its monetary and fiscal policy frameworks among OECD countries".

It also said:

"The stability and resilience of the economy has been impressive and labour and product markets are among the most flexible in the OECD".

We will continue to maintain stability and increase the flexibility and resilience of the economy. Again, I would have hoped that we would have all-party support for that.

Sir Peter Tapsell (Louth and Horncastle) (Con): But does the Chancellor have any meaningful inflation policy having handed over control of interest rates to the
 
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Bank of England, whose Governor's recent public statements have been markedly more pessimistic that his? Is it not clear that the lack of co-ordination between fiscal and monetary policy severely undermined the authority of the Chancellor's pre-Budget report? Does he recall that a distinguished predecessor of his used to criticise punk monetarism, yet he has now become an exponent of punk Keynesianism, boosting expenditure before the election and restraining it—

Mr. Speaker: Order. We are running out of time.

Mr. Brown: There are some members of the Conservative party who remain to be convinced about making the Bank of England independent. I should tell the House that the hon. Gentleman has been consistent in his opposition to Bank of England independence. He said that it would make the efficient macro-economic management of our affairs more difficult and then predicted that it would lead to higher levels of unemployment. Unemployment has gone down by half a million since we came to power and there are 2.3 million more jobs. He should be admitting that he was wrong on the matter and that it was right to make the Bank of England independent.

Mr. Pat McFadden (Wolverhampton, South-East) (Lab): The Chancellor said that low and stable inflation rates have helped 1 million more people to become home owners since 1997—a far cry from memories of 15 per cent. interest rates when the Opposition were in power. However, does he agree that many more people in Britain have the dream and ambition of owning their own home? Will he tell the House how many more people will be helped to do so through the housing measures announced this week in the pre-Budget report?

Mr. Brown: Our aim is that the figure of 1 million extra since 1997 should rise to 2 million by 2010. It is because of the combination of measures that we have introduced to improve the planning system, the use of land, the development of existing land and the improvement of infrastructure, as well as the Government's low interest rate policy that we can aspire to low mortgages and the building of additional houses over the next few years. Opposition Members must face up to the fact that this is a low inflation, low interest rate environment, and that has only happened because there is a Labour Government, not a Conservative Government.

Dr. Vincent Cable (Twickenham) (LD): In his statement on Monday, the Chancellor argued that because the main cause of recent inflation was high oil prices, petrol duties would be frozen and taxes increased on the North sea. If oil prices fall to the level before the recent shock, is it therefore Government policy that petrol duties will be increased and the increase in taxation on the North sea reversed?

Mr. Brown: The policy on fuel prices is as I have set out previously. As for the North sea, I want to give stability to oil companies during this Parliament.

Michael Gove (Surrey Heath) (Con): By increasing taxes?
 
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Mr. Brown: Opposition Members clearly do not want the revenue of £2 billion a year from the increase in North sea oil taxes, so they had better tell us which services they will cut to make possible the loss of that revenue.

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