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With the amalgamation of the Inland Revenue and Customs and Excise, something disappeared from our national life. In 1986, the Conservative Government introduced the taxpayers charter. I do not criticise the amalgamation of the Inland Revenue and Customs and Excise, but the Chartered Institute of Taxation has
produced—I hardly dare say it—a consultation document. The Government love consultation reviews, so I am sure they will accept my invitation. I ask them seriously to consider the comments of the Chartered Institute of Taxation, because the relationship between the state and the taxpayer through HMRC is important.
Most countries have a taxpayers charter. Although we were the first country to introduce one in the mid-1980s, the amalgamation means that its purpose has become obscure and opaque. In other words, the taxpayers charter is not really enacted—or rather, it is there but it does not work properly. The Financial Secretary has probably already got a copy of the Chartered Institute of Taxation’s document, which is an options paper. I would ask her to consider it carefully, because where there is a recognition of both the rights and the responsibilities of taxpayers, the relationship between those who collect taxes and those who pay them is much fairer.
As a member of the Public Accounts Committee, which has just looked into the National Audit Office report and taken an evidence session on it, considering the non-payment of taxes and how HMRC goes about collecting them from the corporate sector in particular, where they are not paid properly, I believe that a reviewed taxpayers charter would be a valuable addition to our tax system. I hope that the Financial Secretary will be able to give a positive response on that.
3.41 pm
Ms Sally Keeble (Northampton, North) (Lab): I am pleased to take part in this debate, which concerns one of the most important parts of the Budget. I want to talk about some of the Government’s anti-poverty measures, particularly those to tackle child poverty.
In discussions about the economy there is often a disconnect between discussion about the macro economy and discussion about the micro economy. People talk about either global economic shifts or the personal finances of people who are poor, but for me the two are different sides of the same coin. We will not be able to achieve the place that we should in the global economy or equip our society and economy to compete unless we deal with the factors in our society that still hold people in poverty. In particular, we will not achieve what we need to compete as a high-skills, high-value economy if a percentage of children are born in poverty, grow up in poverty and end up out of work because they are denied access to the skills and services that the Government have discussed in their anti-poverty strategy.
Although all of us who are concerned about child poverty will have criticisms of some of the measures in the Budget and of what the Government have done, that is mostly because we want those targets to be achieved. It is clear to us on the Labour Benches that the Government’s commitment to tackling poverty is a giant leap forward from what we saw in the 1980s and most of the 1990s. That is partly because of the understanding in government of the need to tackle the factors of poverty, as part of equipping the UK for the challenges of the 21st century, and partly because we understand the complexity of what is needed to deal with poverty. As my hon. Friend the Member for
Regent's Park and Kensington, North (Ms Buck) has said, in addition to the grand vision, we need to understand the detail of the rules. In that respect, some of what is in the Budget—albeit tucked away—will make a substantial change.
There are three measures to tackle child poverty directly. One is the child benefit increase, which will obviously benefit middle and higher-income families, as well as the poor. In that sense, it is perhaps a blunt instrument for tackling child poverty. However, the work of the Treasury Committee has emphasised the importance of looking at a simple universal benefit, in addition to the more targeted ones.
Although no one has talked about this yet, one measure that will have a dramatic effect is the disregard of child benefit for housing benefit and council tax benefit purposes. That will mean that those families who are in the greatest difficulty and who need support with their rent and council tax will not experience a withdrawal because of the increase in child benefit. For me, that is probably the measure that will most improve the income of the poorest households.
I ask Ministers to consider this point. The system is fine for people who are in social rented housing, or who are housed by the council or by a housing association, because there is a proper cap on rents. However, one problem that particularly affects my area is pressure on homeless families—particularly the most vulnerable, such as lone parents—to go into private sector rented accommodation. The rents for such accommodation seem to work by landlords taking whatever is paid in housing benefit and then fixing the rent at the amount that they think people will pay out of their other benefits. People in that accommodation therefore pay not only their housing benefit but £50 or £60 out of their limited other benefits. Alternatively, they might have a parent who coughs up, in which case the landlord charges a bit more.
There is a single parent in my constituency with one child who is living in a privately rented one-bedroom flat. She is paying £525 a month, and she has just lost her job and is going on to benefits. I do not know how anybody is supposed to pay a private sector landlord a supplement of probably £100 out of their benefits. If we are to increase benefits for families, we must ensure that those benefits are spent on their children, better food and school services, which my hon. Friend the Member for Regent’s Park and Kensington, North (Ms Buck) has mentioned, and that they do not just pay increased rents to private sector landlords. I hope that steps can be taken to ensure that.
Another important matter is the increase in the child care element of the child tax credit, which will go directly to the most hard-up families. I completely agree with the comments that were made about it earlier—it is a puzzle why it has not worked, because there previously seemed to be a reasonable take-up. One thing that might have put people off is the fact that, because it is a generous benefit, the results of an overpayment are catastrophic. Someone can ratchet up £135 a week or so in overpaid tax credits. For families that are struggling, overpaid credits are a problem anyway. If the overpayment is of the child care element, it can run into thousands of pounds.
It may well be that in some parts of the country people spend many years on tax credits. However, in
my constituency a number of people, particularly women, are on tax credits for a while, because they are working part-time. Once their children are older, they move into full-time work and come off tax credits, because they are earning too much. If there is an overpayment at that point, they get clobbered, because they have to pay it out of their income rather than through a rounding off of future tax credit awards. For a number of women, that causes fury, because it hits at their aspirations. Such women have worked to improve their position and to get themselves into a professional job, perhaps by training to be a primary school teacher or something like that. They get into a decent job, but then get hit by a public sector debt, which is very much resented. I hope that some thought can be given to that.
The improvement of the benefits is exceptionally good, and the new payments to child trust funds are important, but we must also focus on improving take-up. The right hon. Member for North-West Hampshire (Sir George Young) has mentioned savings, and I think that he believed I was referring simply to the Government paying into child trust funds. I am concerned about the take-up of child trust funds, which tends to be better in more affluent areas. In my constituency, take-up is 75 per cent., but in the poorer area of Salford, it is 62 per cent., so we need to improve take-up in the poorest areas.
It would also help if we ensured that the financial services institutions that are most trusted by the public had the right products to meet that particular market. It is a matter of regret that National Savings and Investments does not provide a child trust fund product—the right hon. Member for North-West Hampshire will recall that we discussed the issue in the Treasury Committee. That seems to me to be a significant gap. That institution has a good public profile and a high level of trust, so it might be possible for it to encourage people who might not otherwise think of taking up savings schemes for their children to do so.
I want to say a few words about structural poverty, as the Government’s agenda for welfare reform, which I very much welcome, is particularly important there. If people are poor when they are out of work in my constituency, it is often due to some particular disadvantage—for example, suffering from a disability or long-term illness that prevents them from going into work. When that happens, the children also suffer. Lone parenthood is another major issue, and we all know that the Government have made it a challenge to ensure that more lone parents get into work. The figures show a massive improvement, which is largely due to the amount of detailed work that went into the new deal for lone parents. I very much welcome that.
The Government also have a programme dealing with incapacity benefit, which ensures, for example, that people get opportunities for interviews. They are offering people active encouragement—more than just support—to think about retraining and going back into work. That is an exceptionally important way of dealing with continuing issues of poverty in the UK. I do not underestimate the scale of the problem of getting people who have been on incapacity benefit back into work. I see people in my constituency surgeries who have had alcohol or drug abuse problems
or who might have had industrial injuries some time ago and are shifting from unskilled or manual work, which has largely disappeared, and are perfectly capable of being retrained for other types of work, although they may not have thought about doing that. Similarly, lone parents who have never been in work or who have been out of work for some time can find it challenging to retrain to go into a workplace that is unrecognisable from just a few years ago.
It is evident from figures released by the Treasury on the take-up of benefits that ethnicity is still a significant factor in poverty. I am sure that the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for East Ham (Mr. Timms) will recognise that from experience in his constituency. It is still an unfortunate feature of life in the UK today that people from black and ethnic minority communities—and particularly certain communities within them—are much more likely to be excluded from the labour market. There is a serious need to overcome those gaps, which is one reason why I particularly welcome the extra money put into encouraging enterprise, especially among women, and small businesses. In my county, about 94 per cent. of businesses are small and medium-sized enterprises. Like other hon. Members, I have noticed that self-employment and small enterprise offer a different way into work for those who experience what they perceive as exclusion from the traditional labour market. Local authority schemes to encourage women to consider setting up and expanding enterprises have been extremely important.
I welcome the Budget measures to deal with pensioner poverty. I very much welcome the proposed extension of fuel allowances, which will tackle one of the biggest problems facing older people, particularly given the increase in fuel prices. I also welcome the measures that the Chancellor set out to deal with pre-payment meters, given the much higher prices that those who use them have to pay. I hope that the Government will also work with the energy supply ombudsman, who does an outstanding job dealing with unfair bills, to examine recent charging by some power companies. To single one out, E.ON seems to have been sending out some exorbitant charges with not much justification.
Angela Browning: I mentioned South West Water charges in my speech, and I share the hon. Lady’s concern about fuel. Does she share my concern that the regulators do not seem to be doing the job that they should do to make sure that consumers ultimately get the right deal from the utilities?
Ms Keeble:
I think that the hon. Lady is right; she certainly has a point. Again, one of the issues is people knowing their rights. If an ombudsman is intended to deal with a particular service or issue, people should know that they can go to that person. Someone came to see me who was on benefits and had been sent a £500 bill by E.ON. He had proof that he had paid all his bills up to date, and was asking how on earth this could happen. It is important that people know that they can go to an ombudsman and get such issues resolved. For those on low and fixed incomes, getting a high bill can
be frightening. Older people in particular will think that they ought to pay the bill, and start to pay it out of very low incomes.
I also welcome the extension of the concessionary travel scheme, which is a particularly important benefit for older people. I urge my colleagues on the Front Bench to consider ways of improving take-up.
I agree with the hon. Member for Tiverton and Honiton (Angela Browning) about the impact of the withdrawal of the 10p starting rate, which will affect some people disproportionately. The group that I would single out is women pensioners between the ages of 60 and 64 who are on a fixed pension. According to information that I have seen, they could face a doubling of their tax bills. To people who can do a bit of overtime to make the money up, £2 is not the end of the world, but it represents more to those who do not have that opportunity. People in my area would tend to say, “If they are taking £2 off me, and then giving it back in the winter fuel allowance, why not just leave my pension be?” This matter requires real thought.
Across the generations, women pensioners have had a tough deal. It is unfortunate that those whose pensions are large enough to be taxed should experience an increase in their tax burden just when their husbands or male colleagues are finding life a bit easier, because they have retired at a higher age and benefit from the increase in the tax allowance.
One of the anti-poverty strategies in the Budget that has not been discussed is extra funding for failing schools. I welcome that, not least because 20 primary schools in Northamptonshire are in special measures or have been notified that improvements are needed. If we are to equip children to meet the challenges of the future and provide the skills base that employers need, the extra money to improve schools will be a key factor in tackling the vicious circle of poverty that is perpetuated by children leaving school without the necessary qualifications.
Along with the need to ensure that people who are out of work are not in poverty, there is the need to tackle in-work poverty. As the Treasury Select Committee has pointed out, that is one of the big challenges that we face, and the Government will have to tackle it if we are to reach our target of ending child poverty. However, I welcome the anti-poverty measures in the Budget. I see them not as a signal of failure, but as a signal of the Government’s real commitment to tackling what is not only a blight on society by any standards, but a drain on our country’s ability to secure the economy and society that we want for the future.
I wish the Budget measures well as they work their way not only through the House but out into communities, delivering a much better life for our constituents.
4.2 pm
Mr. Oliver Heald (North-East Hertfordshire) (Con): In a thoughtful speech, the hon. Member for Northampton, North (Ms Keeble) highlighted the implications of the Budget for pensioners. I felt that what she said tied in with the point made by my hon. Friend the Member for Tiverton and Honiton (Angela Browning) about the effect of the current financial settlement, and the general economic conditions, on pensioners and people on fixed incomes.
The hon. Lady could be said to have issued a challenge when she observed that many of the speeches that had been made so far had concerned either the macro level or the micro level and that the two should be brought closer together, and I thought I would take up the cudgels. It seems to me that the world economic trends of recent years have been helpful to the United Kingdom. The growth of India and China, for instance, has meant imports into this country of cheaper manufactured goods, which have provided a brake on inflation. At the same time new markets have opened up in those countries for British services—our service industries have done very well—and there has been a flood of money into the City of London from those new great economies, and from parts of the world such as the middle east. Huge amounts arrive in the City from the Gulf each day to be invested.
While the overall picture is of a brake on inflation and the possibility of considerable growth in the British economy, I think we have reached a point at which the balance of advantage is changing and we are at something of a tipping point. As I think about the current effects of those great changes, it seems to me that we are beginning to see a world in which we are vying for economic resources, energy and food, and prices are rising as a result. An effect that used to be benign has become inflationary. The Chancellor talked in his Budget statement about increased inflationary pressures over the next two years, and it is hard to see how they will ease, so it might well be the case that we are moving into an era in which inflation will be a problem, as it used to be. Through most of my life—certainly my political life—inflation was for many years the No. 1 issue.
Inflation impacts negatively on the very people whom the hon. Member for Northampton, North and my hon. Friend the Member for Tiverton and Honiton talked about: pensioners and people on fixed incomes who find that their savings, which they had set aside year after year, are suddenly worth very little. Their economic position is very much prejudiced by inflation.
The great battle of the 1970s and 1980s was to try to get inflation under control, and one of the great boons of recent years has been that we have not had such a concern about inflation. On my reading of the Budget statement, the suggestion is that inflation will be 50 per cent. higher over the next two years than it was over the last two. If that is right, and we also consider the other great challenge of the sub-prime mortgage situation and concerns about the banking system, we must now worry much more about inflation than we have for some years.
Let us consider that banking problem. None of the banks currently have sufficient confidence to lend to one another because nobody really knows what the derivatives—the packages of debt that were put together—are worth, or how to price or value them. That is a major problem for the financial system. It is why billions of dollars are being pumped into the system, and everyone hopes that the steps the central banks are taking will work.
The current challenge for the British economy is to stimulate demand without fuelling inflation. Against that background, the normal remedies would be to have low interest rates and, lower taxes, or at least to keep them as low as possible. However, at a time when
there are concerns about fuel bills increasing and food prices rising—very fast in the last year—is it sensible for the Government to throw oil on the fire by increasing taxes on items, such as a pint of beer, that people have to purchase, as that must start to change expectations about wages? The old cycle was that as taxes and commodity prices went up, people asked for higher wages, so wage inflation took hold. That cycle started, and inflation became the huge problem that it was. I question whether the Budget judgment is right if it involves these substantial tax increases, as they are not in the interests of the economy.
I agree with the hon. Member for Northampton, North that there are some good measures in the Budget, such as the winter fuel payments for pensioners and the target to halve the number of children in poverty by 2010. It would be marvellous for our country if that could be achieved. I did not agree with the Secretary of State that there are any great differences between the positions of the parties, however. The fact is that the Secretary of State is not giving a guarantee that he will deliver on the pledge—far from it; he is saying that he will do his best. If the pledge was a guarantee, he should put his job on the line and say, “If I don’t meet this firm promise to the British people that I am guaranteeing, I will resign,” but he is not saying that. Instead he is saying that he will do his best, which is what everyone else is saying. It is an aspiration and a target, not a guarantee.
Ms Keeble: There is a complete difference between the Government, and the Liberal Democrats and the hon. Gentleman’s party in this regard. Both opposition parties have opposed Sure Start, healthy start vouchers, the child tax credit, the child care tax credit and the child trust fund. Every single measure introduced to target low-income children was opposed by both the hon. Gentleman’s party and the Liberal Democrats.
Mr. Heald: The hon. Lady is just plain wrong. For example, when the child trust fund was first mooted, I was a work and pensions spokesman and we supported it. There may have been details of the scheme with which we disagreed—the hon. Lady will accept that such an exchange of views is reasonable—but we supported the principle of having such a capital welfare scheme. In fact, we had ideas about making the pipeline into adulthood stronger. We came up with a plan for an individualised savings account that could follow on from age 18, so I do not accept the point that the hon. Lady makes.
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