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14 Jan 2009 : Column 102WH—continued

A new specialist consultant-led paediatric assessment unit and an older people’s assessment unit will be established at Chase Farm, and they will serve patients currently seen at A and E by the in-patient paediatric
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and older person teams on site. That will allow specialist teams to assess patients and treat or refer them appropriately without the patient having to be admitted to hospital and treated as an in-patient, as happens now.

Joan Ryan: The one thing that we are relieved about is securing the future of the hospital at Chase Farm, given that the very presence of a hospital there has been under threat. However, my hon. Friend the Minister talked about taking the politics out of the situation. We in Enfield feel that we have done that. The Minister can see that there is cross-party concern. There are no residents or public representatives in Enfield or, clearly, further afield—in Cheshunt, for instance—who in any way support a reduction in services at Chase Farm. The final comment that I want to make is that all the doctors, nurses and other staff at Chase Farm do a fantastic job and deserve the tribute that we pay to them.

Mr. Bradshaw: I entirely accept what my right hon. Friend has just said. I was trying to make the point that the system that the Government have established, which involves the referral from the overview and scrutiny committees, the democratic check that that provides and the role of the IRP, was set up to try to avoid the political wrangling that has dogged some of these reorganisations, which I admit are often controversial at local level.

Mr. Andrew Love (Edmonton) (Lab/Co-op) rose—

Mr. Bradshaw: I will give way very briefly; I was not left much time to reply.

Mr. Love: I shall be as brief as I can. Although I accept what has been said about trying to take the politics out of the situation, what people in Enfield simply cannot understand is how, given the overwhelming support for the hospital and what it represents, people could go against that locally determined decision.

Mr. Bradshaw: I hear what my hon. Friend says. Hon. Members will have to forgive me: I will not be able to cover all the issues that I wanted to in the time that the hon. Member for Enfield, Southgate allowed me, but I want to put this on record. He referred to an exchange in the House of Commons before Christmas. I did not mean to imply that the proposals that we are talking about were supported by everybody in north-east London; that is clearly not the case. I am well aware of local concerns, not least because of the assiduous lobbying by my right hon. Friend the Member for Enfield, North (Joan Ryan), who has not only brought all-party delegations to see me, but has lobbied my right hon. Friend the Secretary of State. I believe that her campaigning has succeeded in improving the original proposals substantially. The hon. Member for Enfield, Southgate also quoted selectively from the report by the College of Emergency Medicine, which—

Mr. Mike Weir (in the Chair): Order. Regrettably, we have run out of time for this debate.

11.30 am

Sitting suspended.

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Tax Credits (Working Parents)

2.30 pm

Mr. Mike Weir (in the Chair): We seem to be short of a Minister, but we shall carry on anyway.

Ms Karen Buck (Regent’s Park and Kensington, North) (Lab): Thank you, Mr. Weir. I think that means that I win by default, which is always good news. I am grateful for the opportunity to talk about tax credits and work incentives, particularly for working parents. [Interruption.] I welcome the Minister, who is now in his place; I had only just begun my remarks. I want to start by making it clear that, in my view, tax credits are a good thing. I am here to praise the basic system of tax credits, not to demolish it.

There are 1.5 million families receiving the working tax credit—that is the main focus of my speech this afternoon—and there are nearly 3 million children in households receiving it. The average family in work receiving the working tax credit have topped up their wages by almost £7,000 a year. Without tax credits, for millions of families work simply would not pay. That would not leave parents living a life of ease and luxury on benefits, as so much of the tabloid press would have us believe. It would leave them facing a stark choice between working as an end in itself—in my experience, most parents and most people are wholly sympathetic to that—and ending up deeper in poverty and less able to provide for their children and families.

As things stand, despite the extent of the tax credits system and the resources that go into it, 57 per cent. of all families who are below the poverty line are working families, so the issue is not that we are providing too much, but that we are providing too little. No family, no parent, should be left to choose between a job that leaves them worse off and a life on benefits.

John Mason (Glasgow, East) (SNP): If so many people are working and not able to live on that wage, does that suggest that the minimum wage is too low?

Ms Buck: I do not want to go too far into the byways of the minimum wage, but it certainly indicates that wages are too low in many parts of the country. I shall talk mostly about London, my own area. Given London’s higher costs—I am sure that this also applies in some other parts of the country—people have to earn significantly more than they do in very low-cost areas. One of the side projects that I have as a Member of Parliament is chairing the Fair Pay Network, which campaigns for a living wage in different parts of the country. I hope that that addresses the point.

The substance of my comments will not be that the tax credits system is fundamentally wrong or that there are moral failings in the approach to delivering tax credits, but that there are practical steps that we still need to address as a matter of some urgency if we are to make further progress on tackling child poverty and particularly on ensuring that work pays and that people with children can enter into and sustain themselves in employment at a level that allows them to care for their families. I shall address three issues, the first of which is child care costs and the child care tax credit, and the
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second is housing costs and the interaction between housing benefit, council tax benefit and the tax credits system.

Bob Spink (Castle Point) (Ind): The hon. Lady has brought up a very important issue and is making excellent points. I am sure that she will deal with the benefits trap. The issue that I want to raise relates to child poverty. Her Majesty’s Revenue and Customs has its rules on the clawback of overpayments. First, the individual must have acted properly at all times and not misled the Revenue. Secondly, the Revenue must not have made a mistake in making the payment. That is unfair, in that it results in clawback even when individuals have acted properly, and it will cause poverty for the individuals—

Mr. Mike Weir (in the Chair): Order. Interventions should be brief.

Bob Spink: I will draw my intervention to a close. Does the hon. Lady agree that we should remove the second requirement?

Ms Buck: I have sympathy with the general concern about clawback and overpayments, although that will not be the substance of my comments today. The Government have gone a considerable way on overpayments, compared with where we were a few years ago, but I accept that there is still work to be done.

The difficulty that parents have in assessing what their future financial situation is likely to be—in making that forward calculation—is a real concern. That allows me to segue into the third area that I want to talk about, which is the “better off” assessment and, if one takes into account tax credits and passported benefits and those that are lost, how difficult it can be for people to make a meaningful calculation of their financial prospects. The reality is that many people are not better off in work, for the reasons that I shall explain.

In outlining these issues, I am drawing heavily on my constituents’ experience. I carried out a survey in which a great deal of powerful and well articulated concerns were raised about how the system is working. I am also drawing on analysis conducted for the London Child Poverty Commission, the work of Westminster Children’s Society and briefings from Shelter, Citizens Advice and Every Disabled Child Matters. The interpretation is mine alone, but the facts come from them and the overwhelmingly powerful case that is made is theirs. As I said, I shall concentrate on London, which, although it shares characteristics with some other high-cost areas, is at the sharp end. The problems with policies that apply to the whole country are thrown into sharpest relief in London.

Child care is, of course, central to how parents make a decision about being able to go into work and sustain themselves in employment. I think that everyone would agree that it is critical that all parents thinking about a job can draw on child care that is safe and of high quality. The Government have done a great deal in the past 10 years. The landscape has been utterly transformed since 1997, with Sure Start children’s centres, the neighbourhood nurseries initiative and extended schools. In London, the Government have funded the child care affordability programme to help to plug the gap between London’s very high child care costs—a recent survey
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produced the figure of £8,000 a year for private nursery care in some places in London—and the national affordability threshold, for the purposes of calculating the child care tax credit, of £175 a week. Despite that, there are a number of problems.

First, given the route into assistance via the child care tax credit, which in turn is via the working tax credit, too many low-income working families who are on London wages but face London costs are simply not entitled to help. For those who do qualify, the required parental contribution is often still too high. Families with a total household income of £20,000 or so may still be required to find hundreds of pounds to contribute towards their child care costs. In addition, parents are confused and put off by a formula based on thresholds and percentage entitlements, especially if they really need to assemble a portfolio of child care, such as arranging for someone to pick up a child from a nursery or deal with two children in different child care settings. It is very hard—I would say that, in effect, it is impossible—for anyone to calculate what they will be entitled to and harder still to work out what they will then have to pay out of their future income.

Changes of circumstance can be particularly difficult to manage, especially as many child care providers demand payment in lieu of notice or reducing hours; that is not factored into the system. We could perhaps overlook all the disadvantages if the system were a major vehicle for helping low-income families with their costs, but it patently is not. The child care tax credit is making only a dent in the problem. Only 250,000 lone parents and 133,000 couples receive help from a national total of 6 million tax credit recipients and 1.6 million families in receipt of working tax credit.

Of course, there are significant local and regional variations. In my constituency, 4,770 families receive the working tax credit, but only 550—just under one in 10—receive help with child care costs. In my borough, Westminster, 4,830 households receive the working tax credit; a mere 490 families in the entire borough claim help with child care costs out of a population of 171,000. In Tower Hamlets—a borough more frequently associated with extreme poverty and low income—the figure is no better. A mere 520 families receive the child care tax credit out of 6,390 households that receive the working tax credit and a population of 148,000. In total, only 41,000 Londoners receive the child care tax credit. Given the number of households and the number on low incomes, common sense tells us that the system is failing to help a sufficient number of families.

Above all, although I have much sympathy for the broad thrust of the Government’s welfare reform policies, the child care tax credit fails to help parents of older children. The extended schools programme—an excellent initiative designed to provide wrap-around care from 8 am to 6 pm for 48 weeks of the year to parents whose children have entered the school system—relies explicitly on parental co-payment. That is the only way that the Government believe that those services can be made sustainable.

For lower income households, the child care tax credit is the means by which they can make a parental contribution to the extended schools scheme, yet research done by the Department for Children, Schools and Families indicates that the number of people doing so with the help of the child care tax credit is falling. If only 500 people in my borough receive the child care tax
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credit, it is easy to work out that most will be claiming the tax credit to help with nursery school fees of £200 or £300 a week and that virtually none will be drawing on that benefit for help with the extended schools scheme. That should ring loud alarm bells. We will not be able to deliver the extended school provision without parents making a co-payment, and they will not be able to make such a payment under the child care tax credit system.

It is clear that the child care tax credit is reaching the end of the road. It is not that it is a bad policy; it simply does not deliver what we want. We should look instead to an alternative that involves more direct funding of services—particularly, I argue, for provision for elder children. We also need a voucher or Oyster card system that includes a simple credit for parents who qualify for specific child care payments. That could provide them with up to 100 per cent. of the costs, depending on the circumstances. It would be calculated on income but be banded, and not subject to highly specific and difficult-to-calculate individual entitlements. It should also be able to accommodate regional variations in income, such as those that I have described.

Mrs. Maria Miller (Basingstoke) (Con): I congratulate the hon. Lady on securing this timely debate. She mentioned the concept of the Oyster card as a way of paying for child care. Has she heard that some in receipt of the child care element of the working tax credit are not using the money to pay for child care and that the bad debts that some nurseries are experiencing as a result can be crippling?

Ms Buck: There is clear anecdotal evidence that some parents are receiving the child care element but that it is not going to the providers. However, that would be an interesting subject for a wider debate. None the less, it is consistent with the Government’s approach, usually rightly so, and probably consistent with the approach that would be adopted by the Conservative party, that people should be able to choose how they dispose of their income.

I believe that parents should know exactly what they are entitled to, but that should not be about thresholds and percentages, which are hard to calculate. Whatever the technology, parents should be able to hold the equivalent of an entitlement to a specific number of hours of provision. In some cases, it might be provision for a child minder as well as for a nursery or extended school entitlement, based on household income, that passports them to a certain level of provision for child care.

Such a system is being explored by the London child care affordability programme, which is piloting variations on the child care tax credit system. That is excellent, but as always with such schemes, the pace is now so overwhelming that the child care element of the tax credit is no longer suitable, particularly in places such as London. We should move more swiftly to replace that element.

On housing costs and the interaction between the payment of housing and council tax benefits with tax credits, high rents in the private and temporary accommodation sectors—and, in London, even the social rented sector—make it inevitable that most lone and many two-parent families will continue to rely on housing benefits, even when in work.

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That creates two problems, the first of which is structural: the impact of the taper can creep up to 85p in the pound, making it much harder for working families to reach an income above the poverty threshold. The second is an administrative problem, whereby families on tax credit are subject to a housing benefit regime that reassesses their benefit with every variation in income—an entirely different system of calculation from the tax credit. As a result, it is again utterly impossible for families to calculate their entitlement and to make forward projections of their circumstances.

Housing benefit and council tax benefit are poorly understood, and very much so as in-work benefits. Citizens Advice calculates that lone parents earning low wages will find that increasing their hours will not increase their final income. The current scheme leads to an increase of about £1 a week for every £30 a week extra in gross earnings. Those who can command high enough pay rates to move out of the housing benefit and council tax benefit trap might gain approximately £8 for every £30, but the higher the rent and the higher the child care costs, the less likely they will do so.

The official position of the Department for Work and Pensions is that higher rents do not have an impact on work incentives by dint of the fact that housing benefit can be an in-work benefit. Frankly, that is nonsense. The fact is that housing benefit can continue to cover people’s rent if the income is low and the rent high, but it will not help them to increase their earnings. Taken together with costs and the loss of passported benefits, people could easily end up being worse off in work. For example, a couple with two children and a rent of £120 a week would be only £23 a week better off if their income increased from £100 a week to £400 a week. If their rent was only £60 a week, or treated as such, they would be £55 a week better off.

Much could be done for a relatively small amount of money. Reducing the housing benefit taper rate in London would cost an estimated £70 million and increasing the earnings disregard would cost an estimated £20 million. Introducing a housing costs top-up in the tax credit system would be more expensive at an estimated £200 million. We need to do something similar with council tax benefit, which bites at a much lower rate for families on tax credit. For example, setting the lower earnings threshold for council tax benefit in line with full working tax credit would give a substantial boost to very low earners.

The London Child Poverty Commission argues—the Government accept the fact in principle—that higher costs mean that wages do not go as far in London. Although some people might accept work that makes them worse off in the short term in the expectation that their earnings will soon increase, it would be perverse to expect many to do so, especially if there were children to be considered, yet that is the reality for many London families.

The Government need to address two aspects of the “better off” calculations: first, the reliability and accuracy of information on people’s post-work income—I am thinking in particular of the difficulty in predicting when housing and council tax benefits and child care costs are taken into account—and, secondly, the substantial question whether they are better off after the essential costs of working are taken into account, especially travel, their own meals, school meals and clothing.

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