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Session 2009 - 10
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Delegated Legislation Committee Debates



The Committee consisted of the following Members:

Chair: Mr. Graham Brady
Burt, Lorely (Solihull) (LD)
Cohen, Harry (Leyton and Wanstead) (Lab)
Dhanda, Mr. Parmjit (Gloucester) (Lab)
Duddridge, James (Rochford and Southend, East) (Con)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Griffiths, Nigel (Edinburgh, South) (Lab)
Jenkin, Mr. Bernard (North Essex) (Con)
Lepper, David (Brighton, Pavilion) (Lab/Co-op)
Mates, Mr. Michael (East Hampshire) (Con)
Mudie, Mr. George (Leeds, East) (Lab)
Pearson, Ian (Economic Secretary to the Treasury)
Plaskitt, Mr. James (Warwick and Leamington) (Lab)
Pound, Stephen (Ealing, North) (Lab)
Shepherd, Mr. Richard (Aldridge-Brownhills) (Con)
Thurso, John (Caithness, Sutherland and Easter Ross) (LD)
Wyatt, Derek (Sittingbourne and Sheppey) (Lab)
Eliot Barrass, Committee Clerk
† attended the Committee

Eleventh Delegated Legislation Committee

Wednesday 17 March 2010

[Mr. Graham Brady in the Chair]

Draft Child Benefit Up-rating Order 2010
2.30 pm
The Economic Secretary to the Treasury (Ian Pearson): I beg to move,
That the Committee has considered the draft Child Benefit Up-rating Order 2010.
The Chair: With this it will be convenient to consider the draft Guardian’s Allowance Up-rating (Northern Ireland) Order 2010, the draft Guardian’s Allowance Up-rating Order 2010 and the draft Tax Credits Up-rating Regulations 2010.
Ian Pearson: It is a pleasure to serve under your chairmanship, Mr. Brady. Tax credits, together with child benefit, deliver financial support to the vast majority of families with children in the UK and are vital to our commitment to tackling child poverty. I am pleased to introduce these instruments, which increase certain elements and thresholds of tax credits, and raise child benefit and guardian’s allowance.
I shall deal first with the Tax Credits Up-rating Regulations 2010. Tax credits play a major role in ensuring that work pays and in tackling child poverty. Overall, 6 million families containing 10 million children are benefiting from tax credits. The flexible tax credits system has risen to the challenges posed by the downturn and is delivering additional support to families when they need it most. In 2009-10, 400,000 families whose income had fallen received extra help—on average, £37 more a week. These regulations increase the child element of the child tax credit by £20 above earnings indexation. That means that the child element will increase to £2,300 from April 2010—an increase of 2.9 per cent. Since its introduction in 2003, that element will have increased by £855, benefiting 7.5 million children.
For the first time in half a century, as I think the Committee is aware, the retail prices index decreased, for the year to September 2009, which means that all the rates have increased in real terms. To provide additional support to households during the early stages of the economic recovery, the Government are bringing forward a proportion of the increases expected in April 2011 a year earlier. From April 2010, rates will be increased by 1.5 per cent. for those benefits and tax credits normally uprated by the RPI. In April 2011, rates will be increased by the remaining amount necessary to make up the difference, locking in the real increase arising from the fact that prices have fallen. These regulations therefore increase the disabled element of the child tax credit and most of the other working tax credit elements by 1.5 per cent.
The Child Benefit Up-rating Order 2010 and the guardian’s allowance orders are also being debated. Child benefit is payable to more than 7.5 million families for about 13 million children and young people, providing almost all families in the UK with a worthwhile contribution towards the cost of bringing up their children. These instruments, too, increase rates by 1.5 per cent. From 12 April 2010, child benefit will be worth £20.30 a week for the first child and £13.40 for each subsequent child. Guardian’s allowance will increase to £14.30 a week.
With the increases introduced by these instruments, we shall deliver even more support next year. We remain committed to the Government’s goals on child poverty, and tax credits will remain a key part of that. Between 1998-99 and 2007-08, half a million children were lifted out of relative poverty across the United Kingdom. That is a result of continued investment in tackling child poverty by the Government, as demonstrated by the substantial increases in child tax credit by at least earnings for this Parliament.
As a result of measures introduced since 1997, families with children in the poorest fifth of the population are £5,000 a year better off because of personal tax and benefit changes. The Child Poverty Bill, which has its Third Reading in the House of Lords this afternoon, further demonstrates the Government’s commitment to the eradication of child poverty. I commend these instruments to the Committee.
2.34 pm
Mr. David Gauke (South-West Hertfordshire) (Con): It is a great pleasure to serve under your chairmanship for what I think is the first time, Mr. Brady, and I thank the Minister for his introductory remarks. I do not intend to divide the Committee, as would be expected, but I have one or two questions for the Minister, and I would be grateful if he responded to them.
First, as the Minister said, and to provide some background, for the majority of the benefits that we are discussing, the normal procedure is that they are increased in line with the RPI in the September of the previous year. He has explained that, unusually, the RPI was negative last September. The Government explained what they have done by describing it as bringing forward a 1.5 per cent. increase from the 2011 increase, which would otherwise apply following the usual formula. That will, I understand, have a one-off cost of £700 million for the coming financial year, but no cost thereafter, because the increase will be clawed back from future increases. The Government describe that as additional support for households during the early stages of economic recovery.
The Minister is a man of great integrity, and I would not want to accuse him of being cynical in any way, but there is a cynical interpretation of the increase—that benefits are being increased ahead of inflation before a general election, and will be increased by less than inflation after it. That reminds some of us of the Government’s policy of a one-year-only council tax rebate for elderly households in 2005, when the Government undertook an act of generosity for an election year that was not to be repeated. In this case, we will see whether the policy set out in the pre-Budget report and by the Minister is maintained, and whether benefits increase by less than RPI next year. I would be grateful if he confirmed that that is indeed the case.
I turn to the child element of child tax credit. I understand that the increase is in line with earnings plus £20, as set out in the 2009 Budget. Government policy is to increase the child element of child tax credit by at least the increase in average earnings during this Parliament, but this Parliament is about to come to an end. Will the Minister say whether the Government would wish to continue that policy into the next Parliament, and will he confirm—this is my understanding—that the policy of clawing back in future years benefit increases given this year does not apply to the child element of child tax credit?
What is the policy for next year? Do the Government intend to increase benefits in line with earnings and prices? Does any element of any increase that we are debating today involve bringing-forward or should the increases be considered in their own terms, with no future years in which they will be adjusted?
Finally, the Minister referred to Government policy on child poverty. As he said, the Third Reading of the Child Poverty Bill takes place in the other place today, and on Monday we shall debate the various amendments that the other place has made to that Bill. I do not intend to go into the contents of the Bill, but, as this is one of the last few opportunities for the Government to do so before the election, will the Minister finally confirm explicitly that they will not meet their child poverty targets for 2010? Subject to those points, we do not intend to divide the Committee.
2.41 pm
John Thurso (Caithness, Sutherland and Easter Ross) (LD): What a pleasure it is to serve under your chairmanship, Mr. Brady. I confirm that I do not intend to divide the Committee either, but I want to pursue the question, which is along the lines of the points that the hon. Member for South-West Hertfordshire raised, of what will happen to the uprating next year.
I am grateful to the Minister for the helpful explanatory notes. In paragraph 7.2, there is an explanation that a proportion of the increase expected in April 2011 has usbbeen brought forward a year, therefore providing a 1.5 per cent increase from April 2010. The notes go on to explain:
“In April 2011, rates will be increased by the remaining amount necessary to make up the difference with the RPI for September 2010”.
I know how diligently you read the inflation report, Mr. Brady, and how familiar you are with the fan chart that is helpfully provided—I am sure that the Minister has more than a passing acquaintance with it. Having taken the trouble to have a quick look at the fan chart, I note that it indicates that the central projection is around the 1.5 per cent. mark—it might be one or two points below or one or two points above. If my calculations are right and it is 1.5 per cent., we find that 1.5 from 1.5 equals nothing, so does that mean that there will be a zero increase next year?
As the Governor of the Bank of England keeps telling us, the central projection is the one projection that we can never rely on, and if it were to fall below the current figure to 1.2 or 1.3 per cent., what would the Government do? In those circumstances, given how the path of inflation, and particularly consumer prices index inflation, has run throughout the course of this year, would it not be the case that people would not be benefiting from a real-terms increase? Exactly how will that work? My hon. Friend the Member for Northavon (Steve Webb), who speaks on these matters, set out that point in the Chamber, but I do not think that we have received a satisfactory answer. I would be grateful if the Minister clearly set out what the Government’s approach would be in such circumstances. With those brief remarks, however, I am happy to let the instruments go through.
2.44 pm
Mr. Bernard Jenkin (North Essex) (Con): It is a pleasure to serve under your chairmanship, Mr. Brady, and I believe that this is the first time that I have done so. I do not intend to detain the Committee for long.
Like others, I do not intend to divide the Committee, but I wish to mention that we might be doing things in a strange order this year, because it is usual to uprate our benefits after a spending review. We are uprating child benefits and tax credits somewhat more blindly than we should be because the Government have decided to delay the spending review until after the election. We all know the reason why: they do not want to tell British voters the ugly truth about the state of the finances and the reality of the spending restraints that will be applied by whichever party wins the next general election.
Having said that, I have always been a fan of child benefit. Its great advantage is that it can raise families out of poverty without increasing the poverty trap, and that is why it has always been the foundation stone of any Conservative anti-poverty policy. I make no policy pronouncements on behalf of myself, let alone of my party, but I invite the Committee to consider whether the money that we are spending on child tax credits would not be better spent if it was added to child benefit. Yes, child benefit goes to wealthy families, but given the bureaucracy and suffering that has been inflicted on many of our constituents by the failure to implement child tax credits effectively, and the awful business of confronting constituents in our surgeries who have been faced with demands to pay back credits after they have been allowed to keep them for months or even years, we should learn the lesson that simplicity should always win over complexity when designing benefit systems. I hope that whichever party wins the next election will take that adage to heart and ensure that we do not compound the errors made by the former Chancellor—the man who is now Prime Minister.
Mr. Parmjit Dhanda (Gloucester) (Lab) rose—
 
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