The
Committee consisted of the following
Members:
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 Guardians Allowance Up-rating (Northern Ireland) Order
2010, the draft Guardians 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 guardians
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
helpon 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 2010an 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 guardians 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. Guardians 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 Governments
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 Governments 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 increasethat 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 Governments
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.
If
there were a change of Government at the forthcoming election, I hope
that Labour politicians would not make great play of the fact that the
new Government were not increasing benefits at the rate of inflation.
Of course,
that is locked in and there is no getting away from it. I would be
grateful, too, if he explained what would happen if RPI were less than
anticipated and, say, less than 1.5 per cent. in September 2010? Would
there be a continued deferral or could there be a cut in benefits?
Would the Government have that in mind if RPI were less than 1.5 per
cent? If it were only 0.5 per cent. in SeptemberI know that is
not anticipated, but let us imagine it has happenedwould the
Government repeat the policy that they adopted this year of an increase
in benefits of 1.5 per cent? I would be grateful if the Minister
provided some clarity on
that.
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 confirmthis is my
understandingthat 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
providedI 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. markit 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
Governments 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 Chancellorthe man who is now Prime
Minister.
I wish to
close on the point made by my hon. Friend the Member for South-West
Hertfordshire from the Front Bench. For all the Governments
promises since 1997, they have not succeeded in their aim of reducing
child povertyin fact it has increased in recent years.
That has happened for a number of reasons, but it is fundamentally
because the Governments stewardship of the economy has failed
us. I point out that it is historically true that Labour Governments
always increase inequality and leave the economy in a mess, and it then
falls to a Conservative Government to clear it up. Ironically, a
Government who care more about poverty end up letting the poor down,
and those Governments who put the viability of the economy first
generally create more equal and prosperous societies and more social
mobility than any complex bureaucratic system of publicly funded
poverty alleviation could ever deliver. If there is one thought that we
take with us to our constituents as we move towards the next general
election, it is that
one.
Mr.
Parmjit Dhanda (Gloucester) (Lab)
rose