Examination of Witnesses (Questions 460
- 479)
TUESDAY 8 DECEMBER 2009
RT HON
STEPHEN TIMMS
MP AND SARAH
MCCARTHY-FRY
MP
Q460 Ms Keeble:
The total number of families living in poverty.
Mr Timms: The figure that we have
published, the half million figure, does take account of all the
changes that had been put into effect up until the point to which
those figures applied. The projections are not from the Government,
they are from the Institute of Fiscal Studies.
Q461 Ms Keeble:
The note we have says that the Government does not hold quality
assured data on the family breakdown of LHA customers. You do
not have the data, is that right?
Mr Timms: I think what the note
says about that is correct. But that is a slightly different issue
from the child poverty figures, where the half million does take
account of all the changes there have been up to the point where
that was measured. The next set of figures, equally, will take
account of all the changes—
Q462 Ms Keeble:
It will take account of the changes to Local Housing Allowance
and the fact that quite a lot of poor families are facing a claw-back
in income because of these rule changes, which, as you know, a
lot of people are very concerned about.
Mr Timms: Yes, it certainly will.
The data takes account of all people's sources of income.
Q463 Ms Keeble:
On the childcare element of the Tax Credit, which is specifically
your responsibility, are you surprised at the low average weekly
rates of money provided? Do they not indicate that they are being
claimed for part-time work and quite minor part-time work and
that people are not taking it up in quite the way that was perhaps
originally intended?
Mr Timms: I must say I had not
been struck by that as a surprise. We have seen an encouraging
increase in the number of people taking up the childcare element
of the Tax Credit.
Q464 Ms Keeble:
Two hundred thousand.
Mr Timms: I am sure there is scope
to do better still. Certainly many parents will be using that
support to help them manage childcare alongside a part-time job;
others will do so for full-time work. It is clear that part-time
work is a very important contribution to the progress we have
made on child poverty. There are some parts of the country where
part-time work is harder to get than others and that is a reason
why we have had some difficulties in those parts of the country.
But I have not been surprised myself by those figures.
Q465 Ms Keeble:
I want to press you on that. It surprises me, because certainly
in my own constituency somebody was paying £500 a month for
three days childcare a week, and your average claims here are
£68.69. That would barely pay for a bit over half of a part-time
place, let alone anywhere near somebody being able to go out to
full-time work. What studies are being done of all of this data
and of the take-up in what is happening to women?
Mr Timms: We have looked very
carefully at the take-up point and we are working to increase
take-up and we are looking as well at whether there are more effective
ways in which childcare provision can be supported.
Q466 Ms Keeble:
Material deprivation indicators are another of the measures of
poverty. Are you concerned, since again it was your specific responsibility
in the Bill, that the very excellent indicators of material deprivation
are not enforceable and are not costed?
Mr Timms: I agree that the indicators
of material deprivation in the Bill are excellent. It is worth
making the point that they are the result of quite a lot of academic
work and reflection—I cannot claim credit for them myself.
Their role is to measure material deprivation, so they are not
things that are for enforcement, they are for telling us what
is happening in the lives of children.
Q467 Ms Keeble:
Is it not of concern that you have an indicator which you measure
and for which you have graphs but it is reliant on things which
are not costed and which cannot be enforced? Does it not make
that aspect of the Government's commitment on child poverty a
wish rather than any firm commitment or anything that is achievable?
Mr Timms: The indicators and the
measurements which go with them are informing us about the lives
of children in the UK. The commitment in the Bill is that the
proportion of children who suffer material deprivation and are
of relatively low income should be less than 5% by 2020. It is
a measuring tool. That is the purpose of those indicators. We
are not saying that people want to abolish the position where
anyone on any one of the 21 indicators is below a certain level.
That is not the nature of them. It is about getting a view across
the board of the level of material deprivation amongst children
in the UK and a commitment to ensure that that level is very sharply
reduced between now and 2020.
Q468 Ms Keeble:
I want to ask one more question about the Asset Protection Scheme,
a completely different subject. What information do you have about
the Treasury's calculations of potential losses and when you might
expect to see them start to crystallise? There has been much speculation
about it and it is a key factor in terms of the cost of these
special measures.
Sarah McCarthy-Fry: I think it
is too early to say. We have put the additional cost in with the
excess vote. We do anticipate that we are going to get as much
back as we can. It is too early to say when we expect or even
if we expect any of this to crystallise.
Q469 Ms Keeble:
But it has been too early to say, I have to say, for quite a long
time. There must be some sort of scoping out of what the future
is likely to look like, given that if the costs do start to crystallise
then they could be quite substantial.
Sarah McCarthy-Fry: It is an ongoing
situation and I do think it is too early to give any timetable
or exact figures at this stage.
Q470 Mr Brady:
The Permanent Secretary told us that UK taxation is far too reliant
on receipts from the financial sector and the housing market.
He said that there are important lessons to be learned for the
future. What lessons for the future have you learned?
Mr Timms: I think he said that
we have to look for tax where we can find it (or an expression
of that kind). As you know, the key commitment that we have made
on this is to reduce the deficit by half over the next four years.
We have made a number of announcements on tax measures which will
contribute to that target already. The Chancellor no doubt will
comment on this again when he stands up to address the House in
the Pre-Budget Report tomorrow. One area that I would highlight
is the work we have been doing on addressing both avoidance and
evasion and making sure that the tax that is due is collected
in. We have taken a number of steps to close loopholes and to
bring in tax that otherwise would have been lost, and I think
that is going to be very important work over the next four years
while we seek to halve the deficit.
Q471 Mr Brady:
Would you envisage the proportion of the tax take coming from
financial services and the housing market being less during a
recovery than it is at the moment or than it has been historically?
Mr Timms: That is going to depend
in particular on the level of profitability in the financial sector,
and at the moment, of course, things look rather more buoyant
on that front than they did a year ago, or, indeed, rather less
than a year ago. But it is the amount of corporation tax paid
by those institutions that will be the key determinant of that.
Q472 Mr Brady:
You are hoping that we will be just as reliant on tax from financial
services in the future as we have been in the past.
Mr Timms: I suspect that the UK
economy as a whole is not going to be able to depend on growth
in the financial sector to the extent that we have been able to
over the last decade. Of course that is the strategy that Lord
Mandelson has just set out, the New Industry, New Jobs strategy
which involves, as the CBI have been calling for, for government
to identify parts of the economy where we can look forward to
higher growth (like, for example, the digital sector, for which
I also bear ministerial responsibility) and the Government then
making sure that we have the wherewithal in place for those sectors
to thrive and do well to contribute tax revenues and contribute
employment as well.
Q473 Mr Brady:
To turn to the temporary VAT reduction, do you regret the decision
to end it on 1 January?
Mr Timms: No. The key thing with
the change—and by the way I do believe that the VAT reduction
has been a very significant contribution to limiting the damage
that the worldwide downturn has inflicted on the UK economy—was
to be absolutely certain at the outset of when the rate was going
to go back up, so that people had confidence to plan for that
change. It is also important in order to maximise the stimulus
benefit of the announcement, because clearly people have an incentive
at the moment to make purchases now and in the early few days
after Christmas, ahead of the rate going up. The key thing was
to say when it was going to happen and to stick to it, and not
to change it. That is what we have done.
Q474 Mr Brady:
Is not 1 January the most inconvenient date possible for many
businesses?
Mr Timms: That point has been
made to me by retailers. I understand the difficulties that they
might face, but talking to the British Retail Consortium, their
overriding concern was that they should have plenty of time to
plan for the change. They would have preferred that it was not
at the beginning of the January sales but, more than that, they
wanted to be absolutely sure when it was going to be.
Q475 Mr Brady:
What other dates did you consider?
Mr Timms: I do not think we looked
at any specific alternative date. We did consider whether it would
be right to have a different date, either an earlier date or a
later date, but there was not any particular date that we considered,
and of course if the date had been deferred at all then there
would have been a significant impact. The cost of a month's delay,
for example, is of the order of £1 billion Given the importance
of consolidating the public finances, change along those line
was not attractive.
Q476 Mr Brady:
Do you believe there has been the stimulus effect that was intended
at the outset?
Mr Timms: Yes. Clearly this is
something that the economists are going to be looking at for some
time, mulling over the data as it emerges, but I think the evidence
is clear. It is one of the reasons, certainly, compared with previous
recessions, why we have seen retail sales have been very buoyant.
The economy has supported a lot of jobs and meant that the expectations
that people had about reduced employment or repossessions and
so on have not been fulfilled. I think the VAT reduction has been
a very important and effective part of the stimulus.
Q477 John Mann:
My questions are about HMRC. Are you proud of your management
of HMRC?
Mr Timms: I am proud of a lot
that HMRC has achieved.
Q478 John Mann:
Are you proud of your people management?
Mr Timms: HMRC has achieved an
extraordinary amount in a relatively short time under enormous
pressure. It has, for example, delivered a very significant reduction
in its workforce from, in full-time equivalent terms, 98,000 to
78,000 between April 2004 and October 2009, so just over five
years. That is a dramatic change.
Q479 John Mann:
Are you proud of your people management?
Mr Timms: It is undoubtedly the
case—and I imagine this is what you are referring to—
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