1.36 pm
Vernon Coaker (Gedling) (Lab): I thank the Secretary of State for advance sight of her statement and for her usual courtesy. May I also join her in thanking the members of the independent panel for their serious report, which I know will be read by the families of the victims? Those families and those victims are very much in our thoughts today.
Does the Secretary of State agree that at the heart of the undeniable progress that has been made in Northern Ireland is trust? I am talking about trust in the institutions, trust in the democratic process and, crucially, trust between parties and politicians. Above all, there is a belief in the principle of the rule of law. It is that core principle that has to be paramount. It is a principle that has to be at the centre of the continuing progress in Northern Ireland, and we should not forget that the work of the Police Service of Northern Ireland remains crucial to that.
The current political crisis in Northern Ireland was sparked by allegations surrounding the murder of Kevin McGuigan, following the murder of Gerard Davison. Will the Secretary of State tell the House what the report says about those murders and the extent of any paramilitary activity? In order to reach its conclusion, the panel will have had access to sensitive intelligence. Will she confirm that the panel has obtained all the intelligence for which it has asked? Crucially, will the Secretary of State tell us whether she believes that the assessment of the independent panel and its report today provides a basis for an end to the political crisis in Northern Ireland? If she does, what happens now and how will progress be made? Will she be convening further talks? If not, what does she expect to happen and what will she do?
Will the Secretary of State also update the House on the current situation with respect to the Stormont House agreement and when she intends to publish the Bill?
The reaction of the Northern Ireland parties to the panel’s conclusions is obviously of huge importance. Has the Secretary of State had any preliminary discussion
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with the parties on this matter? It is also important to know the view of the Irish Government. Will she say what discussions she has had with them?
Paramilitary activity has no place in Northern Ireland. The vast majority of the people do not want it and neither do their politicians. Does she agree that it is for the police to enforce the law? They should, of course, be accountable, but their independence is crucial. No paramilitary activity is acceptable, whether it is carried out by remnants of the IRA or loyalist paramilitaries. Will the right hon. Lady tell us what measures, if any, she intends to take as a result of the report? Much of the media focus has been on the IRA, but what is her view of loyalist paramilitaries? Does she believe, for example, that the establishment of the Loyalist Community Council recently was a good thing?
Is not one of the crucial conclusions of the report that
“none of these groups is planning or conducting terrorist attacks”?
Does the Secretary of State agree that, as the report states,
“the existence and cohesion of these groups since their ceasefire has played an important role in enabling the transition from extreme violence to political progress”?
If so, what does that mean for the future? Can she confirm that, as the report says, it is individual members of paramilitary groups who pose the real threat? Although much of the focus is rightly on threats to national security, is it not disgraceful and unacceptable for any individuals or groups to be involved in what the report describes as
“large scale smuggling operations, fuel laundering, drug dealing and extortion of local business”?
It is surely right, therefore, that we in this House restate our support for the work of the PSNI in tackling these issues.
There can be no doubt that once again hugely difficult issues have arisen in Northern Ireland—issues that are an immense challenge to the politicians of Northern Ireland and to all of us who seek to support them as they emerge from the horror of the past. We know that time and again politicians in Northern Ireland have risen to that challenge. They have found a way forward. They have dealt with seemingly intractable problems. Is it not time again for all of us to restate the fundamentals of the agreements that have brought us to where we are, and to reassert the principles of trust, sensitivity and mutual respect on which so much progress has been made, and the primacy of the rule of law? So many people have said to me that they do not want their children or grandchildren to suffer as they have done. Let us all find a way once again to ensure that that aspiration remains a reality.
Mrs Villiers: I agree with the shadow Secretary of State that trust between political parties is crucial in making progress in Northern Ireland and crucial to the effective functioning of devolved government. I wholeheartedly agree that belief in the rule of law and support for that concept is crucial in Northern Ireland, just as it is everywhere else in our country. Like the hon. Gentleman, I believe that the PSNI does a hugely important job in tackling not just the terrorism of the dissident republicans, but the criminality from the groupings about which I have been speaking today.
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In relation to the case of Kevin McGuigan, the assessment confirms that the view of the two organisations, the PSNI and MI5, which compiled the report, is that the Chief Constable’s statement in August remains valid, so the situation in relation to the Kevin McGuigan case continues to be as set out by the PSNI in August.
On the question of access by the panel to classified and sensitive intelligence, yes, members of the panel were shown classified material and they had access to individuals from MI5 and the PSNI to challenge them on the process by which the assessment and the report had been compiled.
The shadow Secretary of State asked whether I believe the assessment can provide a basis to move forward. Yes, I do. As I said in my statement, I do not for a moment say that it answers all the questions in relation to paramilitary organisations. There is now a pressing need in the talks for the parties together to establish what is the best way to grapple with the continuing problems associated with the existence of paramilitary organisations, but I hope the publication of the assessment will inform the decisions that will need to be made in the coming days by the leaders of Northern Ireland.
In response to the question about my discussions on these matters, I have had extensive discussions with the five main parties in Northern Ireland and with the Irish Government as part of the talks process and beyond that. On the hon. Gentleman’s question about the establishment of the Loyalist Community Council, I welcome initiatives designed to move groups away from criminality, but this initiative must be judged on its results.
I echo the shadow Secretary of State. It is correct to highlight the conclusion in the assessment that none of the groups under consideration is planning terrorist attacks. He referred to the role these groups might have played in the transition of their members from a violent past to a peaceful future. I acknowledge that the picture is mixed, but there are some aspects of the assessment that are not completely negative.
That covers most of the hon. Gentleman’s questions. I close by saying that I agree with him that it is unacceptable for individuals, whether they are in paramilitary organisations or not, to be involved in disgraceful activity such as the fuel laundering and smuggling that I outlined today.
Mr Laurence Robertson (Tewkesbury) (Con): The report makes for depressing reading in some ways. Has the Secretary of State had the chance to assess whether any of the money from the fuel smuggling, extortion and so forth finds its way into the political process? Does she agree that the work of these criminals is no reason to bring the institutions down, provided that the police and the other agencies have sufficient resources to track these people down and stamp out their poisonous activities? Are sufficient resources going to these agencies so that they can do exactly that?
Mrs Villiers:
Yes, in some ways the assessment makes for depressing reading but, as I said to the hon. Member for Gedling (Vernon Coaker), the assessment is that the statement of the Chief Constable remains valid. He emphasised in that statement that the criminality appears to be by members for personal gain and to pursue personal agendas, so there is no evidence of funds being
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diverted for political purposes. On police resources, it is important that the police have the resources they need to tackle criminality and terrorism. That is one of the reasons why the UK Government have provided additional security funding, and it is why we need to resolve the budget questions around the Northern Ireland Executive and implement welfare reform so that it has resources for its priorities, such as policing.
Deidre Brock (Edinburgh North and Leith) (SNP): I thank the Secretary of State for advance notice of her statement. That is much appreciated.
I and my party very much welcome the assessment of the review panel, showing that there is little likelihood of a return to the levels of violence that we saw during the troubles. So many people have worked on that over the years and the peace has been hard won. It is very satisfying to note that, in the main, the intent among the parties and organisations is to keep that peace.
There are, of course, the concerns already mentioned about the ongoing criminality and the damage that can be done to communities by that. The police and security services, as mentioned, will require ongoing support in addressing that. I note, though, that the report is clear that the concerns relate to both sides of the debate. We can perhaps now leave aside the idea that one side maintains readiness and the other does not. Both sides, it seems, continue to operate at a lower level than they did previously. I offer whatever help I and my party can provide in dealing with the issues outlined.
In the light of the report and the other developments, including the recent development in the investigation of the murder of Kevin McGuigan, is the Secretary of State confident that the talks to put the Stormont House agreement back on track can now succeed? Does she have any indication that all the governing parties are ready to return to their ministerial posts in Stormont? In relation to her analysis of what will be required to address the criminality mentioned in the report, does the Secretary of State believe—I realise that this question has already been raised—that sufficient resources are available to the police and the security services to tackle it?
Mrs Villiers: I, too, welcome the assessment’s confirmation that the intelligence services do not believe that any of these paramilitary organisations are preparing for a return to terrorism. The hon. Lady is also right to highlight the fact that the problem of criminality is common across the different organisations. She asked whether I am confident that the talks will succeed. It is difficult to say, because there are still some significant gaps between the parties, and the debate over the financial sustainability measures, which are crucial if we are to return to successful devolved government, continues to be difficult to resolve. However, I believe that all five parties participating in the talks want to find a way through and to make devolution work, so I have some hope that we might have a successful outcome, although it is not guaranteed.
Mr Owen Paterson (North Shropshire) (Con):
I thank the Secretary of State for her statement, particularly her tribute to our military and security forces, who defended
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the rule of law through some very difficult decades and created the conditions in which the talks could take place. Does she agree that we cannot have a normal political process in Northern Ireland while those engaged in political activity have links to shadowy organisations that might either go to the grotesque end of murdering Kevin McGuigan, or indulge in money-raising activity that is wholly illegal, such as racketeering, money laundering and fuel smuggling? The answer is absolutely to bear down on every one of those criminal activities, regardless of where that might lead and any potential political embarrassment.
Mrs Villiers: I agree that it is vital that Northern Ireland moves to a situation in which paramilitary groups are part of its past, not its present or its future. It is entirely unacceptable for those organisations still to exist, and the involvement of their members in such serious criminal acts must be a matter of grave concern. It is vital that the police follow the evidence wherever it leads them. Bearing down on the criminal activities of those individuals is how we will help Northern Ireland to move forward.
Mr Nigel Dodds (Belfast North) (DUP): Our party sought this assessment, and it comes as a result of the pressure that we were determined to exert, whatever the criticisms or brickbats that that brought us. We therefore welcome its publication today, setting out the clear, factual position regarding paramilitaries in Northern Ireland. However, the report demonstrates the scale of the work that lies ahead in the talks process. It states that the IRA is committed to the peace process, and it recognises the lack of recruitment, procurement of weapons and so on. Nevertheless, it clearly sets out the continuing existence of its paramilitary structures—that applies to all the organisations that were looked at—and illegal activity by its members. That is totally unacceptable, and it is beyond high time that it was ended in all its forms—terrorism and criminality.
With regard to the account of loyalist groups, although there are no direct implications for devolved government, it is essential that transformation takes place in that regard, too. In that context, will the Secretary of State welcome the willingness of the leadership of those groups to move forward, as publicised last week? Will she work with us, and all those committed to peaceful and democratic means, to end once and for all—this must be the outcome of the talks process—all forms of paramilitarism in Northern Ireland?
Mrs Villiers: I can give the right hon. Gentleman that commitment. I think it is vital that we find a way to end all forms of paramilitarism in Northern Ireland. I also agree that it is crucial that the talks currently underway succeed. All the parties need to engage intensively on this matter and on the Stormont House agreement, because without resolution of those questions it is difficult to see how we can have an effective and functioning Executive delivering on their priorities. It was very important that the assessment was produced and that we have further facts in the public domain, but I acknowledge his point that the scale of the task is great. We must not underestimate that, which is another reason why all the parties need to engage in the talks with determination to find a way forward.
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Dr Andrew Murrison (South West Wiltshire) (Con): I congratulate my right hon. Friend on her statement and the panel on its assessment, which offers partial reassurance, but does she agree that that reassurance must be qualified by the fact that, unlike state actors, paramilitaries do not obligingly leave an audit trail that can easily be assessed by intelligence services, however excellent they are?
Mrs Villiers: Naturally, with criminal and paramilitary activity it is not easy to get an entirely clear picture. Of course, a key element of the talks will be deciding what further process of verification is needed. There has been considerable discussion of reviving a body similar to the Independent Monitoring Commission. I think that is a useful point for discussion, and I am sure that the parties will be considering it in the coming days.
Tom Elliott (Fermanagh and South Tyrone) (UUP): I thank the Secretary of State for her statement. I know that she has tried to put as positive a spin as possible on the report, but it confirms that the report by the Chief Constable of the PSNI two months ago was accurate, that the IRA is still in place, that IRA members murdered Kevin McGuigan and that they are still involved in paramilitary and criminal activity. It actually goes further and gives more information, indicating that the IRA army council is still in place and that it oversees the IRA and Sinn Féin’s overarching strategy. Will she now indicate whether Sinn Féin accepts that the IRA is still in place, and does she accept that the IRA and Sinn Féin continue to be inextricably linked?
Mrs Villiers: It will not surprise the hon. Gentleman to hear that I am unable to speak for Sinn Féin—no doubt it will provide its own response to the report—but I also take issue with him, because I am not trying to put any spin on the assessment. Today of all days, we need people to read the report and consider it objectively. Yes, there is a great deal in it to be very concerned about, but we need to use it as an opportunity to reflect on how we deal with the problem and on what more needs to be done to ensure that Northern Ireland makes progress. I have acknowledged that the situation is serious and that the task will not be easy, but I think that it is a task that can be achieved. Northern Ireland’s leaders have shown in the past that they are capable of grappling with this very difficult kind of issue.
Bob Stewart (Beckenham) (Con): When I was the intelligence officer in Londonderry, the discipline among paramilitary groups such as the Ulster Defence Association, the Ulster Volunteer Force, the Irish National Liberation Army and the Provisional IRA was hugely effective. The independent reviewers have clearly suggested that the leadership of such organisations are not necessarily in control of what their members are doing. I suggest that our security services should be putting huge efforts into dislocating and separating these maverick members of paramilitary organisations from their leadership, who say that they have nothing to do with the upsurge in violence.
Mrs Villiers:
It is certainly clear from the assessment that in many cases the leadership of the various organisations do not control or sanction what their members get up to, but I can assure my hon. Friend that
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Northern Ireland has an outstanding police service, supported by the intelligence services, and they will pursue crime wherever they find it. They do a fantastic job. They will pursue the individuals responsible for the sorts of crimes outlined in the report with as much vigour and determination as they pursue anyone else involved in wrongdoing in Northern Ireland.
Lady Hermon (North Down) (Ind): I am very grateful indeed to the Secretary of State for making her statement to the House. I am relieved that, with regard to the Provisional IRA:
“The PSNI and MI5 do not believe the group is actively recruiting.”
However, what I am worried about, and very curious about, is how much seepage there is from the Provisional IRA to dissident republicans. Is there a high or low level of seepage? What is her assessment?
Mrs Villiers: I am sure that the hon. Lady will accept that these are very sensitive matters and that it is not appropriate for me to go beyond the assessment. Naturally, the risk of seepage between the Provisional IRA and dissident republican groups is always a risk about which our intelligence services and the PSNI are acutely aware. One of the reasons these groupings remain a threat to national security is the danger that their expertise might find its way into the hands of dissident republicans. That is a risk that we all need to be aware of.
Andrew Stephenson (Pendle) (Con): I welcome what my right hon. Friend has said and the work of the panel. Given the information we now have, does she believe that there should be a continuing role for such assessments going into the future?
Mrs Villiers: Almost all the parties have made it clear that part of the solution on paramilitary organisations is an ongoing process of verification that is demonstrably independent, so that is likely to be part of a successful outcome to cross-party talks.
Mark Durkan (Foyle) (SDLP): Does the Secretary of State agree that the assessment proves that there is a need for a whole community approach to making sure that we eradicate all traces of malignant paramilitarism? Does she also agree that alongside that we need a whole enforcement approach by policing and revenue channels against any level of criminality? We have to be absolutely clear that no level of crime can be treated as par for the course in a peace process. We welcome the predisposition towards peace, but we cannot accept a predilection towards crime from the members of these groups.
Mrs Villiers: I agree with all of that. We do need a whole community approach to resolving this problem, and we do need a whole enforcement approach. I pay tribute to the work of groups such as the Organised Crime Task Force, which co-ordinates all the organisations working on organised crime. I wholeheartedly agree with the hon. Gentleman that there is no tolerable level of criminality. Anyone responsible for criminal activity should be pursued by the police and brought to justice.
Tom Tugendhat (Tonbridge and Malling) (Con):
May I remind my right hon. Friend that this is not a Northern Ireland problem but a UK problem? The offence of
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paramilitary violence that has been the scourge of our lives for more than 50 years in these islands has affected some of our families directly, in all parts of the House. I urge her to maintain the pressure that she has so rightly placed on the criminal actions of a few, and to encourage the PSNI, which has been extremely courageous in its work these past years, to continue its work.
Mrs Villiers: I agree with my hon. Friend that this is a UK-wide issue. He is right to remind us all that victims and survivors of the troubles are not confined to the population of Northern Ireland; many of them live in Great Britain. Indeed, there are also people elsewhere in the world who share the pain of those who suffered directly at the hands of these terrorist organisations in their violent past.
Conor McGinn (St Helens North) (Lab): I thank the Secretary of State for her statement and commend my hon. Friend the Member for Gedling (Vernon Coaker) for his response. The Secretary of State said that she wants to see the full implementation of the Stormont House agreement, and I wholeheartedly share her sentiments and support her in that. Is it the Government’s position that they wish to see agreement between all the parties before legislating on the Stormont House agreement, and how long does she anticipate it will take to get that agreement?
Mrs Villiers: We have had some good discussions in the talks on the technical aspects of the legislation needed to deliver the institutions on the past. We hope to introduce that legislation soon. It is important that the Stormont House agreement is implemented in full. The parties have the opportunity to get that process back on the road, and I hope that they will engage intensively in the talks in the days to come.
Bob Blackman (Harrow East) (Con): I congratulate my right hon. Friend on her statement. Clearly, this is a delicate balancing act. In her assessment, has she considered whether any of the parties have breached any of the commitments they made at the Good Friday agreement or at the Stormont House agreement and have, as such, vacated their position as part of the overall strategy for Northern Ireland?
Mrs Villiers: For clarification, the assessment in relation to the paramilitary organisations does not indicate that those organisations are no longer on ceasefire. However, I think that my hon. Friend’s question was primarily about the Stormont House agreement. As the House will be aware, the major blockage on the Stormont House agreement is that the two nationalist parties, having signed up at Stormont castle to welfare reform with top-ups from the block grant, then withdrew their support. That is an instance where two of the parties signed up to something and are not currently supporting it, but I hope we can find a way to get their support back in the days to come.
Jim Shannon (Strangford) (DUP):
As the Secretary of State has indicated, dissident republicans are very active and deadly. The PSNI is on a high alert. Army units have been sent to the Province to give assistance to the PSNI. The terrorist threat is at a severe level in
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Northern Ireland. The law-abiding overwhelming majority of Northern Ireland citizens are sick to the back teeth of this cancer in our society. Does she agree that only by taking a ruthless and uncompromising approach to paramilitary activity can we have a real chance to heal the scars on the face of Northern Ireland once and for all?
Mrs Villiers: We certainly need an uncompromising approach to pursuing criminality wherever it is found. It is also important to harness the activities of wider society. One of the problems in getting convictions for things like paramilitary assaults is that people feel afraid to come forward and give evidence. We need to reflect on what more can be done to give them the confidence to confront these individuals in their communities and to come forward and give evidence in court when those individuals commit crimes.
James Cleverly (Braintree) (Con): The assessment makes it clear that the time of large-scale mass violence by paramilitaries is a thing of the past, but there is a danger, as the years from that period to now extend, that people will romanticise that period of violence and that people who formally or informally associate themselves with paramilitary groups will take independent violent action. What steps is my right hon. Friend’s Department taking to ensure that this romanticisation is nipped in the bud and that people who aspire to relive what they perhaps believe to be some glorious bygone era have their minds set straight and do not embark on individual acts of violence?
Mrs Villiers: My hon. Friend makes an important point. There is a tendency among some to try to rewrite history. That is something that this Government will never support and will always firmly oppose. There is no possible means by which one could romanticise a campaign that saw thousands of people murdered. That is at the heart of our approach to the institutions on the past to be created under the Stormont House agreement. They must be balanced, objective, fair and impartial to make sure that we establish all the facts about the history of the troubles, and do not enable anyone to seek to rewrite the history of the troubles and to draw some wholly unacceptable form of equivalence between terrorism and police officers.
Sammy Wilson (East Antrim) (DUP): The report indicates that individual IRA members remain involved in criminal activity and describes a range of acts, from smuggling right up to murder. What it does not say is that those people are defended by Sinn Féin political representatives who eulogise them, discourage people from giving evidence against them, and make excuses for their activities. Does the Secretary of State agree that one of the biggest impediments to making devolution work in Northern Ireland is the ambivalence of Sinn Féin’s political representatives to the criminality of their associates?
Mrs Villiers: I can provide the hon. Gentleman with at least a degree of reassurance on that. Sinn Féin has always been very clear with me that it condemns criminal acts and criminality. It has certainly done that in relation to whoever was responsible for the murder of Kevin McGuigan.
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Kevin Foster (Torbay) (Con): I thank my right hon. Friend for her statement. I think it is safe to say that it would always be naive to believe that these organisations, after so many years of killing and terrorising, would just disappear. Does she agree that the biggest issue is that while they might not be planning to launch terrorist attacks against the state, they are still encouraging a culture of criminality, including murder and extortion, that terrorises local communities, and that there is no way we can have a peaceful Northern Ireland for its people if these organisations remain?
Mrs Villiers: My hon. Friend puts his points very well. It is worth recalling that some paramilitary assaults have involved teenagers—young people—and in some instances such assaults are child abuse. There is a real brutality to some of the cases we have seen in Northern Ireland in recent years. That is another reason why it is vital that we see an end to paramilitary activity in Northern Ireland.
Ms Margaret Ritchie (South Down) (SDLP): I thank the Secretary of State for her statement. Paramilitary action was never justified at any stage, whether now or in the past. All those murders and all that violence and terrorism were totally unjustified and put people in a great state of peril.
Will the Secretary of State outline what the paramilitary organisations could do to assist in alleviating the problems and anguish experienced by victims, and those who have lost loved ones either through the bullet or the bomb, who are anxious that the Governments and the paramilitary organisations resolve those issues to provide full truth and accountability?
Mrs Villiers: I wholeheartedly agree that the terrorist activities of those groups was never justified, and I pay tribute to the role played by the hon. Lady’s party and the other parties in Northern Ireland that stood out against terrorism throughout the 30 years of the troubles. The crucial way forward for those groupings is to cease involvement in criminality. Their members should stop their criminal activities, and it is vital that the police continue to do all they can to pursue anyone who continues to be involved in such activity.
Danny Kinahan (South Antrim) (UUP): May I thank the Secretary of State and others both for their work on the report and for all the work that goes into everything for us in Northern Ireland? On PIRA, page 11 mentions the continued existence of senior leadership, the provisional army council and some departments. I assume that similar departments—which suggest to me a department of knee-capping or of smuggling—exist in other paramilitary organisations. The Secretary of State has said that she will take an uncompromising approach in future, so will she make sure that all political parties employ no one who is linked to such organisations?
Mrs Villiers:
As I have said on a number of occasions, anyone involved in criminal activity should expect to face justice, and the police will pursue anyone involved
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in such activities. On the organisational structures, the assessment provides further information beyond what the Chief Constable was able to share in his statement. Parties and individuals, however, will continue to have questions about the organisations and how they are run and structured. That is another reason why a formal ongoing verification process to try to move us forward towards resolving the problems once and for all will be an important part of a successful outcome to the talks.
David Simpson (Upper Bann) (DUP): I do not think it comes as much of a surprise to any Member that structures are still in place. Security forces personnel to whom I have spoken are concerned that members of the Provisional IRA who have bomb-building experience have moved to dissident organisations and that that is why there have been a number of under-car booby trap bombs in the past few weeks and months. I am sure that the Secretary of State and the security forces are investigating that.
Mrs Villiers: The security forces have placed a huge priority on seeking to prevent the dissident republican groupings from carrying out lethal attacks. In recent days there have been two examples of attacks on the state by those groupings. It is crucial that the PSNI and its security partners both north and south of the border continue to do all they can to keep people in Northern Ireland safe from the terrorist threat from dissident republicans, and I am confident that they will do that.
Gavin Robinson (Belfast East) (DUP): Last but not least, I was very pleased to hear the Secretary of State say that the Government will always give the police and the security services the fullest possible backing in their efforts to keep the people of Northern Ireland safe and secure. On Thursday we learned of a murder attempt on a member of the armed forces in the constituency of my right hon. Friend the Member for Belfast North (Mr Dodds), and on Friday there was an attempted murder of PSNI colleagues in my constituency of Belfast East.
The Secretary of State will know that, sadly, extremism still exists on the fringes of our society, yet we discovered yesterday that Northern Ireland is specifically excluded from the Government’s counter-extremism strategy. What discussions has the Secretary of State had with the Home Secretary on that, and what assistance does she believe the strategy could give to the righteous fight against extremism in Northern Ireland and across the UK?
Mrs Villiers: I have discussed this important matter with the Home Secretary on a number of occasions. I draw the hon. Gentleman’s attention to the part of the report that makes it clear that the UK Government are open to extending the strategy to Northern Ireland in the future. Given the particular circumstances, we do not think that is appropriate just now, but we are happy to work with the devolved bodies to share best practice and do all we can to counter extremism in whatever form it comes.
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Victims of Crime Etc (Rights, Entitlements and Related Matters)
Motion for leave to bring in a Bill (Standing Order No. 23)
2.16 pm
Keir Starmer (Holborn and St Pancras) (Lab): I beg to move,
That leave be given to bring in a Bill to make further provision about the duties and responsibilities of the Victims’ Commissioner and about the Victims’ Code; to require victims’ services plans for each police service area; to establish a duty to report suspected child abuse by those working in regulated activities, a code of practice on the recording of allegations, a right of appeal by victims against a decision to cease a criminal investigation, and standards for the review of open or reopened homicide cases; to make provision about court procedures relating to vulnerable victims and witnesses; and for connected purposes.
Leave to introduce a similar Bill, called the Victims (Bill of Rights) Bill, was given on 4 March, but that Bill fell because of the general election. As with that Bill, I am glad to inform the House that my proposed Bill has cross-party support, for which I am very grateful. I should also indicate that the Bill does not extend to Scotland.
Although significant improvements have been made to our criminal justice system in the past 20 years, there is growing consensus that it does not serve victims well. Some of the problems are obvious. Many victims, particularly victims of personal or sexual violence, lack the confidence to come forward and report crime, lack adequate support if they do so, and face an unacceptable ordeal in the court room if their case gets that far. The idea of telling many strangers, many times, about an experience of sexual degradation and abuse causes many such victims to feel intense and understandable distress. It takes real courage to come forward. The response of those charged with delivering criminal justice to those who do come forward dictates the likelihood that other victims will report. Yet when they do come forward, victims of crime regularly complain that communication and treatment are consistently poor across all criminal justice agencies.
There are many such examples. The case of Claire Waxman, who is sitting in the Gallery, involved long-term stalking and harassment. I am grateful to her and to Harry Fletcher, who is sitting alongside her, for their help in preparing this Bill.
All involved in delivering criminal justice, including the police, prosecutors and the judiciary, agree that the situation needs to improve, but the question is: how?
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There have been plenty of codes, charters and guidance, and they have moved things on, albeit painfully slowly, and without any real legal teeth the effectiveness of such changes will always be patchy.
Likewise, at a time of tight pressure on the criminal justice system, there is a danger that services to victims will come a poor second to operational priorities. Most services provided to a section of the public are regulated, quality assured and monitored, but that is not the case for victims’ services. There is simply no framework around the provision of those services. As a result of the lack of overall co-ordination, the services provided are fragmented and of varying quality. Existing discrete legal protections—such as restraining orders, special measures or witness anonymity—provide essential safeguards, but there is no legal regime promoting and protecting victims’ rights from the beginning to the end of their engagement with the criminal justice system.
The “Code of Practice for Victims of Crime”, more generally known as the victims code, was a significant and positive development when it was first published in 2005 and it should be supported, but although its provisions remain important, they are not directly enforceable and they require clarification and strengthening in places. Similarly, the role of the Victims’ Commissioner has great potential, but it has insufficient powers, has been unfilled for considerable periods in recent years and is under-resourced.
Against that background, the conclusion that victims’ rights will only be taken seriously if and when they are enshrined in law is now inescapable. If the Bill is brought in, it will offer a real opportunity for change, progress and improvement. As I have said, it has received cross-party support, as evidenced by the names of the supporters to whom I hope to refer shortly. I believe that this is an issue, like the stalking and domestic violence campaigns, on which this House is united, rather than divided. We want change because victims of crime deserve better, and because such improvement will enhance our criminal justice system. I commend the Bill to the House.
That Keir Starmer, Tim Loughton, Sarah Champion, Jenny Chapman, Sir Edward Garnier, Mr Barry Sheerman, Caroline Lucas and Liz Saville Roberts present the Bill.
Keir Starmer accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 4 December, and to be printed (Bill 80).
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Opposition Day
[7th Allotted Day]
Tax Credits
2.23 pm
Seema Malhotra (Feltham and Heston) (Lab/Co-op): I beg to move,
That this House calls on the Government to reverse its decision to cut tax credits, which is due to come into effect in April 2016.
Today’s debate is incredibly important, but it is a shame that we have to hold it at all. It is deeply disappointing for the 3 million families across the UK who are set to lose an average of £1,300 from April that the Government have not taken the opportunity to step back, do the right thing and rethink these unfair proposals. The Conservatives omitted to mention these unfair proposals in their manifesto. Indeed, given another chance today to stop the changes—in the Welfare Reform and Work Public Bill Committee—they chose to vote against doing so.
Last night, we heard the latest arguments in favour of the cuts, which are already backfiring. The Government are seeking to make this a binary choice between cutting the incomes of the working poor and funding nurses, when in fact many of those in receipt of tax credits are our nurses, teaching assistants, care workers, civil servants and so many others who work day and night to keep our public services and our economy moving.
David Rutley (Macclesfield) (Con): The decision to seek to reverse these reforms is an important one, but when was the hon. Lady made aware of it—on the Labour side? [Interruption.]
Hon. Members: Just ignore him.
Madam Deputy Speaker (Mrs Eleanor Laing): Order. We will not have shouting from the Back Benches. Nobody will ignore anyone in this Chamber. We will have a measured debate on an important subject.
Seema Malhotra: I do not think I even need to respond to that intervention. The hon. Gentleman is seeking to trivialise this debate. We have been very clear about what we would do and about what we are calling on the Government and his party to do. His constituents will be watching him today and asking: who he is standing up for—his constituents or his party?
Seema Malhotra: I will make some more progress and then give way.
These cuts will also hit the self-employed and those who run our local businesses. It is bizarre for the Government to take £1,300 off each family by highlighting how much more they have already taken in tax credits. Today, it has become even clearer that the Government have chosen to balance the books on the backs of the poor. The Chancellor has made this a debate about taking from the non-working poor or from the working
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poor, rather than a choice recognising that, in tough economic times, it is fairer that those who have more should contribute more.
Andrew Gwynne (Denton and Reddish) (Lab): The £1,300 that my hon. Friend cites is of course an average. Many working people in my constituency will get clobbered by a lot more than £1,300 a year. Is not the really serious point that only in April the Prime Minister said on TV—in the studios—that he would not cut tax credits?
Seema Malhotra: My hon. Friend is absolutely right. It is not on the basis of one occasion that we are saying that the Government have changed their mind or have not told the truth; they have not told the truth on this measure step by step since it was first introduced in the Budget. They have tried to hide the impact on hard-working families across Britain. My hon. Friend is absolutely right that the £1,300 figure is an average, and many families are set to lose much more.
Chris Philp (Croydon South) (Con): The hon. Lady will be aware that the Conservative manifesto made it very clear there would be £12 billion of welfare savings, so this was clearly flagged up. Will she explain where, if she opposes the measure, she will find the savings—which other benefit would she cut, or which tax would she raise?
Seema Malhotra: Perhaps the hon. Gentleman needs to talk to the Prime Minister about why he said on “Question Time” during the election that he would not cut tax credits. That is a conversation for him to have with the Prime Minister.
Barbara Keeley (Worsley and Eccles South) (Lab): The hon. Member for Croydon South (Chris Philp) talks about the Conservative manifesto, but the manifesto cannot have outlined that 689,000 carers might be affected. Those who care 35 hours a week and then try to work 16 hours on the national minimum wage will be hit. What do Conservative Members have to say about that?
Seema Malhotra: My hon. Friend makes her point incredibly well. It is those who are working so hard to support us in every sphere—in our public services and the economy—who will be hit the hardest by this move. I hope that the Government will change their mind today. I will make some more progress before I take further interventions.
The Chancellor says that he wants a low-welfare, low-tax, high-wage economy—this may come as a surprise, but of course we all do—but what he says and what he does are two different things.
Maria Caulfield (Lewes) (Con): Will the hon. Lady give way?
Seema Malhotra: I will give way in a moment.
The Chancellor decides to cut tax credits at the same time as cutting income tax and inheritance tax for some of the wealthiest in our society. His failure to grow wages in the last Parliament not only led to a drop in living standards, but meant that tax receipts were lower than they would otherwise have been. In addition, as
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the Institute for Fiscal Studies has highlighted, welfare spending was virtually unchanged during the last Parliament because of the growth in tax credit payments and the explosion in housing benefit payments caused by his low-wage economy. Indeed, the number of people earning less than the living wage has risen by 45% since 2009. The Government may seek to hide what they are doing and to make this a debate about the Labour party, but it is a debate about the quality of life for millions of families who are working hard to make ends meet.
Gareth Johnson (Dartford) (Con): I will give the hon. Lady another opportunity to answer the question. If she were to reverse these reforms, how would she pay for it—would she raise taxes, cut spending or simply borrow more money?
Seema Malhotra: Perhaps the hon. Gentleman has not read any blogs or listened to any media in the last two days. We have been on the media repeatedly and have explained very clearly that we would do that through long-term growth, making sure that we invest in high skills and increased—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing): Order. I cannot hear the hon. Lady, so I assume that nobody else can hear her. This is a debate and we must be able to hear the opening speeches. Everyone will have a chance to shout in their own four or five minutes.
Seema Malhotra: Thank you, Madam Deputy Speaker. I hope that the hon. Member for Dartford (Gareth Johnson) heard my answer. Perhaps his constituents will also be asking whether he has heard them. I am sure they are wondering who he will stand up for today.
Lucy Frazer (South East Cambridgeshire) (Con): Will the hon. Lady give way?
Seema Malhotra: I will give way in a moment if I can make some more progress.
It is shocking that the Government continue to avoid telling the truth about these changes, including the Prime Minister, to whom I wrote last week, asking him to clarify his comments that after all the Government’s changes a family where one earner is on the minimum wage will be £2,400 better off. He is yet to be clear about how he reached that conclusion, how many families will gain in the way he suggests or what assessment he makes of the analysis by the Institute for Fiscal Studies, the Resolution Foundation, Barnardo’s and so many others who are against these changes.
The Chancellor chose either not to perform or not to publish an impact assessment of these changes for the Commons—a move that was criticised in no uncertain terms by the Social Security Advisory Committee. There are only two ways to interpret that: the Government either do not want to know or do not want to tell.
Stella Creasy (Walthamstow) (Lab/Co-op):
My hon. Friend talks about the impact of these changes. Let me give her one simple example from my Walthamstow constituency of a working mum. When her tax credits were delayed, we had to refer her to a food bank
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because they were literally the difference between being on the breadline and having bread. Does my hon. Friend agree that that will happen to working people across the country if these changes go ahead?
Seema Malhotra: My hon. Friend is absolutely right. She highlights, too, the impact of the Government’s appalling administrative processes on our constituents. They are left trying to make ends meet and having to go to food banks. More than 60% of the use of food banks is due to issues with benefits and benefits administration.
Lucy Frazer: After an intervention, the hon. Lady asked whether Government Members had been listening to the media. I listened to an interview she gave on Radio 4 this morning. She gave only two examples of changes that she would make to the tax system. One related to inheritance tax and the other was to raise the tax threshold to 50p. In 2017-18, that would raise only £270 million. Where would she get the other £4.2 billion?
Seema Malhotra: I thank the hon. and learned Lady for her comments. Perhaps she will say what she is doing for the 6,300 families in her constituency who will be affected by these changes. Perhaps she should speak to those in her party who have raised serious concerns about the changes, including Lord Tebbit.
Before the debate on the statutory instrument in September, the Government chose either not to perform or not to publish an impact assessment of these changes, so one was not available for the debate in the Commons. The Exchequer Secretary seemed to suggest that they had done that, when clearly they had not. The distributional analysis that the Chancellor finally submitted to the Secondary Legislation Scrutiny Committee in the other place last week has been described by my right hon. Friend the Member for Birkenhead (Frank Field), the Chair of the Work and Pensions Committee, as a “sleight of hand” and an attempt to “bamboozle”.
Maria Caulfield: Will the hon. Lady give way?
Seema Malhotra: I will make a little more progress first.
It is worth reminding hon. Members exactly what the Government propose to do with these changes. First, they will effectively halve the threshold at which claimants start to see their tax credits award tapered away, from £6,420 a year to £3,850. Secondly, they will increase the rate at which the award is tapered away to zero. That means that for every pound that is earned above the threshold, their award will be tapered away by 48p. Previously, the rate was 41p. House of Commons figures show that a family with two children and two parents who earn the minimum wage will see a fall in their income of more than £1,800 next year. By the end of the Parliament, that family will lose a devastating £7,700.
Catherine West (Hornsey and Wood Green) (Lab): Does my hon. Friend agree that this amounts to nothing less than a penalty for those in work? Such a work penalty is typical of this Government.
Seema Malhotra:
My hon. Friend is absolutely right. The Conservative party claims to be there for the workers, but it is going against everything that hard-working
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families are doing to make ends meet. It is time for the Government to rethink what they are doing and stand up for those they pretended to stand up for at the time of the election.
Mr Alan Mak (Havant) (Con) rose—
Graham Evans (Weaver Vale) (Con) rose—
Seema Malhotra: I will give way in a moment.
A family with one earner on the minimum wage will be more than £1,500 worse off next year and almost £7,000 worse off over the Parliament.
The claim that we have heard most is that working families should not be concerned because the minimum wage will see significant increases in the next few years. As the Institute for Fiscal Studies has made abundantly clear, the claim that those increases will close the gap is arithmetically impossible. Paul Johnson, the director of the IFS, summed it up:
“The key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients”.
“Unequivocally, tax credit recipients in work will be made worse off by the measures in the budget on average.”
Andy Slaughter (Hammersmith) (Lab): There are 4,200 working families in my constituency who will be affected. Given that the Prime Minister said before the election that he would not cut tax credits, does my hon. Friend think that this House and the other place would be right to vote down the proposals?
Seema Malhotra: My hon. Friend is absolutely right. I hope that Government Members will make that decision today.
The IFS has found that, as a result of all the tax and benefit changes in the summer Budget, by 2020, households with incomes in the second, third and fourth deciles will be worse off by £1,250, £860 and £530 respectively. Indeed, the Resolution Foundation’s recent report showed that the changes are likely to result in 200,000 more children being pushed into poverty at a time when the Welfare and Work Bill is effectively erasing Labour’s Child Poverty Act 2010, the duty in it to eradicate child poverty by 2020 and the measures to monitor child poverty. Perhaps a Government Member would like to ask their own Front Benchers a question about that.
Seema Malhotra: I give way to the hon. Gentleman. He has been very patient.
Mr Mak: The hon. Lady will know that when the tax credit system was created it cost £4.4 billion to administer, whereas this year it will cost £30 billion. Will she admit that the only credible welfare system is an affordable welfare system?
Seema Malhotra:
Perhaps the hon. Gentleman should ask what will happen to the 4,500 working families in his constituency who are set to see an average cut in their household income of more than £1,300. What impact will that have on whether they can keep their
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home, put food on the table or afford clothes for their children? I suspect that he will have a lot to answer for in his constituency.
A million single parents who are in work are set to be £1,000 a year worse off and 1.5 million married women will be £600 poorer.
Kwasi Kwarteng (Spelthorne) (Con): Will the hon. Lady give way?
Seema Malhotra: I will in a moment.
These cuts will also hit the self-employed who are on tax credits. Since 2010, self-employment has grown at twice the rate of overall employment. We know that, on average, self-employed people earn 40% to 50% less than those who are in regular employment.
Kwasi Kwarteng: Will the hon. Lady give way?
Seema Malhotra: I will in a moment.
This weekend, The Observer included the case of somebody in Manchester who is self-employed. He expects his tax credits to be reduced to virtually nothing from next April. I hope that in his response, the Exchequer Secretary will be straight about what these changes mean for the self-employed.
Kwasi Kwarteng: I thank my constituency neighbour for giving way. We have heard an impressive array of statistics, but does the hon. Lady have one proposal for reducing the deficit?
Seema Malhotra: That is absolutely incredible. We have answered that point in the media and in articles, and I do not need to keep going over that ground. The hon. Gentleman might want to respond to the 3,000 families in his constituency who will be hit by these changes, and say how he will reply to institutions that have done hard research into these matters. The Government have chosen to carry out no impact assessment for what has been described as an “array of statistics”. This debate is about people’s lives, and the hon. Gentleman should stand up for his constituents, just as Labour Members will do when voting in the Lobby tonight—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing): Order. The hon. Lady is clearly not giving way and hon. Members are wasting time in the debate.
Seema Malhotra: It is clear that the Conservative party is in disarray. Lord Tebbit, the hon. Members for Uxbridge and South Ruislip (Boris Johnson) and for Telford (Lucy Allan), and others, are calling for reforms, or for the Chancellor to think again.
Lucy Allan (Telford) (Con): Does the hon. Lady agree that taxpayers’ money should be targeted at those most in need, and not used routinely to top up low pay?
Seema Malhotra:
I think that comment represents a misunderstanding about what tax credits are supposed to help with. I hope that the hon. Lady’s Government will be more successful this Parliament in increasing wages—hopefully to a level where people start to come off tax credits—but they do not have a very good record
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to date. As I said, the number of people earning less than the living wage has risen by more than 45% since 2009.
Clive Efford (Eltham) (Lab): In their interventions so far, Conservative Members have already conceded the argument. They started by saying that low-paid workers were going to be better off, and that Britain needs a pay rise and will get one. They have conceded that argument, but now it is all about choices and how tough it will be to balance the books. They have lost the argument.
Seema Malhotra: My hon. Friend is right, and as far as the public are concerned Conservative Members have lost the argument. It is now time for their constituents to ensure that they support the changes that we propose, and that they hold the Government to account at the next election.
The right hon. Member for Haltemprice and Howden (Mr Davis) has described the use of a statutory instrument as an attempt to avoid scrutiny, and on 6 October he said:
“The Government has to balance the books, but the burden shouldn’t be on the poorest…I hope this doesn’t turn out to be our poll tax.”
Even the Bow Group, which perhaps speaks for several Conservative Members who may not be able to speak today, has said:
“Tax Credit cuts could damage Britain’s entrepreneurial economy and the Conservative Party’s claim to be the workers party”.
Caroline Lucas (Brighton, Pavilion) (Green): The hon. Lady is making a powerful case. In my constituency more than 4,500 families will be affected, in particular because of sky-high private sector rents. Does she agree that people will be hit particularly hard when cuts combine with the fact that Governments have not taken action to bring down rents in the private sector?
Seema Malhotra: The hon. Lady is right, and cuts are being made without any recognition of rising rents and the cost of living that affects household budgets. We cannot make such a move without thinking about the impact on family budgets, particularly of rents.
Seema Malhotra: I will continue for a moment and then I will give way.
New House of Commons Library analysis that we have published today shows that at least £0.5 billion will be lost to the London economy if cuts to tax credits come into effect, and that will hit nearly 410,000 low and middle-income working families in London. In my borough of Hounslow, 13,500 working families will be affected, and the local economy will be hit by about £17.5 million of reduced purchasing power if the cuts come into effect.
Angela Rayner (Ashton-under-Lyne) (Lab):
I know from many conversations that I have held with Conservative Members that they agree that aspiration is key. I was on tax credits before coming to this place, and I also benefited from further education, so I plead with
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hon. Members to consider that. Does my hon. Friend agree that by cutting tax credits and further education the Government are preventing people like me from having those aspirations?
Seema Malhotra: My hon. Friend makes a powerful point and indicates through her own story how this anti-aspiration measure will hit families that are working hard not just for themselves, but to give their children a chance in the future. As they continue to struggle, these cuts will impact on those children, and it is projected that 200,000 more children will be moved into poverty.
I am conscious that many Members want to speak, so in conclusion I will say that this measure is set to hit the poorest the hardest. The Prime Minister is fond of saying that he supports those who work hard and do the right thing. His Conservative election manifesto stated:
“The British character is renewed every day by the millions who work hard, raise their families and care for those who need help, do the right thing and make this country what it is.”
“We are fixing the economy so that everyone feels the benefit”,
but at the moment that could not be further from the truth. Far from being the party of the common ground or of workers, this move shows that the Government are no longer interested even in knowing how families are set to be hit by the choices they make. This decision is not just poor politics but poor economics, and families are concerned about what the impact will be as they struggle with paying the rent or their mortgage, and with putting food on the table at a time when food bank use continues to rise. The problem of low pay in the UK persists, and changes to tax credits are about to make things much worse. With 6 million people not earning enough to cover the basic costs of living, tackling in-work poverty is crucial, but we should not do that by making matters worse and hitting those who need help the most.
The Government have chosen to introduce these changes without even a transition plan, and when cross-Benchers and bishops start to express concern in the other place, we hear reports that No. 10 will threaten to suspend the other place if Members table and win a fatal motion. There is a chance today for every Member of the House to do the right thing and stand up for their constituents, by putting families in their constituency first and their party second. I urge Conservative Members to vote with us in the Aye Lobby today.
2.48 pm
The Exchequer Secretary to the Treasury (Damian Hinds): Protecting working people’s economic security is, and always has been, a priority for this Government. We are passionate about that, because we believe in people being allowed to meet their potential and fulfil their aspirations from wherever they come in life. Our mission is to get wages up, tax down, and welfare under control. The reforms to tax credits must be understood as part of a wider package of reforms that includes an increase to the personal allowance, increased childcare provision for working families, and of course the national living wage.
Next April the legal minimum pay for a full-time worker will be £1,300 higher than it was the year before. We have done that at a time when businesses have
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created record numbers of jobs—1,000 a day and 2 million in total, and the highest rates that we have ever reached. Coupled with strongly rising wages, more hours on offer and low inflation, our policy is delivering security and prosperity for working households up and down the country. That is what the country deserves and that is what we are doing.
Helen Goodman (Bishop Auckland) (Lab): Is the Minister aware of the fact that average incomes will reach their pre-recession point only in 2017, after seven years of this vile Tory Government?
Damian Hinds: As a matter of fact, living standards have this year reached beyond their pre-crisis point, or indeed any prior year.
We can make lasting economic reforms only because we have taken the tough decisions to get this country back on its feet after the financial crisis that crashed into Labour’s structural deficit, which was among the highest in the developed world. Some choose to indulge in a game of “What if we had unlimited money?” We face facts. In 2010, the Government inherited a deficit of £153 billion. That is almost £6,000 for every household in the country. Our budget deficit was 10.2% of GDP. For every £4 the Government were spending, £1 was borrowed. That could not be allowed to go on, because when Governments lose control of the national finances, those who lose the most are generally those who have the least.
Sir Edward Leigh (Gainsborough) (Con): The Minister is making some excellent points and I fully support his desire to reduce the deficit and reform tax credit. This is a listening Government, so I just wonder whether, in the coming weeks as we consider the impact of the reform and in terms of compassion, it might be worth looking at tweaking the child tax credit—or the marriage allowance, which is very low—to try to soften the blow. I do not expect the Minister to answer now, but that is surely worth considering.
Damian Hinds: As I will come on to outline, the Government are doing a number of things that have some offset against what is happening on tax credits.
Sir Oliver Heald (North East Hertfordshire) (Con): Does the Minister not agree that the Opposition have completely ignored the background, which is that at the moment wages are rising at a rate of 3.5%? We are seeing wages rising. The policy is working and it would be wrong in those circumstances to continue to subsidise and act as a drag on wages by using tax credits in the way they have been used.
Damian Hinds: As a result of this Government’s strong economic management, we are indeed seeing strong wage growth coupled with strong employment growth. This is the right time to make lasting economic reform.
On the deficit, much progress has been made, but this year we are still having to borrow £3,300 for every household in the land. To tackle a deficit of that proportion requires all income groups to share the burden. I agree
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with the hon. Member for Feltham and Heston (Seema Malhotra) that it is right that those with the broadest shoulders should bear the most.
Dr Liam Fox (North Somerset) (Con): To put this issue into context, will my hon. Friend confirm that the average taxpayer is paying £1,900 extra in tax this year just for the cost of Government debt interest? Is not the only way to reduce this debt tax on ordinary taxpayers to get rid of the deficit and pay down the debt, something which the Labour party seems incapable of grasping?
Damian Hinds: It is indeed an extraordinary amount. For every month we fail to deal with the deficit, not only would we be racking up more debts for all our children but we would be incurring greater interest charges in the here and now, which means money not spent on other essential services.
Lady Hermon (North Down) (Ind): I am grateful to the Minister for giving way, although I am not quite sure he will be so grateful when he hears my question. I have to admit—in fact, I am embarrassed to say—that I voted with the Government on the cut to tax credits. I did so on the clear basis and understanding that there would be mitigation in the Chancellor’s autumn statement of the worst effects of the cuts to tax credits. The Minister cannot imagine my anger as I listened to his party’s conference, and the Prime Minister and the Chancellor ruled out any such mitigation. I will be voting with the Opposition this evening, unless the Minister tells this House today what mitigation the Chancellor will guarantee in his autumn statement. I give the Minister the opportunity to persuade me to change my mind.
Damian Hinds: The hon. Lady, who is a veteran and very experienced in the House, will know I cannot pre-empt anything in the Chancellor’s autumn statement on this or on any other subject. She was right to vote with the Government on the statutory instrument. As I will be outlining in my remarks today, this is a reform package of measures for working people. It is the right thing to do for the future of those families and the future of our country.
Frank Field (Birkenhead) (Lab): Nobody expects the Minister to be able to provide an answer on what will be in the autumn—or November—statement, but can he confirm that the figures that the Prime Minister uses to say that eight out of 10 people will be better off as a result of the Government measures include all of us and large numbers of other people, while the two out of 10 who will not be better off are all those claiming tax credits? Will he confirm that when we go into the next general election all the current 3.2 million tax credit claimants will not be better off as a result of the measures he has announced?
Damian Hinds:
I hesitate to use a double negative, but I cannot say they will not be better off. Many, many people will be better off. On the specific point of the eight in 10, that refers first to financial year 2017-18, and, as the right hon. Gentleman will know, to all working families. Obviously, the precise impact of the different measures—tax credits, national living wage,
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income tax personal allowance, childcare, social rents and all the other different elements—will vary with precise circumstances, but many, many families will be considerably better off. The hon. Member for Feltham and Heston herself was good enough to cite one such example of one particular type of family being £2,440 better off by 2020.
Damian Hinds: I must make some progress.
The tax credit reforms are an important part of fiscal rebalancing, but they are only one part. On the same day that the tax credits lower threshold and higher taper rate take effect, we are reforming dividend tax and pensions relief for those on high incomes, and initiating a further clampdown on tax avoidance. Those are three measures among a set that also includes: the end of permanent non-dom status, restrictions on landlords’ tax relief and the continuation of a top rate of tax that is higher than it was in 4,718 of the 4,753 days the Labour party was in office. If we look at how the burden of deficit reduction is spread through society, the simple fact is this: the distribution of spending among income groups is constant between 2010 and 2017, while the burden of tax has shifted towards the best-off.
Graham Evans: Does my hon. Friend agree with the former Labour Chancellor of the Exchequer, Alistair Darling, who said that subsidising lower wages in the way that tax credits do was never, ever the intention?
Damian Hinds: My hon. Friend brings me on, quite handily, to my very next point. When tax credits first came in, their aim was entirely noble, but they quickly soared out of control. The total cost more than trebled between 1999 and 2010, ending up costing £30 billion in 2010. Scandalously, while spending spiralled under the previous Government, in-work poverty actually rose by 20%. Now, we can kick a problem down the road or we can do something about it. We chose to do something about it. Our reforms do not abolish tax credit or anything close.
Owen Smith (Pontypridd) (Lab): Will the Minister confirm that the average tax credit bill to the Exchequer under Labour was £22 billion, whereas under the Conservative party, it has been £30 billion? So it has gone up on this Government’s watch.
Damian Hinds: I heard the hon. Gentleman make this extraordinary point on “Newsnight” last night. He talks about an average. If we have an upwards curve, and we draw a line through it, of course it is going to be lower in the middle than at the end. The point is the bill kept on rising—
Damian Hinds: Will the hon. Gentleman let me answer? The point is it kept on rising, with particular spikes just before 2003 and 2010.
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Chris Philp: Does the Minister share my astonishment that despite being asked four or five times, his opposite number failed to say how the Opposition would fund this £4 billion? Does that not demonstrate that Labour cannot be trusted with our public finances?
Damian Hinds: I am afraid I could not put it better than my hon. Friend, and I will not try.
Under these reforms, fully half of families will still be eligible for tax credits, and the total cost will come down only to what it was as recently as 2008. They will focus support on the lowest incomes, while taking those on higher incomes off tax credits altogether.
Catherine West: How would the Minister, on behalf of a party that says it is on the side of working families, explain this change to the 2.7 million children affected? It is a disgrace.
Damian Hinds: Today’s bills will be paid at some point. We believe that the challenges for this generation should be dealt with by this generation, and we believe we need to get our finances under control and eliminate the deficit, and not just pass on the problem to our children and grandchildren.
Dawn Butler (Brent Central) (Lab): Does the Minister think that the 1% pay cap on public sector workers contradicts the Government’s policy for a high-wage economy?
Damian Hinds: I do not deny that pay restraint in the public sector is difficult, but that 1% restraint has also protected 200,000 jobs in the public sector, which is an important aim. In addition, since 2007-08, pay in the public sector has risen faster than in the private.
Damian Hinds: I keep saying I must make some progress. For the moment, I think I must mean it.
These reforms of tax credits go hand in hand with the new settlement for working Britain that my right hon. Friend the Chancellor set out in the last Budget. At the same time, we are introducing radical measures to put more cash where it belongs—in the pockets of hard-working people. Our increases to the tax-free personal allowance mean that a typical basic rate taxpayer—
Madam Deputy Speaker (Mrs Eleanor Laing): Order. The Minister has just said he intends to make progress. Many people wish to make speeches today. If they continue to jump up and interrupt him and still wish to make a speech later, they will be disappointed.
Damian Hinds: I am grateful, Madam Deputy Speaker.
Our increases to the tax-free personal allowance mean that a typical basic rate taxpayer has seen their income tax bill cut by £825 since 2010. We are adding a further £80 next year and a further £40 the year after.
Kwasi Kwarteng: Will the Minister explain to the House how increasing the personal allowance has helped the very people the Labour party is claiming will be affected by this cut?
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Damian Hinds: We believe in taking people out of tax, where possible, and enabling them to keep more of the money they have earned.
Naz Shah (Bradford West) (Lab): In my constituency, more than 31,000 children will be affected by these tax credit changes. How many more children will the Minister’s cuts push into poverty?
Damian Hinds: We are making these necessary changes for the future of all sorts of families, but more than anybody for the sake of our children. The hon. Lady will know that the best way to address poverty is through work, and that is what we have been doing. She will also know the statistics—that where a child is in poverty and a parent moves into work, in 75% of cases they move out of poverty as a result, and that where a parent moves from part-time to full-time work, 75% of children also move out of poverty.
From next April, we will have the national living wage, which by 2020, when it will be worth more than £9 an hour, will mean over £5,000 more in gross full-time pay for someone on the minimum wage today.
Helen Whately (Faversham and Mid Kent) (Con): Does my hon. Friend share my frustration that the Labour party does not seem to understand that tax credits involve the taxpayer subsidising businesses paying low wages, which has to change?
Damian Hinds: As always, my hon. Friend is correct, and she brings me on to my next point. Already, more than 200 firms, including some of our biggest employers, have announced they intend to pay staff at or above the national living wage before it comes into effect, which has helped to push private sector wage growth to 4.4%, according to latest figures, at a time of low or no inflation.
Then there are the wider things we have done on living costs. We have frozen council tax and fuel duty. On childcare, we have already introduced 15 hours for the 40% most disadvantaged two-year-olds, which is just through its first full year of operation and still ramping up. From 2017, there will be 30 hours for working families with three and four-year-olds, and just the additional 15 hours will be worth £2,500 per child per year.
Andrew Gwynne: The Minister can cut the waffle. To many of my constituents, this is a matter of trust. Why does he think the Prime Minister, on 30 April, toured the television studios and told an audience at “Question Time” that he would not cut tax credits? It was seven days before the general election. Does he think that had anything to do with it?
Damian Hinds: The statutory instrument does not affect the level of child tax credits. The hon. Gentleman, being a keen student of these matters, will know about the taper for tax credit awards and the stacking effect of the different elements, but the child tax credit, as the Prime Minister said, is not being changed.
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Damian Hinds: I am conscious of time and know that many people want to speak.
Perhaps most important is the wider effect of the national living wage. The independent Office for Budget Responsibility estimates that as the national living wage imposes upward pressure further up the scale, 6 million people will get a pay rise. That effect starts now, but it will continue rising right up to the end of the decade. We are not just talking about a lower welfare, lower tax, higher wage economy; we are seeing it happen.
Owen Smith: The Minister has made the point repeatedly that the new national minimum wage is meant to offset the reduction in tax credits. What proportion of those on tax credits are currently on the national minimum wage? I suspect I will not get the answer, so I will tell him. It is 25%.
Damian Hinds: The hon. Gentleman’s intervention is timely. Had he been listening—that might sound as I did not mean it to sound—he would have heard me talk about the wider effects of the national living wage. It affects not just people on the national minimum wage, but a much wider distribution. Most economists estimate that it would extend about 25% up the income scale.
Owen Smith: That does not answer my question.
Damian Hinds: It does answer the question. The hon. Gentleman was suggesting that this proportion would not benefit from a national living wage, which is incorrect. A lot of people who are not on today’s minimum wage will also benefit to a sum of about—[Interruption.] I am asked how many—the estimate is that about 6 million people will benefit directly or indirectly.
Mr Chuka Umunna (Streatham) (Lab): Let me ask the Minister about the subsidy point. We can all agree on the context that we need to reconfigure our labour market. Almost 6 million people are not earning a wage that they can live on. Ultimately, yes, a subsidy going to employers is not desirable, but surely the issue here is the order in which we transform our economy. The fact is that through a properly prosecuted industrial strategy—something that we have obviously not seen in our steel industry—it is possible to reconfigure the labour market. That should come first—before taking away the tax credits and support from people who are not earning enough. Ultimately, that is the difference between the two sides.
Damian Hinds: The harsh reality that we face is that we have a budget deficit equivalent to £3,300 for every household in the country. We need to take firm action on that now. It is right, as I said earlier, that the burden is spread right throughout society, but it is also right to shift the burden towards the upper end, which is what has happened with the tax burden.
Andrew Percy (Brigg and Goole) (Con):
The Minister will know that many Conservative Members, including me, are concerned about these changes. I will not, however, vote with the Opposition because of the nature of the vote and its non-binding effect. However, further to the reference point—[Interruption.] If a few more Labour Members had turned up at the original vote, we might have won. Let me take the Minister back to
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the point made by the hon. Member for North Down (Lady Hermon). Will he confirm that the autumn statement offers the opportunity for the Government to mitigate some of these effects, whether it be through a change to the order or through other tax changes? Can he confirm to me and many others on the Government side who are concerned that the Treasury is looking at other things that can be done to help this group of people?
Damian Hinds: There are a number of mitigating elements involved in the package. We have been talking about the national living wage, and there are major—[Interruption.] These things are all new. There are major extensions to childcare provision. We have reductions in social rents, and increases in the income tax personal allowance.
Damian Hinds: Before I conclude—I am very conscious of the time—I want to address a couple of points about poverty. The best route out of poverty is employment. We have created the conditions for the private sector to create record numbers of jobs—over 2 million since 2010. The best way to target in-work poverty is, first, by helping people move up the hours scale and, secondly, by increasing wages. We are seeing wages rise strongly, and we are seeing living standards rising by 3.1%, year on year.
Damian Hinds: I am not giving way again, as many people want to speak and I am coming towards the end of my remarks.
The number of people in in-work poverty is 200,000 lower than it was at its peak in 2008-09. Let me remind Members of the surest way to create poverty and to dash the aspirations of working families up and down the country. It is to lose control of the public finances. We are making sure that that never happens again. We are driving down the deficit; we have set out the path towards surplus; and through our Charter for Budget Responsibility, we are making sure that we insulate ourselves against any future shocks the world economy might throw at us. We do all this while delivering a new settlement for working Britain—one where decent wages are not subsidised by the public purse, but met by employers; one that says to employers, “You can have very competitive tax, but you must pay your people properly”; one that allows hard-working people to keep more of the money they earn; and one that offers a way out of reliance on benefits and top-ups through work that pays.
Those have not been easy decisions to make, but we face a £3,300 per household deficit, and if we reduce the level of state support people are inevitably affected. But tough decisions become necessary decisions when we are working towards the most important and the most progressive goal of all—economic security for working Britain in an uncertain world. Our new settlement for working Britain is an integral part of that. We will continue down the path of economic security, stability and opportunity for working Britain.
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3.15 pm
Ian Blackford (Ross, Skye and Lochaber) (SNP): I am pleased to have the opportunity to debate tax credits today, particularly in light of the wholly inadequate time we had to debate tax credit changes on 15 September in connection with the statutory instrument. Would it not have been better if the proposed changes were made part of the Finance Bill so that they could have been properly scrutinised and debated and so that many Conservative MPs would not have been made deeply unhappy about what their Government have done?
During the week of the tax credit debate, a damning report from the House of Commons Library was published on the effect on many people of the changes consequential on these proposals. Let me state that the Scottish National party wholly opposes the changes to tax credits, which are nothing less than an attack on low-income families in this country.
The Prime Minister told his party conference that he wants a “war on poverty”. I would tell the Government that actions speak louder than conference rhetoric when cutting tax credits is going to increase poverty, particularly child poverty. The reality is that this is not a war on poverty, it is a war against the poor. All of us came into politics to make a difference. I say to the Government and to all Conservative Members that they should examine their consciences. Do they want to push through these cuts that will damage millions of families, increasing inequality in this country?
Chris Philp: Will the hon. Gentleman confirm that it is now the policy of the SNP to use the new tax-raising powers shortly to be introduced to increase income tax in Scotland in a year or two’s time to increase tax credits in Scotland?
Ian Blackford: I find that extraordinary. We fought in the general election on delivering home rule to Scotland, which meant full fiscal autonomy. Given the damage that the hon. Gentleman and the Conservatives are going to do to hundreds of thousands of families in Scotland, they should give us the power over our economy and over welfare so that we can protect people in Scotland from the damage they are going to do.
We hear that individual Tory MPs have been summoned to speak to the Prime Minister and Chancellor to be straightened out. I appeal to them not to be bought off. They should do the right thing and support today’s motion. This is a Government who cut inheritance tax for those wealthy enough to have £1 million-plus properties and punish those on low incomes. “All in this together”?—well, we can reflect on that line.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP): Will my hon. Friend reflect on the fact that the Government have also refused to close what is called “the Mayfair loophole”, allowing more than 8,000 people earning more than £1 million a year to pay only 28% tax, while hammering the poor?
Ian Blackford: My hon. Friend is absolutely correct. We have seen growing inequality over the course of the last few years, and the Budget will only increase it.
Imran Hussain (Bradford East) (Lab): Will the hon. Gentleman give way?
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Ian Blackford: Let me make a little progress, and then I will.
Let us look at the facts of the matter. In Scotland, more than 500,000 children are in families that rely on tax credits, 350,000 of which are from the more than 200,000 low-income families who will be hit by these changes. If we take the UK as a whole, the Library tells us that 3.3 million in-work families received tax credits in April 2015, of whom 2.7 million had children. The Library tells us that the average negative impact in the reduction of the tax credit award in 2016-17 will be £1,300. As the Library puts it, the changes to tax credits will deliver savings of £4.4 billion in 2016-17. Of course, that is one way to put it; in reality, it is £4.4 billion that will be taken out of the pockets of the poor and the majority of working families, and £4.4 billion-worth of spending that will be taken out of local economies.
Michelle Thomson (Edinburgh West) (Ind): Do not people in lower income groups tend, in general terms, to spend money in their local communities, and will the cuts not therefore remove potential investment and growth from those communities?
Ian Blackford: Indeed, and I shall be saying more about that a little later. You do not fix the deficit by taking spending out of the economy. The point is that those hard-working families who receive tax credits tend to spend every penny that they get, injecting money into the local economy, paying tax, and so on.
Imran Hussain: The hon. Gentleman has rightly referred to inequality. Does he accept that these cuts will disproportionately affect the BME communities, thus increasing racial inequality?
Ian Blackford: That, too, is a very reasonable point. I think that what the Government are doing will pose real dangers to the cohesion of society.
Dr Andrew Murrison (South West Wiltshire) (Con): Will the hon. Gentleman give way?
Ian Blackford: I will make a little progress, but then I will happily give way again.
The House of Commons document also states:
“There is no transitional protection for existing families on tax credits.”
Let us just dwell on that statement. The harsh winds of a winter chill are brought to you by Her Majesty’s Government—or, as we might put it, Ebenezer Cameron. I do not believe that any of us came into this place to put our hands on our hearts and say that we want to do this to hard-working families. We have it in our power to stop it today. Just imagine the letters dropping through constituents’ letter boxes, telling them about the massive cuts that are about to afflict them, and for what purpose! We must pause, reflect, and change course. Today is the opportunity that the House needs to recognise that we have got this one wrong. We need to be brave, be bold, and collectively do the right thing.
Let us stop and think about this for a minute. Low-income families, on average, will lose £1,300 a year. Let us now look more specifically at a single-earner couple with two children, working a 35-hour week on the minimum wage. That couple will see their tax credit
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award fall by £1,853 in 2016-17. The impact of the so-called national living wage will only modestly offset the impact of a fall in tax credit income, and the net family income will fall by £1,525.
James Cleverly (Braintree) (Con): Will the hon. Gentleman concede that the parties represented on his side of the House have made a series of apocalyptic predictions about the British economy since the 2010 general election, and that, one after another, those apocalyptic predictions have been proved wrong? Why should we believe your predictions now?
Ian Blackford: We are not making any apocalyptic predictions about the economy. What we are talking about is the impact on hard-working families. We want to see investment in our economy. We want to see investment in innovation and skills, improving productivity and improving the living standards of all, in Scotland and elsewhere. We want to work with you so that we can improve those things.
Patricia Gibson (North Ayrshire and Arran) (SNP): Will my hon. Friend give way?
Ian Blackford: I will give way in a second, but I want to make a little bit of progress.
Let me pose this question to Conservative Members. What will you say next year to constituents, hard-working, decent folk, many of whom will have voted for you, and who have just seen their incomes cut by more than £1,000? Are you going to tell them that their hard work is paying dividends—that for them, work is paying? You do not have an answer, because there isn’t one. The policy is wrong, and you have the opportunity to change it: to do the right thing for the country, and to do the right thing for hard-working families in your constituencies.
Andrew Percy: As the hon. Gentleman knows, he is making many points with which I agree. I know that he is keen to be honest with the House, but will he be clear about one thing? Tonight’s vote will not overturn the changes in tax credits, although a vote in the other place may do so at some point in the future. Today’s debate is a good opportunity for us to express our concerns, but I do not want the hon. Gentleman to lead anyone who is watching it to believe that the vote will be on tax credits. Even if the motion is passed, it will make no difference. Will the hon. Gentleman be clear about that, please?
Madam Deputy Speaker (Mrs Eleanor Laing): Order. Before the hon. Member for Ross, Skye and Lochaber responds to that intervention, I must tell him that he has been talking quite a lot about “you”. I am sure that he does not mean the Chair. Perhaps it would work rather better if he addressed the Minister.
Ian Blackford: Thank you very much for those wise words, Madam Deputy Speaker.
I agree with the hon. Member for Brigg and Goole (Andrew Percy) that what the House has today is an opportunity to send a message to the Government that they ought to reflect on what has been proposed. I think that they have made an honest mistake. I hope that it is
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an honest mistake, that we can reflect on it, and that we will not punish people in the way that the tax credit changes will do.
Alex Chalk (Cheltenham) (Con): Will the hon. Gentleman give way?
David T. C. Davies (Monmouth) (Con): Will the hon. Gentleman give way?
Ian Blackford: I want to make some more progress, because I know that many other Members want to speak.
I mentioned that constituents would be coming to you, and asked what answer you would give them. I think that what we must do is the right thing: the right thing for hard-working families in all our constituencies.
Ian Blackford: I am going to make some progress.
Every Member of Parliament should look up the online House of Commons paper, which contains a link to the number of tax credit recipients by constituency. Any Members who support the Government’s proposals can see exactly how many of their constituents will be affected by them. We remember Mrs Thatcher saying, back in the day, that there was no alternative. That, of course, was nonsense. We also heard that there was no such thing as society. That sort of behaviour should be a thing of the past. There has to be social cohesion. We have to demonstrate that we want to help people out of poverty, not remove a ladder that would take them out of it.
I know what people in my constituency are saying. They do not like this. It is seen as mean-spirited. It is punishing the poor: ordinary, hard-working folk. There is no excuse for it, and we can stop it. There will be a massive impact on families, and we know that the end result will push families with children into poverty. We hear—and we have heard it in the Chamber today—that many Tory Members have voiced concerns at the impact of the changes. We should say to the Government, “You need to listen to those of us on this side of the House, as well as some of your own voices that are reacting to the impact of what you are doing.”
Rebecca Pow (Taunton Deane) (Con): You asked just now—not you, Madam Deputy Speaker—
Madam Deputy Speaker (Mrs Eleanor Laing): Order. I am not having this any more. I have let a lot of people get away with it today, but this is an important debate, and we must observe the rules of the House. Just say “the honourable Gentleman”!
Rebecca Pow: Thank you so much, Madam Deputy Speaker. I remembered as soon as I had said it that I should not have said it. Apologies, Madam Deputy Speaker.
The hon. Gentleman asked just now what it was that we wanted in our constituencies. What we really want is a better future for everyone. We do not want people to be hard done by. Will the hon. Gentleman comment on
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this? We want more jobs, a better future, more money and better childcare, all of which the Minister has outlined today.
Ian Blackford: We all want a better future. We all want more jobs, and better-paid jobs. But the point is—the point that we cannot get away from—that you do not do that by punishing those who are in work, and who will be pushed into poverty. As the Government have often said, work must pay. You cannot do what you are doing and be consistent with your own objectives.
Deidre Brock (Edinburgh North and Leith) (SNP): Does my hon. Friend agree that although it is of course indefensible for the Government to pick up the tab for employers who refuse to pay their staff decent wages, cutting the support from the working poor will not force wages up? A strong labour market will, as will rigorous enforcement of a genuine living wage and ending zero-hours contracts.
Ian Blackford: Absolutely. I hope that we will go on and have a robust debate about productivity in this country and about skills and innovation, because driving investment into the economy will drive wages up and negate the need for tax credits. None of us has a fundamental desire to see the long-term existence of tax credits, but they can only be removed when wages are driven up. What we cannot do is what the Government are doing and cut tax credits ahead of increases in wages.
Oliver Dowden (Hertsmere) (Con) rose—
Ian Blackford: I am going to make some progress, because I am aware of the time.
One has to ask about the moral compass of a Government who want to increase the inheritance tax threshold while the poorest in our society are being squeezed to such an extent. One nation, they tell us, but whose nation is that? It is not a country in which we want to live. Perhaps from an economic point of view we need to ask where the logic is in this policy. We are told that it is about getting the deficit down, but taking cash out of the pockets of the poorest means taking cash out of the economy and depressing economic activity. Those on low incomes tend to spend what money they have. This provision does not fix the deficit; it takes spending—[Interruption.] That is patronising? I will tell Government Members who is being patronised, and that is poor people in this country.
Let us make it clear, as we did during the election in Scotland, that we want to get the deficit down but that this is not the way to do it—[Hon. Members: “How?”] Members ask how we will do that, and I am happy to give them an answer since they have given me the opportunity. I remind them that we won the election in Scotland, with 56 MPs returned for the SNP, and we had a progressive message that we delivered to the people of Scotland of investing in our country by increasing spending by a modest 0.5% per annum that would have delivered additional spending in the UK of £140 billion and would have reduced the deficit to 2% of national income by the end of the decade. That is a much more responsible way to deal with the future of our country.
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There is a philosophical question of whether effective support through tax credits for employers paying low wages excuses those employers from paying a real living wage that offers dignity for work. I would argue that we all want to reach a situation in which work pays, to the extent that those in work have a decent standard of living. The SNP has been championing a real living wage as a response to dealing with poverty and that would mean that hard-working families would become financially sustainable, driving up tax revenues, reducing the deficit, enhancing economic activity and, ultimately, leading to an enhanced fiscal position. The desire to make work pay, which the SNP fully supports through the idea of the living wage—the real living wage, not the Tory construct—has to go hand in hand with an environment that encourages productivity, but we know that that has not happened for the past eight years, with productivity flatlining and even the OBR’s forecast for the next four years showing only limited recovery in productivity. We cannot have sustained growth in wages unless we have growth in productivity.
Oliver Dowden: Will the hon. Gentleman give way?
Ian Blackford: No, I am going to make some progress.
We need a national debate about how we can strengthen and drive sustainable economic growth, driving up living standards and making work pay. We can only reach a high wage economy with investment in skills, innovation and business. That is not happening, and its absence is why we need the safety net of tax credits. That is why the Government must reconsider what they have voted through.
The Resolution Foundation has shown that the so-called living wage will boost wages by £4.5 billion by 2020, nowhere near the impact of the £13 billion of cuts to various working age benefits. It cannot be acceptable that working people pay such a price. We need to cut inequality, not drive it, which is what the Government are doing.
Let us come back to the example of the family losing £1,525 of their income next year. What will the Government say to such families when they are faced with difficult choices? Family budgets are already tight and something has to give.
Ian Blackford: I will not give way just now.
Just imagine what will happen when someone living hand to mouth faces an unexpected problem. Perhaps over the winter the central heating boiler will need to be fixed or a fridge will need to be replaced. What will Members say to their constituents when they knock on the surgery door? Where is the compassionate Conservatism we used to talk about? When their voters have their income cut by more than £1,500, all those problems will mean difficult choices. That is why this issue needs re-examining. I am appealing to the Government to listen to the many voices raising legitimate concerns.
The Government talk about being a one nation Government, but if that is their desire they cannot square it with the rise in inequality that will be accelerated through these measures. We know that a report published by the Resolution Foundation on 7 October estimates that the tax and benefit changes will push a further
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200,000 children into poverty in 2016. Is that really a price worth paying? We cannot accept that that can be right. This is not just a question of the 200,000 who will fall into poverty next year; the figure will increase to 600,000 by 2020.
Alex Chalk: The hon. Gentleman has talked four or five times about doing the right thing, but is it not important to recognise that that includes doing the right thing by the next generation, which stands to be saddled with billions of pounds of debt that cannot be paid back?
Ian Blackford: Of course we need to make sure we are doing the right thing for people today and for the next generation, but that comes back to what I explained to the House: the position the SNP had at the general election—a responsible position of investing today and for tomorrow, a responsible position of dealing with the deficit but investing in the future of the country.
Dr Eilidh Whiteford (Banff and Buchan) (SNP): Does my hon. Friend agree that part of the problem in making today’s children suffer in the short term is that child poverty has enormous long-term consequences?
Ian Blackford: My hon. Friend is absolutely correct. We must ensure that we deal effectively with child poverty in this country, but these measures will constrain that effort.
Paul Farrelly (Newcastle-under-Lyme) (Lab): On Friday a lady called Edith came to my surgery to complain about her daughter’s situation. She is a nursery assistant earning £8 an hour. She works 30 hours a week and cannot work any longer because she has school-age children. Edith was mortified about the effect of the cut in working tax credits on her daughter and her family’s welfare. What does the hon. Gentleman think the Prime Minister should say to people like Edith up and down the land as to how they can trust his word in the future?
Ian Blackford: The sad reality is that I do not think the Prime Minister has anything to say to Edith in the hon. Gentleman’s constituency. That is why I am appealing to hon. Members on both sides of the House to reflect on the damage that these measures will do to Edith and others. We are having a good debate today.
Ian Blackford: I want to finish off as I have spoken for quite some time.
Perhaps it is little wonder that the Government want to redefine poverty. The numbers being pushed into poverty are frightening. It is not a price that a civilised society can pay.
In conclusion, I am grateful that we are having this debate today, but it must not end here. I would plead with the Government to change course before it is too late. These millions of families should not be affected by these tax credit changes. I hope the Government act, but failure to do so would demonstrate yet again that we need full powers over Scotland’s welfare system to be in Scottish hands, not the hands of the Chancellor and the Work and Pensions Secretary.
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There is a clear contrast, with a Tory Government in Westminster attacking the poor and a Scottish Government using their powers to protect the poorest and most vulnerable in our society. The Scottish Government have invested £100 million to ensure no one pays the bedroom tax and invested £40 million to protect council tax benefit. That is a caring, compassionate Scottish Government. If Westminster wants to punish the poor, it should give Scotland powers over tax and spending so that we can protect our own people from this heartless Conservative Government.
3.37 pm
Mr Kenneth Clarke (Rushcliffe) (Con): I shall endeavour to give a brief speech, but I think this is a rather big occasion.
We have reached a stage six months into the new Parliament where we are defining the issues in terms of how we are going to conduct the responsible management of the economy over the rest of the Parliament and achieve the healthy, long-term recovery that, as my hon. Friend the Member for Cheltenham (Alex Chalk) has just said, we are trying to give to benefit our children and grandchildren, and not just ourselves.
We won the election because, I think, we were regarded as more credible on economic policy. People had not always agreed with what we had done, but they realised we would take the necessary difficult decisions to keep the country on course with an economy in the process of recovering.
The Labour party has still not woken up to the fact that it lost the election because it was not credible on the economy and was simply presenting an uncertain collection of rather populist proposals that did not add up to a responsible future. That has been illustrated today. Labour Members are having a very enjoyable time because at this difficult stage for them they have found something they can all oppose. They have found nothing they can all support and they can present no alternative, but they are enjoying opposing on a populist basis what has been put forward. I would exempt from that the hon. Member for Streatham (Mr Umunna), a former shadow Secretary of State and briefly a contender for the leadership of the Labour party, who has just left his seat, because he made an intervention conceding that he was against taxpayers subsidising pay, but the message was, “Make us virtuous, but not yet.” He was quite happy to go along for the time-being with this flawed system until some uncertain date in the future.
The Scottish nationalists appear simply to be taking the view that this is a good popular occasion on which to give a harrowing description of the consequences of these proposals, and to imply that they are a deliberate attack on the poor that has been chosen by the class enemy on this side of the House. Fortunately, however, I see no prospect of the Scottish National party getting a UK majority—however successful it might be electorally—and of having responsibility for the economy on which my constituents are dependent.
The starting point, as usual in these debates, is that in modern Britain there is a wide community of interest in where we are all going. We all think that the economy
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should be managed to boost the overall prosperity of the country. At the same time, however, we live in a society in which we have to seek to alleviate poverty, to ensure that people are helped when they work hard to help themselves and to ensure that we have a system whereby we can provide a decent income for those people who are so vulnerable or so unlucky that they are unable to support themselves without help. That is the starting point, and that is why we have a welfare state and a welfare system.
My second point is that I have always thought that tax credits were one of the most flawed innovations to be brought into our welfare system. The idea was taken from the Clinton Administration in the United States and applied slightly differently here. It might have had some worthy intentions behind it, along the lines of providing negative income tax, but I always suspected that it was in fact introduced for politically populist reasons. The new Government could be seen to be giving money to add to the pay of a wide section of the population, and we have had that system ever since.
Mr Clarke: I will give way in a moment, but I want to make some progress. I do not want to speak for long, as lots of Members want to speak. Let me just finish my outline, then I will start to give way.
When tax credits were introduced, the then Government were confined by their election promise to stick to the spending and tax programme that they had inherited, because of the deficit. I seem to recall—I have not looked this up—that they therefore introduced them by means of a device that treated them not as public expenditure but as a tax change. Indeed, I seem to recall being assured on the Floor of the House by the then Chancellor of the Exchequer, when I expressed my disbelief, that they constituted negative expenditure.
That is why the payments became the responsibility of the Treasury and were described as tax credits. The Treasury is—or was—very good at collecting money from people who do not want to pay it, but with great respect to my old Department, which I greatly admire, it was not particularly suited to handing out benefits to people on low incomes with any degree of reliability or accuracy. I still get constituency cases relating to tax credits, because the system is based on forecasting someone’s income based on the previous year, but lots of people do not notify precisely all the changes in their arrangements. Ever since the system started, one feature of it has been that perfectly ordinary working people get demands to repay thousands of pounds that have been paid to them in error. I think that the level of error has come down, but at one point it was staggering, with a very high proportion of claimants being given bills by the Treasury that they could not afford to pay.
These measures were usually introduced on the eve of an election, so that even more members of a grateful public could receive yet more money on top of their pay. More importantly, it rapidly became clear that a lot of this money was subsidising employers, who found that they could hold down incomes. This was happening at a time when the economy was coming out of a recession, and they could therefore hire all the staff they needed, with the taxpayer subsidising their pay.
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Given the objectives that we are all agreed on, and that it is quite obvious that we need welfare reform—although Labour Members are unable to think of any at the moment—I cannot think of a more obvious target for such reform than the tax credit system. I approve of the Government’s choice in that regard. Of course, electoral bribes are always difficult to reverse, but I shall explain in a moment why this is a good time to make substantial progress towards getting rid of this dreadful mistake, which the last Labour Government should never have introduced.
Mr David Lammy (Tottenham) (Lab): The right hon. and learned Gentleman makes an important point about the nature of the benefit and the difficulties some people experience in paying it back a year later. Does he accept, however, that the system of family credit was introduced by Margaret Thatcher, and that Eleanor Rathbone fought for family allowances back in 1929? There has broadly been a cross-party consensus that the welfare state has to deal with those on low incomes, particularly those who are working.
Mr Clarke: Of course the Government have a duty to look after those of all kinds who are below subsistence income—that is what we have the welfare state for. I used to support family allowances with some vigour, because in those days we had persuaded the then Government to pay it to the mother, and a high proportion of women—there probably are still some in this position—did not know what their husbands earned and it was right to pay a benefit for the children directly to them; it was a kind of social reform. I did agree with the current Government that the time had come to end it for higher-rate taxpayers—again, it was a general subsidy. Various attempts were made to do a negative income tax, but we never succeeded in finding one—I tried over the years, talking with Chancellors and also when I was Chancellor. What has been introduced—tax credit—was a Clinton invention, altered by the Labour Government, and it has never worked properly, for the reasons I have given.
Mr Clarke: I do not want to take as long as the Front Benchers, so I will make a little progress.
Why do this now? There is never going to be a better time again to make more substantial progress in loosening our dependence on this subsidy to pay. I will not repeat what the Minister said admirably from the Dispatch Box about all the other things that are being done in more sensible areas, where we support the income and help with the expenditure of working families. That of course has to be key. That is the alleviation that everybody is demanding of what is bound to be difficult when we move forward. I am not naive. Politically, I point out to my Conservative colleagues that this is early in a Parliament, six months in, and my guess is that if we do not take this decision now, everybody will run for the hills if we decide we are going to do it in two years’ time. If we are looking, as a governing party should do, to what we are going to be able to show to the public by way of a successful economy when we next face them in five years’ time, we will see that now is the time to take the necessary decisions to get on with this.
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More substantially, as has been mentioned by, among others, my hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald), the former Solicitor-General, the employment situation is extraordinarily strong. This is the time to do it, because we are never going to get all the full compensating reactions in the labour market if we do not get them at a time when employment is at a record-breaking high, unemployment is very low and real incomes are rising at an amazing 3% a year.
In all the figures that keep being cited about what will happen to those who lose tax credit, there is one great incalculable, although people have tried to estimate it: what will employers do as they realise that their staff are losing their tax credit? We have already seen various firms lining up to say that they are going to pay my right hon. Friend the Chancellor’s living wage, some straightaway. That is because the labour market has changed, they do not want demoralised staff and they want to race ahead of the Government and say that they are giving a big pay rise. I accept that not everybody will be able to do that, but I think that employers, finding that the subsidy of tax credit is being drained away again, are in a better position now than they have been for years to say, “Perhaps we are going to have to give—perhaps we ought to give—a reasonable pay rise to the staff working for us because we can no longer rely on the Government setting in behind us.” Again, if we do not do it when the employment market is so strong, we will never do it at all—now is the time.
Mr Alistair Carmichael (Orkney and Shetland) (LD): I thank the right hon. and learned Gentleman for giving way, because I agree with an awful lot of his analysis of the problems caused by the whole system of tax credits. The difficulty is that we do not start with a blank sheet of paper. The fact is that the cuts are in the here and now, whereas the possible increase in wages will come only in the future. Can he really see any employer giving somebody a wage rise because they have just had a third child who will not be eligible now for tax credits?
Mr Clarke: Quite a lot of low-paying employers will realise the effect on the morale of their staff, some of whom will tell them that they are losing their tax credits. I am not naive and know that this will not mean that nobody loses. Not everyone will be able to do that. The downsides of the change—my hon. Friends on the Front Bench explained the upsides that will affect a lot of these working families—may not be totally eliminated, but there will be fewer problems now if we go ahead with this. I have already said that getting rid of electoral bribes, which most parties have given over the years, always proves to be terribly difficult. I have seen some dreadful things introduced and then nobody has the nerve to vote against them. Perhaps I should not worry. I receive a free bus pass, free television on which I do not pay a licence, and a winter fuel allowance to save me from winter poverty. I know that I was meant to say to the previous Labour Government, “God bless you, Mr Brown. You are a worthy man, and I shall vote for you from now on.” My political views are more complicated than that. Tax credits were about the Labour Government bumping up people’s income on the eve of an election.
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Mr Clarke: No, now is the time to get on.
I will conclude by turning to the rather big question of the £4 billion that will be lost by this motion. We are having a cheery knockabout argument and £4 billion is going out the window, and neither the Labour party nor the Scottish National Party can agree on any credible explanation of what they will do about that. They will borrow the money; that is what they did and that is what they will do.
I think that the right hon. Member for Birkenhead (Frank Field) is trying to catch your eye, Madam Deputy Speaker. He tried to produce some alleviation; at least he is halfway there. I think his changes save only £2 billion, so another £2 billion must be found from somewhere else. Perhaps he will address that when he speaks.
More importantly, there is talk of Labour and Liberal peers in the House of Lords voting down the measure. That is really quite a startling constitutional innovation. They use technical arguments, saying that it is a statutory instrument, and that it was not in the manifesto. Well, Budget measures are not in manifestos, so that is not a relevant argument. If the Upper House decides that it will not accept the supremacy of this House when the Government set tax and spending matters, I advise all Members in this House of all political parties to take that extremely seriously. It is irresponsible and it should not be done. We do not want a repeat of what happened in 1911. Personally, I will become a fervent advocate of reform of the House of Lords, as I always have been, all over again if they start doing that.
Pay should be set by employers once we get back to a healthy and normal world. We cannot have a system where we all have a party political argument about how much subsidy the Government will give to employers for selective members of the population. We do need welfare reform, and tax credits are one of the best candidates for such a reform. The Treasury should never have been paying out on welfare. We cannot get rid of it, but it is time to make some great progress. If this matter gets lost, the path of steady recovery that we have been on, as we lead the way in the western world towards a much more balanced, sustainable and modern economy, will be seriously damaged. I support my hon. Friend the Exchequer Secretary to the Treasury, and I hope that we will reject the motion.
Madam Deputy Speaker (Natascha Engel): Order. Before I call the Chair of the Select Committee, I point out that we have less than three hours left and more than 50 Members wishing to catch my eye. Dropping the speech limit down to two or three minutes seems ridiculous at this stage. There will also be a maiden speech following the contribution of the Chair of the Select Committee, and I do not want to impose a limit until after that. Can we please keep interventions to an absolute minimum and speeches as short as possible, so that I can put the time limit on as late as possible? With that, I call Frank Field.