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House of Commons

Tuesday 27 October 2015

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Tax Credits

1. Mrs Emma Lewell-Buck (South Shields) (Lab): What assessment he has made of the potential effect of proposed changes to tax credits on child poverty. [901797]

2. Kirsten Oswald (East Renfrewshire) (SNP): What estimate he has made of the administrative cost of proposed reforms to tax credits announced in the summer Budget 2015. [901798]

3. Wes Streeting (Ilford North) (Lab): Whether he plans to make changes to the Government's proposals to reform tax credits. [901799]

4. Naz Shah (Bradford West) (Lab): If he will bring forward transitional provisions for the proposed changes to the tax credits system. [901800]

The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne): Last night, unelected Labour and Liberal peers voted down the financial measure on tax credits approved by this elected House of Commons. That raises clear constitutional issues that we will deal with. We will continue to reform tax credits and save the money needed so that Britain lives within its means, while at the same time lessening the impact on families during the transition. I will set out these plans in the autumn statement. We remain as determined as ever to build the low tax, low welfare, high wage economy that Britain needs and the British people want to see.

Mrs Lewell-Buck: Six thousand, eight hundred children in South Shields are growing up in families who rely on tax credits. One of my constituents told me, “Tax credits at the moment only just make it possible for families to feed and clothe their children as it is. If this Government keep making cuts on those of us who are lowest paid we may just give up hope.” The public, the experts, some of the Chancellor’s own MPs and the other place all agree that his plans will victimise working parents and their children, so will he please give my constituents some hope and shelve these ridiculous tax credit cuts?

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Mr Osborne: We will give the hon. Lady’s constituents, and indeed the constituents we all represent in this House, support by continuing to deliver economic security in this country—economic security that has seen unemployment fall in her constituency by 44% since 2010. One of the ways we deliver economic security is by controlling our welfare bill and making sure this country lives within its means. That is what we will continue to do.

Kirsten Oswald: The Chancellor has singularly failed to listen to the SNP and to this House when we have said that he needs to think again about tax credits. He sounds like he is keener on dealing with peers than on listening to them, so how about he listens to the people and just drops these tax credit plans once and for all?

Mr Osborne: This House of Commons voted three times for the changes that were rejected by the House of Lords. I am sure that we look forward to the support of the Scottish National party on that constitutional question. I would make this point to the hon. Lady’s constituents: we need to have a welfare system that works. We need to move to a lower welfare, higher wage economy. We do that by introducing the national living wage and having a welfare bill that the country can afford. That is the best thing we can do for the security of the people she represents.

Wes Streeting: If the Chancellor had listened to the evidence from the outset, he would not be in this mess. If his Back Benchers had voted with their consciences, there would be an alignment of opinion between this House and the other place. Instead of manufacturing a phoney constitutional crisis, why will he not put his toys back in the pram and appreciate that he needs to go back to the drawing board with his failed policy that hits working people the hardest?

Mr Osborne: We will deliver the welfare savings that we were elected to deliver in this Parliament. We will help people in the transition to that lower welfare, higher wage economy. I remember a time when the Labour party used to support moving from welfare to work; it has entirely abandoned that approach. We will be the party that stands up for working people, and working people need controlled welfare and a country that lives within its means.

Mr Speaker: I call Naz Shah. She is not here.

Mr Andrew Tyrie (Chichester) (Con): Does the Chancellor agree that whatever our views may be in this House on the tax credit dispute, in overturning the settled will of the elected Chamber, the unelected Lords has exercised the powers of a Chamber of Parliament in the tax area, whereas for at least 100 years it has been well established that it has, and should have, only the legitimacy of a consultative assembly?

Mr Osborne: The Chair of the Treasury Committee makes an important point. Of course, on only five occasions in recent decades has the House of Lords blocked or rejected a statutory instrument, but never on a financial matter. We heard a whole range of opinions yesterday—from Lord Butler, the former Cabinet Secretary, to constitutional experts such as Vernon Bogdanor—telling

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us that this was unprecedented. We are going to have to address it—the Prime Minister has made that very clear. That is what we have to do to make sure that the elected House of Commons is responsible for the tax-and-spend decisions that affect the people of this country.

Sir Edward Leigh (Gainsborough) (Con): I have written to the Chancellor about a lady in my constituency, Stacey, to whom I have talked at length. She earns only £11,000 a year and says that £31 a week is being cut from her budget. I know that the Chancellor will meet me to discuss that. Surely the point is that we should have the conversations here, and he will listen, and that ultimately we will be held responsible and chucked out. What is not right is that unelected people, who never have to stand again, should decide how the people are taxed and how we spend our money.

Mr Osborne: I agree with my hon. Friend on the constitutional point, which is a matter that the whole House of Commons will want to address. I take very seriously the point he raises about his constituent. I have made it clear that we will listen with regard to how we make the transition to a lower welfare, higher wage economy. When we introduced controversial welfare changes in the last Parliament, such as the removal of child benefit from higher earners and the introduction of the welfare cap, we made changes, having listened to Parliament, to smooth the transition to both those important reforms. Of course we will listen to the House of Commons in this respect, but the end goal is clear: this country cannot have an unlimited welfare budget that squeezes out other areas of public expenditure. We cannot have a situation whereby we have 1% of the world’s population and 4% of the world’s economy, but 7% of the world’s welfare budget.

Philip Davies (Shipley) (Con): May I urge the Chancellor to stick to his guns on tax credits? Gordon Brown spent billions of pounds he did not have on tax credits, to try to buy votes at the 2010 election. Does the Chancellor agree that there is no painless way out of huge debt and that people would do well to remember that before they ever elect a free-spending Labour Government again?

Mr Osborne: I completely agree with my hon. Friend. Spending on tax credits went up three times during the last Labour Government, yet working poverty increased during that period. In other words, it had completely the opposite effect from that intended. The people who suffer when the country loses control of its public finances are, indeed, the low paid. They are the people who get turned out of work. It is not the richest in the country or the trade union barons who lose their jobs when that happens; it is the poorest in the country. What we can deliver for them is economic security. So, yes, we will listen on the transition, but we are determined to deliver controlled welfare and economic security for the working people of this country.

Sarah Champion (Rotherham) (Lab): The Children’s Society estimates that 10,000 children living in 5,100 families in Rotherham will be punished by the tax credit changes. What transitional provisions will the Chancellor put in place to support them?

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Mr Osborne: I will set out at the autumn statement how we make sure that we smooth the transition to the lower welfare, higher wage economy that the people of Rotherham and the rest of the country want. We have to make choices in this country. Are we prepared to see our country decline, our budget go out of control and jobs lost, or do we want to continue delivering the economic security that sees a record number of people in work and that has seen employment increase in Rotherham?

Dr Liam Fox (North Somerset) (Con): The average taxpayer in this country now pays £2,000 a year in extra tax just because of the Government’s debt interest payments. Is not it time that we saw that debt tax on this country’s payslips, so that those who believe they can spend with impunity, including the unelected Chamber, recognise the cost it will provide to future generations?

Mr Osborne: My right hon. Friend is quite right to call it a debt tax. Indeed, one of the largest items of Government spending is paying the creditors we owe, who fund our national debt. That crowds out the spending that we could be putting into our education and transport systems. We have, of course, taken forward an innovation proposed by a Government Back Bencher in the last Parliament, and we now send a tax statement to every taxpayer so that they can see how much we spend on debt interest and how urgent it is that we remove this deficit and reject those who want to borrow forever.

Chris Leslie (Nottingham East) (Lab/Co-op): On the constitutional point, will the Chancellor read out the specific sentence in the Conservative party manifesto where he promised he would cut tax credits?

Mr Osborne: I am very glad that the hon. Gentleman has a copy of the Conservative manifesto. It is an excellent document, which says we are going to deliver better schools for people, we are going to put more money into the national health service for people, we are going to invest in transport for people and we are going to make £12 billion of welfare savings.

Richard Fuller (Bedford) (Con): It is good to see the Chancellor in listening mode. There is another group that can assist practically but which we are not talking about—companies. Are our companies in listening mode about the measures that they can take in moving their employees to the national living wage much more rapidly? What can the Chancellor say about what they are doing to help on this issue?

Mr Osborne: My hon. Friend makes a very important point. The savings we make in welfare are part of a package that includes a national living wage. Although the national living wage starts to come in next year, over 200 major companies—such as Sainsbury’s, Morrisons, Costa Coffee and many others—have already, since the Budget, introduced wage increases that match what we are proposing to do by statute, so we are already seeing the benefits of the national living wage coming into effect before it is even introduced.

Stewart Hosie (Dundee East) (SNP): We know that there are 500,000 more children in poverty since 2010—[Hon. Members: “No.”] There are 500,000 more children

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in poverty since 2010, and there will potentially be 4 million children in poverty by the end of this Parliament. If the Chancellor is in listening mode, knowing that he does not need to make these cuts to balance the budget, why does he not listen to those who say, “Stop now with the policy of tax credit cuts”?

Mr Osborne: I am afraid that the hon. Gentleman is just not correct on the numbers. Child poverty is down by 300,000 since 2010, and the number of children in workless households is now 500,000 fewer than it was when the Government came to office. The truth is it is difficult to take any lectures from Scottish National party Members about balancing the books. They made forecasts for their oil revenues that would have left Scotland with a £30 billion black hole if they had ever got their way. We will go on delivering economic security for the people of Scotland, and indeed the rest of the United Kingdom, by taking the difficult decisions that his party ducks.

Stewart Hosie: The Chancellor is in denial—absolute denial. Did not yesterday, 26 October, demonstrate two things—the Chancellor has lost his political touch, and his chance of being Prime Minister has just gone up in a puff of ermine-clad smoke?

Mr Osborne: As ever, when pressed, all that SNP Members want to talk about is party political gains, rather than sorting out the mess that this country was in six or seven years ago. As a result of the changes we have made, there are hundreds of thousands more people in Scotland with jobs, businesses are investing in Scotland, as they are across the United Kingdom, and we will go on making those changes. The hon. Gentleman can go on praying in aid a House of Lords that he has spent his whole life campaigning to abolish. I will go on delivering the reforms to our economy that are needed to help Scotland to continue to grow.

Victoria Atkins (Louth and Horncastle) (Con): At the end of the previous Labour Government, nine out of 10 families with children were eligible for tax credits, some of whom earned up to £60,000. In other words, they were paying their taxes and then getting some back. Is it not better to reduce taxes in the first place so that people keep more of their hard-earned income?

Mr Osborne: My hon. Friend speaks for her Lincolnshire constituents and for the whole United Kingdom in saying that we want to move to a lower tax, lower welfare, higher wage society. We took such a step in the Budget by increasing the personal allowance to £11,000. We also cut taxes for business, reducing corporation tax and expanding the employment allowance so that smaller businesses could take on more people. It is all about continuing to deliver the record levels of employment we see in our country, and indeed the growing economy that today’s GDP figures confirm.

John McDonnell (Hayes and Harlington) (Lab): May I remind the House that for 3 million people out there who have done everything asked of them and have been bringing up their children and going to work, this is not a constitutional matter? Those people will lose £1,300 a year. Given what happened in the other place last night, may I reassure the Chancellor that if he brings forward

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proposals to reverse the cuts to tax credits, fairly and in full, he will not be attacked by Opposition Members; indeed, he will be applauded? Can he assure us that whatever proposals he brings forward, he will not support any that an independent assessment demonstrates will cause any child to be forced to live below the poverty line?

Mr Osborne: I am, of course, happy to accept any proposals that the hon. Gentleman puts forward—[Interruption.] I am happy to listen to those proposals, but there is a difference between those who say, “We want to make no savings to welfare at all; we want to abolish things like the benefit cap; we are not prepared to make any savings at all to the tax credit system”, and those who say, “Yes, we want to move to a lower welfare society, but we want help in the transition.” If the hon. Member for Hayes and Harlington (John McDonnell) has proposals to help with the transition, of course I will listen to them, but if he is again promoting uncapped welfare and unlimited borrowing, I do not think that the British people will listen to him.

John McDonnell: The Chancellor has a choice before him: he can push on with tax giveaways to multinational corporations, and press on with cuts to inheritance tax for the wealthiest few that he announced in the summer Budget, or he can reverse those tax breaks for the few, and instead go for a less excessive surplus target in 2019-20. He can avoid penalising 3 million working families with cuts to tax credits, and stick to his self-imposed charter. Is he prepared to listen to reason on this matter? Is he, or any Government Member, prepared to step up and show some leadership on this issue?

Mr Osborne: Let us remember that we inherited a tax system where City bankers were paying lower tax rates than the people who cleaned for them, and multinationals were paying no tax at all. We have introduced a new tax to ensure that multinationals do not divert their profits, and we increased capital gains tax precisely to avoid that abuse of tax rates. We will not take lectures from the Labour party about a fair tax system.

In a way, the hon. Gentleman reveals what he believes, which of course I completely respect. He says that we should abandon our surplus rule and run a deficit forever, but I profoundly disagree with that central judgment. If we borrow forever and are not prepared to make difficult decisions on welfare, we will condemn this country to decline. As a result, people will become unemployed and living standards will fall. That is not the Britain I want to see. We will go on taking difficult decisions to deliver that lower welfare, lower tax, higher wage economy, and this elected House of Commons will continue promoting the economic plan that delivers that.

Scotland: Fiscal Framework

5. John Nicolson (East Dunbartonshire) (SNP): What recent discussions he has had with Ministers in the Scottish Government on a future fiscal framework for Scotland. [901801]

The Chief Secretary to the Treasury (Greg Hands): I am currently in discussions with the Scottish Government on the design of their new fiscal framework. We met on

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four occasions, and after each meeting a joint statement was released providing details of the items covered. Talks have been constructive, and we are hopeful of coming to a final agreement in due course.

John Nicolson: Does the Chief Secretary to the Treasury remain committed to a funding formula based on Barnett, as promised in the vow and referred to by the Smith commission?

Greg Hands: The Government remain committed to the Barnett formula and to delivering all aspects of the Smith agreement during the fiscal framework, and in the Scotland Bill that is currently before this House.

Mr Peter Bone (Wellingborough) (Con): Will the excellent Minister think again on that answer, because my constituents have £2,000 less per person on public expenditure than constituents in Scotland and we pay the same taxes? How can that be fair?

Greg Hands: It is worth noting that the Barnett formula will continue, but diminish in importance. For the first time, more than half the Scottish Government’s budget will come from Scottish taxpayers rather than a grant from the UK Government. That will add extra accountability to the Scottish Government.

Employment Trends

6. John Howell (Henley) (Con): What assessment he has made of recent trends in the level of employment. [901802]

7. James Morris (Halesowen and Rowley Regis) (Con): What assessment he has made of recent trends in the level of employment. [901803]

The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne): We have a record number of people in work. Today’s GDP data show that Britain continues to outperform other western economies, but there are clear global risks and there is still much more to be done to fix our economy. In the autumn statement, we will take more steps to ensure the recovery is felt right across the country, make long-term investments for the future, and, crucially, continue to make the tough decisions required so that Britain lives within her means.

John Howell: The total number of unemployed in my constituency is 219, with youth unemployment at only 36. Will my right hon. Friend join me in praising institutions such as the Henley college, which is providing excellent apprenticeship training?

Mr Osborne: It is very good to hear about the success the people in my hon. Friend’s constituency have had in finding work over recent years and the clear business confidence that exists in Oxfordshire. The Henley college is doing an excellent job in making sure that young people have the skills they need to take the opportunities now out there in the jobs market. We will, of course, go on helping such institutions by increasing the number of apprentices we fund in this country, so that we deliver the 3 million apprenticeships mentioned in our election manifesto.

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James Morris: Unemployment in my constituency has fallen by 50% since 2010, but, given the recent news about the difficulties in Caparo in the west midlands, we must not be complacent. Does the Chancellor agree that we need to do more to invest in training and skills, such as the new advanced science, engineering and technology centre at Halesowen college, so we can equip local people with the skills they need to take future opportunities?

Mr Osborne: I visited with my hon. Friend a number of the very successful businesses in his constituency; they are exactly the kind of small and medium-sized businesses that are the backbone of the British economy. They need help with their training, and Halesowen college can help to provide that training to the young people in the area, so they can get the jobs that are being created in his area.

Caroline Flint (Don Valley) (Lab): The Chancellor claims he is on the side of working people but, as far as I can see, he has been afraid to publish an impact assessment of changes to working tax credits on people taking up or remaining in work. Will he guarantee, given last night’s decision and the delay, to look at that and that, in any proposals, he will include an impact assessment on people taking up work, increasing their hours or staying in work and how that affects employment levels?

Mr Osborne: We have published an impact assessment, an equalities assessment and a distributional analysis of the measures we produced in the Budget. None of those were ever produced by any Labour Chancellor, so we continue to provide the information that people seek. What matters above all is getting the central judgment right about fixing our economy, making sure we deal with our deficit, and going on delivering economic security for the people the right hon. Lady represents.

Mark Durkan (Foyle) (SDLP): The Chancellor is fond of telling us about 2 million more people in employment, and then he usually does a little facial lap of honour of the Chamber. Has he estimated how many of those 2 million people would be hit by his proposed changes to tax credits? How many would he be comfortable with still hitting in any revised changes?

Mr Osborne: The measures to save welfare—as I say, we will help with the transition—come alongside the increase in the national living wage, the increase in the personal allowance and the action we have taken to cut social rents. They are all part of a package that is delivering economic security to the people in Northern Ireland and across the United Kingdom. The hon. Gentleman remembers what the situation was like five or six years ago in Northern Ireland: high unemployment, a lack of business investment and people looking for work. Now we are in a situation where jobs are being created and people are finding work. Do I say that everything has been done that needs to be done? Absolutely not. We have more to do to bring jobs and investment to Northern Ireland. Let us work together to make that happen.

David Morris (Morecambe and Lunesdale) (Con): My local council keeps bleating on about cuts, saying how they are going to affect everybody living there. But,

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on the front page of a newspaper, a management consultancy company that the council brought in said that in my constituency and the region, 10,000 jobs are going to be created over the next five years.


Yes, very lucky. Does the Chancellor agree that his economic policies have put that on track and that my area of the world is going forward, making it better for the people who live there?

Mr Osborne: My hon. Friend is absolutely right. As a result of the combination of him being a very effective local MP and the fact that we have a Conservative Prime Minister and a Conservative Government, we are delivering more jobs into my hon. Friend’s part of Lancashire. Indeed, I remember on visits with him seeing the work being done on the link road to the port, which for decades—including when there were Labour MPs representing the constituency—was campaigned for, but never delivered. Now it is actually being built and delivered as a result of my hon. Friend’s local efforts.

Rob Marris (Wolverhampton South West) (Lab): Contrary to what the Chancellor believes, my party does want to deal with the deficit; we just think he is going about it the wrong way. We are worried about certain employment trends. The Solar Trade Association, for example, has warned that up to 27,000 jobs could be at risk due the Government’s announcement of the withdrawal of support for solar energy schemes. What steps do the Government propose to take to avoid large-scale redundancies and this employment trend in the solar industry and what support will the Government offer to the industry?

Mr Osborne: Of course we are in a constant dialogue with the solar industry, and solar energy use has dramatically increased over the last five years, but so have the costs of that technology. Quite reasonably, then, we have reduced the subsidy going to solar. There has to be consistency in what Labour Members argue for. On the one hand, they say, quite reasonably, “Please deal with the energy prices that are affecting the steel industry”, but then their spokesman gets up and says, “Please add more cost on to energy bills in order to subsidise renewables.” The trouble is we cannot have both.

Large-scale Redundancies

8. Nigel Adams (Selby and Ainsty) (Con): What support his Department provides to people affected by large-scale redundancies. [901804]

The Chief Secretary to the Treasury (Greg Hands): I recognise that all job losses are deeply concerning for those affected. In the case of large-scale redundancies, the Jobcentre Plus rapid response service can provide support for affected workers. The rapid response service stands ready to provide support, and is already working at Kellingley colliery in my hon. Friend’s constituency. We may consider further intervention in exceptional cases where the impact is particularly significant.

Nigel Adams: I, too, welcome the support and retraining packages for steelworkers. As my right hon. Friend rightly says, several hundred workers at Kellingley colliery are facing redundancy later this year, and a further 240

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power station workers at Eggborough are going through a consultation and are very worried about their future and their jobs at the station. Will the Chief Secretary urgently meet me to discuss a similar support and retraining package for those workers in my constituency?

Greg Hands: I totally recognise the difficulties faced by many people in my hon. Friend’s constituency. One thing I will say is that my hon. Friend is a real champion for jobs in his constituency. Only last week, he ran his fifth annual jobs fair for his constituents, and that is part of the reason why unemployment there went down by more than 1,000 in the last Parliament. I will, of course, be happy to meet my hon. Friend to discuss further what training and support is available for the constituents affected.

Helen Goodman (Bishop Auckland) (Lab): Seventeen hundred people in Redcar have lost their jobs, and throughout the north-east it is expected that total job losses will be 9,000. Will the Minister tell those people how long it will take for his measures to take effect and for them to have jobs again?

Greg Hands: We are taking a number of measures in relation to steel. We are tackling unfair trade practices, and voting and speaking on that basis at EU summits. We are doing something to deal with high energy bills and we are making sure that more public contracts go to UK steel producers. At the end of the day, the one thing the UK Government cannot do is deal with the world steel price at the moment. We are offering comprehensive packages, particularly in Redcar, and we are making sure that the situation is as good as it can be at the moment.

Research and Development

9. Callum McCaig (Aberdeen South) (SNP): If he will take further fiscal steps to support research and development. [901805]

The Chief Secretary to the Treasury (Greg Hands): The Government have made a long-term science capital commitment, investing £6.9 billion in the United Kingdom‘s research infrastructure up to 2021. In the last Parliament we maintained the ring-fenced science budget, in cash terms, at £4.6 billion per annum, and in 2013 we provided £1.75 billion of support in research and development tax credits. Further decisions on support for research will be made as part of the forthcoming spending review.

Callum McCaig: The Government’s record on R and D does not match their rhetoric. Only yesterday, some of the leading companies in the United Kingdom expressed the fear that the Government’s reported plan to replace R and D tax credits with interest-paying loans could hit R and D investment and send it abroad. Will the Minister reassure Parliament and business that R and D grants will continue to be made available to help our businesses to innovate and remain competitive?

Greg Hands: Future plans for R and D tax credits are, of course, a matter for the spending review, but I disagree with what the hon. Gentleman has said in the light of what we have done in the last five years.

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According to a recent evaluation by Her Majesty’s Revenue and Customs, each £1 of tax forgone on R and D tax credits stimulates between £1.53 and £2.35 of additional R and D investment. During the last Parliament, the Government increased the generosity of the R and D tax credit scheme for small and medium-sized enterprises from 175% to 270%.

Mark Pawsey (Rugby) (Con): Both the Chancellor and the Prime Minister recently visited the Manufacturing Technology Centre, which is in my constituency. Does the Minister agree that such collaborations between the academic world and manufacturing industry show the way forward?

Greg Hands: I absolutely agree with my hon. Friend, particularly when it comes to innovation. The Global Innovation Index ranked the United Kingdom second in the world in 2013. We have been ranked first for the reach, impact and well-roundedness of our research and first for our research productivity, which is 3.87 times the world average.

Northern Powerhouse

10. Chi Onwurah (Newcastle upon Tyne Central) (Lab): What plans he has to provide local authorities within the northern powerhouse with additional funding and powers to raise funds to support those authorities in carrying out newly devolved responsibilities. [901806]

The Chief Secretary to the Treasury (Greg Hands): By the end of this Parliament, local authorities will be able to retain 100% of local taxes to spend on local services, and areas with city-wide elected mayors will be given even greater flexibilities in relation to business rates. Each devolution deal will be bespoke, but the deal agreed last Friday with the North East combined authority includes a new £30 million-a-year funding allocation which will bring together funds to deliver a 15-year programme of transformational investment in the region.

Chi Onwurah: The north-east is keen, indeed determined, to slip Whitehall’s leash, but some fear that hard-pressed civil servants will seek to devolve cuts while retaining control of spending. To avoid that, will the Chancellor commit himself to complete transparency in respect of the budgets of the devolved functions, and to publishing the full funding figures for the years before and after the spending review?

Greg Hands: Of course we will publish information, but I remind the hon. Lady that the deal that was signed last Friday commits us to £30 million a year of additional funding. If she does not think that that is a good deal, perhaps she should listen to Simon Henig, the chairman of the new North East combined authority. He is a member of her own party, but it seems that she does not want to listen to what has been said by a member of her own party. He said:

“The agreement being signed today will bring significant economic benefits and opportunities for businesses and residents.”

The hon. Lady should be welcoming that.

25 [901821]. David Rutley (Macclesfield) (Con): Last week’s announcement of £130 million for the new “China cluster” at Airport City Manchester, and the announcement of a new flight from Manchester to China, further underpin the northern powerhouse. Is it

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not clear that, for all the Opposition’s droning on about regional policy over recent decades, it is this Government and this Chancellor who are delivering a clear vision for the north?

Greg Hands: Last week’s state visit by the President of China was exceptionally successful, including the Manchester leg of his journey. Various announcements have been made in Manchester concerning the northern powerhouse, but particularly important was the announcement of the first direct flight connecting Manchester and the northern powerhouse region to China. I am sure that that will prove vital to the connectivity of the northern powerhouse, and will ensure that inward investment is brought into the region.

Richard Burgon (Leeds East) (Lab): Last week, credit rating agency Moody’s concluded that the Chancellor’s decision to fully devolve business rates to local authorities will lead to an increase in council debt levels and fragmentation of the creditworthiness of local government, and will leave many local councils, including Lancashire County Council, with their credit rating downgraded. In the light of that analysis, what safeguards can the Chancellor promise will be put in place to ensure that poorer areas of the country, including in the Government’s so-called “northern powerhouse”, do not lose out on vital revenue as a result of this Government’s reforms?

Greg Hands: The hon. Gentleman needs to know that over many years a large number of local authorities have been calling for precisely this kind of devolution of the tax base so that they have control over their own decisions and the funding given towards them. Many of the local authorities calling for these additional powers have been the Labour authorities in inner-city areas, particularly in the north and the northern powerhouse. We intend to deliver on that to make sure that there is devolution in this area.

Bank Stability

11. David Mowat (Warrington South) (Con): What progress his Department has made on implementing ring-fencing proposals to enhance the stability of major banks. [901807]

The Economic Secretary to the Treasury (Harriett Baldwin): The Government are fully committed to implementing a robust and effective ring-fencing regime, and we remain firmly on track for the separation of banks by January 2019. We passed the last legislation implementing the Independent Commission on Banking ring-fencing recommendations this year, and the Prudential Regulation Authority is currently consulting on the second tranche of implementation rules before publishing the final rules this year.

David Mowat: I thank the Minister for that answer. In 2012, the then Governor of the Bank of England said that unless these regulations were tightly specified there was a risk of their being watered down before implementation in 2019. We now see Barclays joining RBS and Lloyds in requesting significant waivers. Will the City Minister reconfirm the Government’s commitment to Vickers and the design principles within the legislation?

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Harriett Baldwin: Of course, the Government remain as committed as ever to implementing a robust ring-fencing regime, as recommended by the Independent Commission on Banking. Obviously, I am not going to comment on speculation about how individual banks would like to implement their ring-fencing rules, because that is a commercial decision for banks, as long as they remain compliant with the considerable restrictions imposed by the legislation. Their deadline is the start of 2019.

John Pugh (Southport) (LD): There is a lot of crying wolf and worried bleating from the banks on this subject of ring-fencing. Is the Minister aware of any banks that have decamped to foreign parts because of it?

Harriett Baldwin: The Government are delighted that the UK recently, once again, topped the poll as the No. 1 location for a global financial centre. We believe that our legal system, language, geographical location and brilliant skilled workforce, and many other factors, contribute to this being an excellent place to locate a global financial services firm.


12. Neil Carmichael (Stroud) (Con): What steps he is taking to tackle the productivity gap. [901808]

The Exchequer Secretary to the Treasury (Damian Hinds): My hon. Friend is absolutely right to highlight the importance of increased productivity, which, along with growing employment, will drive growth, raise living standards and ensure a better quality of life for our citizens. Our productivity plan set out a range of reforms designed to make sure that the UK remains a dynamic, open and enterprising economy, supported by long-term public and private investment in infrastructure, skills and science.

Neil Carmichael: Does the Minister agree that the recent report by the Governor of the Bank of England highlighting Britain’s membership of the European Union in positive and authoritative terms suggests that if we make sure that we do get productivity right and do protect our financial services, the prospects for our economy will be very good, both dynamically and in terms of growth?

Damian Hinds: As my right hon. Friend the Chancellor has noted, the best outcome for the UK economy is that we achieve major economic reform of the EU. We want the UK to play a leading role in creating a dynamic, competitive and outward-focused Europe, delivering prosperity and security for every country in the EU, particularly by accelerating the integration of the single market.

Derek Twigg (Halton) (Lab): One important factor in increasing productivity is ensuring that companies are able to invest in new plant and machinery. Is the Minister convinced that banks are doing all they can to lend to companies to ensure that they can make such investment to improve productivity?

Damian Hinds: The hon. Gentleman is right to identify the importance of private investment. It is one reason why we have brought in the highest ever permanent level of the annual investment allowance, and of course banks play a crucial role in identifying those opportunities.

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Suella Fernandes (Fareham) (Con): Does the Minister agree that raising productivity is the route to raising living standards for everybody, and that this Government’s commitment to cutting corporation tax, our historically high investment in infrastructure and the planning reforms will all contribute to achieving that aim?

Damian Hinds: I agree with all that. It is rising productivity that underpins rising real wages and therefore improving living standards.

Seema Malhotra (Feltham and Heston) (Lab/Co-op): Mr Speaker,

“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”

The Chancellor may recognise his own words from his Mansion House speech in July. Why was he so damning of his own record?

Damian Hinds: My right hon. Friend the Chancellor has been absolutely consistent in identifying the need to rebalance the economy and export more. I am afraid that this country’s productivity gap has existed for a very long time—I am not even going to try to pin the blame entirely on the previous Labour Government; it has existed for longer than that. We need to fill that gap and address the shortcomings that our economy has had over a long period. The productivity plan that this Government are bringing in is doing just that.

Seema Malhotra: I thank the Minister for his answer. The Chartered Institute of Personnel and Development has said that his productivity plan is “fatally undermined” by insufficient measures to improve the skills of the workforce. Could that be just one reason why the UK’s productivity gap compared with other G7 countries has widened to the largest on record since 1991?

Damian Hinds: The hon. Lady is right to identify the importance of skills, and that is why human development is absolutely at the heart of the productivity plan. The apprenticeship levy is a really important structural reform to help the delivery of 3 million apprenticeships. Then there is the network of institutes of technology and all the excellent work being done in the Department for Education, working on basic skills, including English and maths, which we know are vital and of such high value in the marketplace to both employers and employees.

Personal Allowance

13. Caroline Ansell (Eastbourne) (Con): What plans he has to raise the personal allowance during this Parliament. [901809]

The Financial Secretary to the Treasury (Mr David Gauke): The Government are committed to raising the income tax personal allowance from £10,600 to £12,500 by the end of this Parliament. That is alongside our commitment to raising the higher-rate threshold to £50,000. More than 30 million individuals will benefit from those changes. This year’s summer Budget confirmed that the personal allowance will increase to £11,000 next year and to £11,200 in 2017-18.

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Caroline Ansell: I thank the Minister for that answer. Raising the personal allowance is one of the most powerfully progressive things that we are doing in moving towards a lower tax, higher pay society. Income tax cuts will mean that nearly 5,000 people in my constituency will be lifted entirely out of paying income tax. Does that not show that Conservatives are on the side of working people?

Mr Gauke: My hon. Friend is absolutely right. Those working 30 hours a week on the national minimum wage will be taken out of income tax altogether and kept out of income tax. That contrasts with the position in 2010 when people earning just £6,500 were paying income tax. Those people have recently seen an increase in their marginal rate from 10% to 20%.

Joan Ryan (Enfield North) (Lab): Raising the personal allowance is not a panacea; it will do nothing to address the deep levels of poverty among the working poor. Is the Minister concerned at all at recent Office for National Statistics figures showing that 6 million jobs pay less than the living wage?

Mr Gauke: The best way to address poverty is to ensure that we have a strong economy—jobs growing, increasing productivity, making sure that we have the business investment that we need. This Government are delivering a pro-business approach that is good for job creation, which is why there are more people in work than we have seen ever before.

Topical Questions

T1. [901787] Karl Turner (Kingston upon Hull East) (Lab): If he will make a statement on his departmental responsibilities.

The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne): The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

Karl Turner: But for the Government’s defeat in the other place, 4,000 struggling families in east Hull would have lost, on average, £1,300 a year. Now that the Chancellor is in listening mode, would he please commit to dropping this vicious assault on hard-working families?

Mr Osborne: In Kingston upon Hull, which the hon. Gentleman represents in this House, unemployment has fallen by 32% since the Government came to office in 2010. That is because we have delivered economic security and committed to the fact that Britain should live within her means. Yes, of course we will listen, as I have said, during the transition we make to that lower welfare, higher wage economy, but we have to go on making savings in our welfare budget or else it will crowd out spending on our national health service and education system. That will mean that Hull does not have the resources it needs to thrive and prosper.

T6. [901792] Lucy Allan (Telford) (Con): Wage increases reduce the burden of tax credits on the taxpayer. What assessment does the Chancellor make of wage increases in my constituency, in the west midlands and in the UK?

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Mr Osborne: We have very strong wage growth at the moment in the west midlands and across the country. That is, of course, very welcome. The introduction of the national living wage will benefit, I think, around 300,000 people in the west midlands, including my hon. Friend’s constituents. That is part of a package to support the working people whom she represents and to give economic security to that west midlands engine that we all want to see.

T2. [901788] Rushanara Ali (Bethnal Green and Bow) (Lab): Following last night’s votes, the Chancellor said that he would listen. Will he confirm that he will not be writing to the 3 million families before Christmas delivering the devastating news that their tax credits will be slashed? Surely the Chancellor—an aspiring future Prime Minister—does not want to go down in history as Scrooge delivering devastating news to millions of people. Or does he?

Mr Osborne: Obviously, we will inform families once the changes that we have made become law.

T7. [901793] Damian Collins (Folkestone and Hythe) (Con): The channel tunnel and port of Dover are very important pieces of national infrastructure. When there are disruptions to services, as we saw in chaotic scenes this summer, they cause misery for people in Kent. Will my right hon. Friend agree to meet me and other Members from Kent to discuss what funding can be made available to find a long-term solution to managing road freight in Kent and ending the misery of Operation Stack?

Mr Osborne: Of course I would be very happy to meet my hon. Friend and other Kent MPs affected by the traffic jams that build up when there is disruption at the channel tunnel. We have made available Manston airport as a temporary measure to help alleviate the congestion caused by Operation Stack. There is a proposal from Kent about a much bigger investment in a longer-term solution and I will be happy to talk to my hon. Friend and his colleagues about that.

T3. [901789] Carolyn Harris (Swansea East) (Lab): Given the growing evidence that fixed-odds betting terminals are being used as a prime vehicle through which to launder money, will the Chancellor assure the House that there will be a prominent focus on the machines in his upcoming anti-laundering action plan?

The Economic Secretary to the Treasury (Harriett Baldwin): The hon. Lady will be aware that we are in the process of considering how we implement the fourth anti-money-laundering directive. We will be looking closely at the evidence, and I encourage her to get in touch with me.

T8. [901794] James Morris (Halesowen and Rowley Regis) (Con): The Black Country local enterprise partnership has done an excellent job in bringing jobs and investment to the black country, but does the Chancellor agree that the time has come for local enterprise partnerships to work together with the west midlands combined authority to deliver further growth, jobs and investment for the west midlands region? [Interruption.]

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Mr Osborne: I hear the hon. Member for Wolverhampton South West (Rob Marris) saying, “Well said!” Let me make this point. In the west midlands we have the real prospect of a further big devolution to the combined authorities with an elected mayor. We are working with the local authorities, the three excellent local enterprise partnerships and the local MPs. We are close to an agreement, but let us try to get it over the line. That would give the people of the west midlands the control over local decision making that we have now given to the people of south Yorkshire, Manchester, the north-east and Teesside.

T4. [901790] Vicky Foxcroft (Lewisham, Deptford) (Lab): In my constituency, there are 9,000 families with children claiming tax credits. Some 5,500 of those are working families. The Chancellor said that he is listening but has dismissed every proposal so far. Millions of families need him to change course and make work pay. Will he listen now and introduce transitional relief so that those working families will not be out of pocket by £1,300?

Mr Osborne: We are listening, and we are listening in particular to what we can do to help with the transition to the lower welfare, higher wage economy that we want to see in the hon. Lady’s constituency and across the country. We will also take steps, as we always do, to ensure that work pays by increasing the personal allowance—we are committed to increasing it to £12,500 in this Parliament—by introducing the national living wage, which will help many thousands of people in her constituency, and by supporting the businesses in her constituency, without which we would not have the jobs that are now employing local people.

Chris Green (Bolton West) (Con): Since 2010, more than 37,000 of my constituents have had their taxes cut, enabling them to keep more of what they earn. Some of them have begun to accumulate savings for the first time. Can the Chancellor assure my constituents that the Government will continue to cut their taxes and support them with their future saving?

Mr Osborne: I can absolutely give that assurance to my hon. Friend, who represents his constituents in Bolton so well. We will go on delivering lower taxes to help the working people in his constituency. We will also ensure that we go on supporting savings in his constituency. We are introducing a new savings allowance and a help-to-buy ISA to help the people he represents to get on the housing ladder.

T5. [901791] Bridget Phillipson (Houghton and Sunderland South) (Lab): The Chancellor seems to have taken issue with being told to think again by the other place last night. Will he now reflect on how thousands of my constituents—people who work hard and do the right thing—must feel at the prospect of losing thousands of pounds every year as a result of his actions?

Mr Osborne: As I have said, the people who suffer the most when the economy fails and when the country fails to control its public finances are precisely the people the hon. Lady is talking about: the low paid. They are the people who lose their jobs. They are the victims of economic insecurity. We are determined to deliver economic security and a controlled welfare bill—which, after all,

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the people she represents have to pay for through their taxes—and we will set out how we will ease the transition to that lower welfare, higher wage economy.

Richard Graham (Gloucester) (Con): The coalition Government freed pensioners from mandatory annuities and encouraged saving through ISAs and auto-enrolment. However, tax relief on contributions to pensions is expensive and favours higher-rate taxpayers much more than others. Does my right hon. Friend agree that that is an area in which sensible reform could be considered, in order to help to balance the budget without disincentivising saving?

Mr Osborne: My hon. Friend is right to say that we have taken significant steps to encourage saving, not least by giving pensioners control over their pension pots in retirement and by trusting those who have saved all their lives with the money that they have earned and put aside. He is an expert in these matters, and he will know that we are open to consultation on the pensions taxation system at the moment. It is a completely open consultation and a genuine Green Paper, and we are receiving a lot of interesting suggestions on potential reform. We will respond to that consultation fully in the Budget.

T9. [901795] Kirsten Oswald (East Renfrewshire) (SNP): Will the Chancellor confirm that there is nothing in the passing of the charter for budget responsibility that will restrict the Scottish Government’s ability to borrow, which is already enshrined in statute under the Scotland Act 2012?

Mr Osborne: I am happy to confirm that the deal we struck with the Scottish Government on capital borrowing remains intact. Indeed, we want to strike a new agreement with them involving a new fiscal framework, and we are having a good discussion around capital borrowing powers, resource borrowing powers and the mechanism to ensure that Scotland genuinely sees the benefits and bears the costs of any decisions taken by the Scottish Government. That represents the true nature of devolution, which I am sure the Scottish National party wants to see, so let us make sure we get that agreement.

Johnny Mercer (Plymouth, Moor View) (Con): I welcome my right hon. Friend’s comments last night on transitional arrangements, but does he agree that we simply must reform this crazy tax credit system, which enforces low pay, and that we will take no lessons from the Opposition, who have failed cities such as mine when it comes to helping the working poor? This tactic of bribing our lowest earners and most vulnerable people, not to improve social mobility or to help them but simply to win votes, is deplorable and must end in this country for good.

Mr Osborne: My hon. Friend makes a powerful point: we have created a welfare system that subsidises low pay, and surely it is better to increase that pay. That is why we are introducing the national living wage and I know that will help many of the people my hon. Friend represents in Plymouth.

T10. [901796] Mary Glindon (North Tyneside) (Lab): Under the devolution deal, the Chancellor has committed £30 million a year to create a new investment fund for

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the north-east. Will this be wholly new money or will existing grants be cut? Where is the guarantee that he will not be robbing Peter to pay Paul?

Mr Osborne: It is additional new money and it is a long-term commitment to the north-east of England. Of course, we could not have reached this agreement without the support of the local Labour council leaders who have come together through the combined authority to strike what I think is an historic deal. There has been lots of conversation over many years about devolving power to the north-east; now we are going to have the elected mayor with powers that are currently exercised in London being exercised in the north-east. That is proper devolution.

James Heappey (Wells) (Con): Last week Mudgley cider producer Roger Wilkins told the local press that cider is

“an agricultural lubricant, an agricultural wine for the working man”.

Will the Chancellor continue to support hard-working people and lubricate the Somerset economy by cutting tax on cider?

Mr Osborne: I very much remember my visit, I think with the Prime Minister, to a cider producer in my hon. Friend’s constituency before the election. It turned out to be an extremely productive visit of which he is the living representative. He will know that in 2010 we reversed the cider tax that was being proposed by the previous Labour Government and we have been able to help cider producers. I think the industry is incredibly important and I will take what steps I can to support it in the future.

Marie Rimmer (St Helens South and Whiston) (Lab): The Resolution Foundation has found that all tax and benefit measures announced, including the national living wage, will push an additional 200 children into poverty by 2016. Two thirds of those children will be in working families. By 2020 up to 600 further children will be pushed into poverty. Chancellor, you said you would listen to the Lords, and indeed the bishops, last night; will you now share with the House what constructive action you will take to protect the poorest families and children?

Mr Osborne: The hon. Lady raises her question in a perfectly fair way. I will listen to the concerns that have been raised in this, the elected Chamber, about the transition of the welfare reforms we have put forward precisely so that we continue to help working families. Those families are best helped when we have economic security, a controlled welfare budget and a system where

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we do not subsidise low pay but we increase wages through the national living wage. We will make sure in the autumn statement that we help working families.

Several hon. Members rose

Mr Speaker: I did not want to interrupt the question because I understood the hon. Member for St Helens South and Whiston (Marie Rimmer) was getting to her point. I understand why Members like to put their inquiries directly to the Minister, but may I please appeal to Members not to use the word “you” in their questions? We go through the Chair in debates for good reasons. I have no proposals on these matters. The Chancellor might have; we shall see.

Christopher Pincher (Tamworth) (Con): Over the last three years unemployment in Tamworth has fallen faster than anywhere else in the country. As my right hon. Friend is in listening mode, will he tell the House whether he has heard any sensible representations from the shadow Chancellor or others about how to decrease business taxation and regulation to create more jobs in the west midlands?

Mr Osborne: I am sorry to say I have not, because the only proposals that have so far been put by the Opposition are for an increase in business taxation—that was in their election manifesto—and a wealth tax, which at the weekend, the shadow Chancellor was talking about potentially introducing in this country. So his proposals—and to be fair to him he has been entirely consistent on this for 30 years—are essentially for a high tax, big state economy where, frankly, private businesses do not have such a big role to play. I think that is the wrong direction for our country.

Patrick Grady (Glasgow North) (SNP): How much would the Chancellor save for the public purse by abolishing the House of Lords?

Mr Osborne: That is a very decent proposal for the autumn statement, to which we will give proper consideration. People who have been in Parliament with me for the last 14 years know that my view is pretty clear—we should have an elected House of Lords—but of course that view has not prevailed in this Chamber in the years I have been both on the Opposition and Government Benches. However, I do think that while we have an unelected House of Lords, it should respect a constitutional convention that has existed for 100 years, and we need to look at that now.

Several hon. Members rose

Mr Speaker: Order. I am sorry, but demand always exceeds supply.

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Tax Credits

Application for emergency debate (Standing Order No. 24)

12.35 pm

Dr Eilidh Whiteford (Banff and Buchan) (SNP): I seek leave to propose that the House should debate a specific and important matter that should have urgent consideration—namely, the uncertainty caused to millions of UK families following the vote on tax credits in the House of Lords yesterday. Accordingly, therefore, I would like to apply for an emergency debate under Standing Order No. 24.

Across the UK there are 7 million working-age families with children eligible for tax credits, and the impact of this Government’s proposed tax and benefits changes will be to reduce their incomes by an average of almost £1,300 a year. In Scotland, over 200,000 working families with around 350,000 children are set to lose out. That is an enormous and disproportionate impact on parents who are working hard in low-paid jobs to support their families.

But yesterday’s vote in the House of Lords, when peers passed amendments for the cuts to be put on hold, subject to independent analysis, and for transitional protections to be put in place for three years for those affected by them, throws the Government’s plans into chaos and leaves low-income families in the dark. Members of this House need to know how the Government intend to respond, and need to know as a matter of urgency.

Yesterday in the House of Lords the wheels came off the wagon quite spectacularly for the Government’s austerity reforms, in spite of a valiant whipping effort that saw 93% of Tory peers turn up to support the Government. The degree of Cross-Bench concern about the injustice of these measures is almost unprecedented. I know I am not the only person on this side of the House—or, indeed, the other side of the House—who berates the House of Lords as an affront to a modern democracy. But when even our unelected, unaccountable and, in my view, rather bloated second Chamber unites to tell the Government they have got it very wrong, it is incumbent on the Government to listen. When even the leader of the Tory party in Scotland tells her own Government that these cuts to tax credits are “not acceptable” and that they need to think again, it is incumbent on the Government to listen.

The Government have tried to present these austerity cuts as part of a package of measures, but we know that their paltry increases to the minimum wage fall very far short of a real living wage. This Government have made a choice to put parents with low-paid jobs on the frontline of their failed austerity agenda and we need answers from them urgently. What transitional arrangements are now being put in place for the millions of working families who are set to lose out? Will they give us a cast iron assurance that they will not now flood the other place with more Tory appointees who turn up like phantoms to do their dirty work?

Mr Speaker: I have listened carefully to what the hon. Lady has said and I have to give my decision on this matter without stating any reasons. That is the requirement upon the Chair. I am afraid that I do not consider that

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the matter which the hon. Lady has raised is appropriate for discussion under Standing Order No. 24, and I cannot therefore submit the application to the House.

I said that I am not required to give any reasons and, indeed, there is a sense in which I am required to give no reasons. I do, however, think it is important for people beyond this House to find our procedures entirely intelligible, and I think it worthwhile to note that these important matters have just been debated, they will be debated further today, and there is a scheduled debate on them on Thursday.

Members have other means by which to pursue these matters and I feel sure they will, but the hon. Lady has very properly asked me whether I think this should be debated as an emergency debate under Standing Order No. 24, and, having reflected upon what she said, my answer on this occasion is no.

Dr Liam Fox (North Somerset) (Con): On a point of order, Mr Speaker. Across the House there is a great deal of genuine concern about the implications of the events in the unelected Chamber last night, and many of us would welcome your initial view on the constitutional implications of that. Many of us believe that those with no accountability for taxation have a moral duty not to vote on such issues, and many of us would go further and believe that it is a bit rich to question, for example, the democratic deficit in the European Union when we have an unelected and appointed Chamber as part of our own legislature.

David T. C. Davies (Monmouth) (Con) rose—

Mr Speaker: Just before I respond to the right hon. Gentleman, I will hear the hon. Member for Monmouth (David T. C. Davies).

David T. C. Davies: Further to that point of order, Mr Speaker. I looked through the Standing Orders last night and discovered that what the hon. Member for Banff and Buchan (Dr Whiteford) called an “unelected, unaccountable and somewhat bloated” second Chamber actually has no power at all to reject European Union treaties, such as that on the Transatlantic Trade and Investment Partnership, but it seems that it does have the power to reject the will of this elected House. As a doughty defender of elected Members of Parliament, will you issue guidance as to how we may ensure that the will of this elected House prevails?

Christian Matheson (City of Chester) (Lab) rose

Mr Jacob Rees-Mogg (North East Somerset) (Con) rose—

Mr Speaker: I think I will do a wrap-up at the end. Let us hear from the hon. Member for City of Chester (Christian Matheson), and then we must hear from Mr Rees-Mogg—the day would not be complete without him.

Christian Matheson: Further to that point of order, Mr Speaker. I am pleased to hear the late conversion of Conservative Members to democracy and the rejection of an unelected Chamber, but can you give me some guidance? Is there not a constitutional role for the other

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place in giving pause to this House when it has made a decision that is out of sync with feelings in the country, so that the House can look at that decision again?

Mr Rees-Mogg rose—

Clive Efford (Eltham) (Lab) rose—

Mr Speaker: Order. I say to the hon. Member for Eltham (Clive Efford), who is a very distinguished taxi driver by profession, that he will be aware of the cab rank principle, and also of the principle of waiting in a queue for one’s turn. We will come to him. Don’t worry, he will not go cold. We will look after his interests, I am sure.

Mr Rees-Mogg: Further to that point of order, Mr Speaker. I wonder what you will do to remind their lordships of our declaration of privilege from 1678, declaring that all financial matters pertain to this House, a privilege that the House of Lords has now ignored only three times since 1860. As our mouthpiece, will you bring that to the attention of their lordships in no uncertain terms?

Alex Salmond (Gordon) (SNP) rose—

Mr Speaker: I will take Mr Salmond’s point of order before I respond.

Alex Salmond: Further to that point of order, Mr Speaker. I am becoming increasingly concerned about the outbreak of revolutionary fervour among Conservative Members. Has there ever been a precedent for a Chancellor of the Exchequer being outflanked as a defender of the working classes by the House of Lords?

Clive Efford rose—

Mr Speaker: I think Mr Efford is about to burst, so we had better take his point of order.

Clive Efford: I wait at your pleasure, Mr Speaker.

Further to that point of order, may I point out that we have had a general election this year, and that during the campaign the Government were consistently asked whether they had any intention of cutting tax credits? They consistently said that that was not their intention. It is parliamentary convention that the House of Lords does not overturn manifesto commitments, but that measure was not in the Conservative manifesto and there is clear concern in the country about it. It is right that the House of Lords should ask the Government to think again.

Martin John Docherty (West Dunbartonshire) (SNP) rose—

Mr Speaker: One does not have to put one’s hand up, Mr Docherty, but it will be a pleasure to hear your point of order before I respond.

Martin John Docherty: Further to that point of order, Mr Speaker. It seems that the House of Lords—the unelected, unaccountable, bloated Chamber through the other side of the doors—is causing some angst today. Will you forgive my ignorance as a new Member,

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Mr Speaker, and highlight to me and many of my Scottish National party colleagues why, while we cannot vote on some issues in this House, the unelected and unaccountable barons and baronesses of the Scottish peerage will be able to vote on them in the other?

Mr Speaker: The short answer to the last question, which I think had something of the character of a rhetorical inquiry, is no.

Let me say, with all courtesy to the House, that I was keen to hear all the points of order before responding. I intend no discourtesy to the House when I simply say this: the responsibility of the Chair is for order. Nothing disorderly has occurred. There has been no procedural impropriety; that would not have been allowed. Whether people like what happened last night, because of the substance of the issue or their views on constitutionality, is a matter for each and every one of them. In terms of where matters rest, as I said last night from the Chair in response to a point of order from the shadow Chancellor, this is now a matter for the Government to take forward as they think fit.

With reference to the point of order from the Chair of the Welsh Affairs Committee, the hon. Member for Monmouth (David T. C. Davies), the hon. Gentleman flatters me. He does not need guidance from me on how to go about his duties, and neither does any other right hon. or hon. Member. It is not for the Chair to put a gloss on what transpired last night. I think, in truth, that Members are actually not all that interested in my gloss or my response to their points of order; they simply wanted to get their views on the record, and that they have done.

Mr Rees-Mogg rose—

Mr Speaker: I will indulge you with one further point of order, Mr Rees-Mogg.

Mr Rees-Mogg: I am grateful to you, Mr Speaker. I want to refer back to this House’s claim of privilege, which we have made for many centuries. I would have thought that you were the defender of this House’s privileges and that this is beyond the immediate political debate.

Mr Speaker: The matters that are currently in dispute are inevitably of what I will call a high-octane character. In such circumstances, if I may very politely and respectfully say so to the hon. Gentleman, I do not think it helps matters if the Chair adds in substantive terms, without exceptionally good reason, to the total number of evaluative comments that have already been made. I think it would be better not to do so. I do jealously guard the rights of this House, but I have to rest with what I have said—that nothing procedurally improper has taken place. Let us wait to see how matters are taken forward. As I said to the hon. Member for Gainsborough (Sir Edward Leigh) last week, in the final analysis each House knows what its powers are and are not.

Mr David Winnick (Walsall North) (Lab): Further to the point of order, Mr Speaker, I wonder whether it would be in order for a motion to be debated on the Floor of the House congratulating the House of Lords on what it decided yesterday.

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Mr Speaker: The short answer to the hon. Gentleman is that it would be entirely orderly if he, for example, secured a Backbench Business Committee debate. It is not for me to encourage such a debate, nor to discourage it, but the answer to his question is as I have stated.

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Benefit Sanctions Regime (Entitlement to Automatic Hardship Payments)

12.48 pm

Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP): I beg to move,

That leave be given to bring in a Bill to amend the system of benefits sanctions; establish automatic hardship payments where sanctions have been imposed; and for connected purposes.

There are people in my constituency who have no food to eat today. Until recently, they had been claiming employment and support allowance or jobseeker’s allowance. Their social security payments have been stopped; they have been sanctioned. As things currently stand, they have no immediate right of appeal. Some of these people may have made a mistake in their paperwork or have been late for an appointment. They may lack the necessary IT skills to use Universal Jobmatch or have been asked to do something by jobcentre staff that they did not do. Whatever their actions, the consequences carry too heavy a burden. These people are now left with absolutely no means to sustain themselves. On every level, this is an unacceptable state of affairs. This is the central issue that my proposed Bill addresses. It will ensure that all those who are sanctioned automatically and immediately receive a hardship payment, and that those payments will not require to be repaid.

The current system has punished military veterans for selling poppies. It has removed the sole source of income from those who failed to complete their medical examination because they were having a heart attack at the time, and it has withheld money from people who failed to complete their job search evidence form on Christmas day. Indeed, one of my constituents was recently sanctioned on the strength of hearsay evidence that she had been incarcerated, despite that being wholly untrue. It cannot be right that sanctions are applied on that basis.

The system that administrates those punishments is deeply and fundamentally flawed. Many of those affected are not even aware of their rights. I have met constituents who were not told by staff at their local jobcentre about hardship payments or even how to appeal. That is why my proposal gives those facing sanctions an automatic right to those payments. That will ensure uniformity in their application.

In my view, anyone who lacks the means to buy food or heat their home is a vulnerable person. There is currently a formal appeals process. When invoked, 50% of those appeals against sanctions—half of them—are upheld. This is a system that is, at best, 50% correct. If another process in this land resulted in half of the judgments being overturned, there would be a national outcry.

The human impact of sanctions is such that Department for Work and Pensions staff have been required to receive guidance on how to deal with victims suffering from mental health issues who are pushed towards self-harm or suicide. It is right that staff have measures in place to help them support vulnerable people who have been driven to their limit, but it is tragic that that is a central part of our welfare system.

The DWP has not been able to use its experience to provide any credible evidence whatsoever that the system of financial penalties works to get people back into

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stable employment. I am particularly disappointed that the Government failed to act adequately in their response last week to the Work and Pensions Committee report. This Chamber has heard time and again that this is an ideological crusade against the poor, not an evidence-based mechanism to help people find work. It is driving people in this country to food banks.

Organisations such as the Trussell Trust and local food banks such as The Gate in Alloa exist because they identified a need that needs to be met. They should not be a necessary extension of the UK’s failing benefits system, but they are. The social security system as it exists today is not doing what it says on the tin, and the vulnerable cannot wait any longer for this Government to get it right.

Research carried out by the Child Poverty Action Group has found that 20% to 30% of food bank users said that their household’s benefits had recently been stopped or reduced because of a sanction. The same research showed that deciding to accept help from a food bank was often difficult, and it was described by participants as “unnatural”, “embarrassing” and “shameful”.

What does it say about us if fellow citizens have to rely on charity to sustain themselves? The protection of the vulnerable should be a central tenet of any Government’s work. It is not a peripheral responsibility and it should certainly not be devolved to the kindness of others.

Other research from Oxfam, presented as evidence to the Work and Pensions Committee earlier this year, shows that when women are sanctioned it tends to disproportionately affect others, because caring responsibilities often fall to women. Furthermore, charities such as the Single Parent Action Network and Gingerbread have seen a reduction in the number of DWP advisers who are aware that they are able to use flexibility when dealing with lone parents who would otherwise face financial sanction. That leads to a significant number of lone parents being sanctioned erroneously, only to have the decision overturned. According to Gingerbread, the figure is 42% for lone parents, compared with 31% of all claimants. The current regime impacts greatly on women, and that is why I am particularly proud that my Bill has the cross-party support of nine female MPs.

Six months ago the Work and Pensions Committee called for a broader, independent review of benefit conditionality and sanctions, because of its concerns about the effectiveness and operation of the current process. After considering the balanced, cross-party report for half a year, last week the Government rejected its central proposal. Instead of a fundamental review of the whole system, the Government propose what they call a yellow card system. A yellow card is something players get during a football or rugby match. This is no game. Such terminology is unhelpful and wholly inappropriate.

A complete rethink of the process is required. The tired old argument that it helps people to find work has not been proven, while the evidence of the despair and poverty inflicted on its victims is growing larger by the day. It must be reformed in this place, because the limited powers over welfare offered by this Conservative Government to the Scottish Parliament specifically preclude measures to mitigate the system I have described today.

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The Scottish Parliament should be given the powers required to build a humane system of social security, not piecemeal powers that can only mitigate the negative impact of Tory policies. From the sanctions regime to the tax credits fiasco, this Government continue to punish the poor. This relentless assault must come to an end.

The Bill will not address all the serious problems of this punitive system. I wish it could. I continue to support a full moratorium on all benefits sanctions until an independent and fundamental review of the whole process takes place. Under the particular parliamentary process in question, however, I believe I have proposed a simple and pragmatic measure that would address the fundamental issue of people being knowingly left in destitution.

This Bill will ensure that those who are sanctioned will automatically and immediately receive a hardship payment, and that those payments will not need to be repaid. No one should be left without by our social security system. This Government should not abandon those people who need their help the most. Ministers must reconsider their position on that fundamental issue. It is the right thing to do. My proposal would be a positive first step in protecting the vulnerable in my constituency and beyond.

The sanctions system is why an increasing number of people and their families, in every part of our country, do not have the means to eat today. It is one of the key reasons that food bank use in Scotland and across the whole of the UK is at an all-time high. The system supporting it is flawed and needs urgent reform. That is why this Bill is necessary, so I urge this House to support me today.

12.57 pm

Philip Davies (Shipley) (Con): I rise to oppose the Bill, but congratulate the hon. Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) on promoting it. She used to be a member of the Conservative party, but she has certainly regressed since those heady days. It seems a long time since she espoused any Conservative principles—she certainly did not do so today.

I would not want people who are listening to this debate to run away with the idea that people across the country and across this House are opposed to benefits sanctions in the way set out by the hon. Lady. In fact, many of us are very supportive of the sanctions regime. To start with, we should point out that sanctions have always played a part in this country’s benefits system—it is not this Government who introduced them. They have always been an essential part of the benefits regime, to make sure that people do what they are requested to do in return for those benefits.

Many of my constituents contact me to say that they think that the requirements on people who claim benefits, which taxpayers pay for through their taxes, should be even more onerous, not less so, as the hon. Lady seems to suggest. I refute her starting point, which is that sanctions are a bad thing. In my opinion sanctions are a good thing, and the least the taxpayer should expect is that people abide by the requirements that are understandably made of them in return for claiming benefits.

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On the hardship fund, which the Bill directly refers to, the hon. Lady seemed to peddle some information that may not turn out to be quite as it seems. It should be pointed out that jobseekers who are sanctioned can apply for a hardship payment that is equivalent to 60% of their normal benefit claim, and those on jobseeker’s allowance who are seriously ill or pregnant can receive 80% of their normal benefit payment. If the hon. Lady wants it to go any higher than that, and if people are just going to have their sanction replaced in full by a hardship payment, there would be no point in having any sanctions in the first place, so I refute her point.

The hon. Lady should have pointed out in her remarks—this makes her Bill rather redundant—that those with children, all ESA recipients and anyone categorised as vulnerable can claim hardship payments from day one of their sanction. She omitted to say that in her speech. She was trying to give the impression that that is not the case, but it is the case. Although other jobseekers cannot claim for the first 14 days of a sanction, the most vulnerable people are already protected. Contrary to the point she made, claimants are regularly told about the availability of hardship payments throughout their claimant journey, and improvements have been made to the payment process to ensure that payments are made within three days. The vast majority who apply do receive hardship payments.

The hon. Lady mentioned the independent review of sanctions and the Select Committee report. She should bear it in mind that Matthew Oakley, who led the independent review of JSA sanctions, said that sanctions are

“a key element of the mutual obligation that underpins both the effectiveness and fairness of the social security system”.

She did not manage to point that out in her remarks. She spoke about the Select Committee report, but the Chairman has said that he was

“pleased that the Government has accepted many of the Committee’s criticisms of its approach and…the recommendations for change.”

Hardship payments are already available to the most vulnerable people from day one of a sanction, and most people in the country support the principle of sanctions when claimants do not fulfil their obligations. I must say, Mr Speaker, that there is a book as thick as you like of the reasons people may avoid being sanctioned. The idea that people can just miss a five-minute appointment once and are automatically sanctioned is for the birds. That may well be the tale they go and tell the hon. Lady in her surgery, perhaps because they want her sympathy when they go and tell her their tale. I suspect that the truth about why they have been sanctioned is often very different from the tale they tell her. I am sorry that she just seems to accept what they say hook, line and sinker, without any criticism whatever. I know that SNP Members do not like to hear any criticism. They are not used to it in Scotland, but they had better get used to it in this House. [Interruption.] SNP Members would do well to listen to other people’s opinions from time to time. They may learn something. [Interruption.]

Mr Speaker: Order. Mr Angus Brendan MacNeil, you have yet to reach the apogee of statesmanship, which is my long-term ambition for you. Calm, like the colleagues to your left and right, is the right course—calm!

Philip Davies: To try to get the hon. Gentleman to become a statesman may be beyond even you and your skills, Mr Speaker.

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Given that the most vulnerable already have access to hardship payments from day one and that the sanctions regime in itself is a good thing, given that what the hon. Lady proposes goes way beyond the recommendations of the Oakley review and even way beyond the recommendations of the Select Committee, and given that people are already informed about the hardship payments throughout their claimant journey, her Bill is not only bad—if anyone adopted her strategy—but completely unnecessary.

I do not intend to deprive the hon. Lady of her day in the limelight by pressing the Bill to a Division, but I thought it worth while pointing out that many Members of the House and, more importantly, many people in the country, do not accept her criticisms of the sanctions regime for benefits.

Question put (Standing Order No. 23) and agreed to.


That Ms Tasmina Ahmed-Sheikh, Hannah Bardell, Mrs Sharon Hodgson, Caroline Lucas, Ms Margaret Ritchie, Liz Saville Roberts, Naz Shah, Dr Eilidh Whiteford and Corri Wilson present the Bill.

Ms Tasmina Ahmed-Sheikh accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 4 December, and to be printed (Bill 85).

Welfare Reform and Work Bill (Programme No. 3)


That the Order of 20 July 2015 (Welfare Reform and Work Bill (Programme)) be varied as follows:

(1) Paragraphs (4) and (5) of the Order shall be omitted.

(2) Proceedings on Consideration shall be taken in the order shown in the first column of the following Table.

(3) The proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

ProceedingsTime for conclusion of proceedings

New Clause 1; new Clause 8; amendments to Clauses 9 to 12

Two hours after the commencement of proceedings on the motion for this order

Remaining new Clauses and new Schedules, amendments to the remaining Clauses of the Bill, amendments to the Schedules to the Bill and remaining proceedings on Consideration

One hour before the moment of interruption on the day on which those proceedings are commenced

(4) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.—(Guy Opperman.)

Owen Smith (Pontypridd) (Lab) rose—

Mr Speaker: Did the hon. Gentleman wish to contribute on this matter?

Owen Smith: On new clause 1, Mr Speaker.

Mr Speaker: No. This is the programme motion. It is a good job the hon. Gentleman did not want to contribute, because he cannot—because it has been carried and we are moving on—but he will get his opportunity.

Owen Smith: I am ever eager.

Mr Speaker: Indeed.

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Welfare Reform and Work Bill

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1

Repeal of Tax Credits Regulations 2015

“(1) The Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015 are repealed.”—(Owen Smith.)

Brought up, and read the First time.

1.6 pm

Owen Smith (Pontypridd) (Lab): I beg to move, That the clause be read a Second time.

Mr Speaker: With this it will be convenient to discuss the following:

New clause 8Tax credit reforms—

“The measures in this Bill and (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015 relating to the award of tax credits and the relevant entitlement within Universal Credit shall not take effect until the Secretary of State has implemented a scheme for full transitional protection for a minimum of three years for all families and individuals currently receiving tax credits before 5 April 2016, such transitional protection to be renewable after three years with parliamentary approval.”

Amendment 49, in clause 9, page 12, line 2, leave out from “relevant sums” to end of subsection and insert

“is to increase in line with the consumer price index.”

Amendment 50, page 12, line 6, leave out from “child benefit” to end of subsection and insert

“are to increase in line with the consumer price index.”

Amendment 51, page 12, line 8, leave out subsections (3) and (4).

Amendment 52, in clause 10, page 12, line 36, leave out from “relevant amounts” to end of subsection and insert

“is to increase in line with the consumer price index.”

Amendment 53, page 13, line 1, leave out clause 11.

Amendment 54, in clause 11, page 13, line 8, leave out “2017” and insert “2022”.

Amendment 55, page 13, line 31, leave out clause 12.

Owen Smith: I rise for a second time to speak to new clause 1 in my name and those of my hon. Friends the shadow Chancellor, the shadow Chief Secretary to the Treasury and my shadow Work and Pensions team. The new clause is very straightforward. It would repeal the Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015.

It is a shame that the Secretary of State for Work and Pensions is not in the Chamber to debate this important measure. I do not know what else he is doing, but he has been noticeable by his absence from the debate on tax credits in recent days. I have been to 25 studios and other arenas to debate the issue. I have looked high and low for any Minister of any stripe with whom to discuss it, and they have been noticeable by their absence. I am therefore delighted that there are

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three Ministers of the Crown on the Front Bench to contest the issue. That is a first in recent weeks, and I am very pleased to have this opportunity.

It is a shame that the Secretary of State for Work and Pensions is not in the Chamber. If he was here, I would have started by reminding him of something he has said in the House—indeed, he has said it on several occasions over the years—which is that he is a great believer in second chances. He has said that he believes that Britain should be

“a nation of the second chance”.

Opposition Members entirely agree with the Secretary of State. Indeed, that is one of the very few things on which I do agree with him. We should believe in second chances. I therefore say to Ministers and to the House that we have a second chance today. We have a second chance following yesterday’s vote in the House of Lords, which has called on this House to think again. In doing so, I think that the other place spoke not just for itself but for the entire country. It has asked us to think again and to give a second chance to repeal tax credits regulations that will hit so many people across this country.

In touring the studios in recent days, I have quite often heard the suggestion that the vote in the other place yesterday presaged a constitutional crisis in this country. In truth, what it did was to stop a financial crisis for the 3 million families who will be hit by the tax credits regulations when the changes are implemented next year. The message to us from the other place is quite simply to pause: for Ministers to pause before they lick the envelopes of the 3 million letters that they intend to post out at Christmas to tell such families across the country to anticipate a 10% reduction in their incomes, which is an average reduction of £1,300 for each of those 3 million working families. If the Government proposed to cut the salaries of Members of the House by 10%, there would be uproar on the Government Benches—indeed, on all Benches. Working families in this country, and people who are doing difficult low and middle-income jobs—there are 3 million of them, or more—are being told that next year they will face a 10% cut to their incomes at a stroke of a pen. It is not adequate.

Mark Spencer (Sherwood) (Con): In 2010 the tax credit system supported people on wages in excess of £60,000. Will the hon. Gentleman say what level of income should mean that people can no longer get support through the tax credit system? How much would someone need to earn before they do not need that support?

Owen Smith: I will start with a different figure, because 5,000 of the hon. Gentleman’s constituents who will be hit by this change should ask him what he thinks is fair or just about asking them—hard-working families in his patch—to take a 10% cut to their income. That to me is the substantive issue, and the smoke and mirrors produced by the hon. Gentleman and other hon. Members about the constitutional crisis or the offsetting mitigating prospects for other changes elsewhere in the Government’s finances do not answer the central question: is it right or fair to ask hard-working families to take such a cut to their incomes?

Tax credits have changed enormously. It is untrue to say that they were simply the creation of the previous Labour Government because successive Governments

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have helped family or income support to evolve over many years—arguably, such measures were first introduced in this country in the 1920s and they have gone through different iterations. Different Governments have used different ways to try to do what we all believe in, which is to make work pay and keep people in work. Thresholds are flexed and levels have changed, and the amount of money we spend on tax credits has changed over time. However, it is a net positive for us as a society and for our economy to keep people in work, and this cut will diminish work incentives for the people that the hon. Gentleman and I hope to support.

Mark Spencer: The hon. Gentleman is being generous in giving way. He must recognise that the system creates circumstances in which some employees turn down promotions and overtime because that would dramatically affect their tax credits. Surely it is better to have a system where people who want to work extra hours or take a promotion would be better off if they did so.

Owen Smith: I have heard that argument a lot recently, and there is no evidence to support such a contention. It is nice to believe that were we to reduce the amount of money people have—withdraw the subsidy, as the hon. Gentleman would say—some employers would increase their payments to people and wages would go up, but I do not suggest that that is true or that any evidence supports it. Tax credits have been a necessary subsidy for low wages, and I welcome and applaud the decision by the Government to increase the national minimum wage. That is the right thing to do, which is why Labour called for it before the election—the Government could get on with it a little faster and stop spinning it as a national living wage when we know it is not, but it is a welcome step. There is no evidence to suggest that if we withdraw the subsidy at a stroke, employers will think, “I’d better put up wages for my workforce because they will struggle to survive on what they earn.”

Hywel Williams (Arfon) (PC): Surely the answer to the first question from the hon. Member for Sherwood (Mark Spencer) is that tax credits must ensure a decent, reasonable standard of living. Such standards have been defined over many years by large numbers of people in research institutions—I will not trouble the House with those matters now, but they are well understood.

Owen Smith: Let me be clear: tax credits are a success. They have kept people in work in this country, and we have seen a shift in the volume of single parents in work.

Oliver Dowden (Hertsmere) (Con): Will the hon. Gentleman give way?

Owen Smith: I will in a moment.

In 1997 about 43% of single parents were in work in this country, and today it is 65%. The reason for that is tax credits. Tax credits have made it possible for thousands of constituents in my patch—and in the constituencies of all Members—to stay in work despite the decline in wages.

1.15 pm

Barbara Keeley (Worsley and Eccles South) (Lab): My hon. Friend is rightly making a good speech about working families, but Ministers have made little mention

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of the impact that cuts to tax credits will have on working family carers. A carer in receipt of carers allowance who works 16 hours a week on the minimum wage and claims working tax credits will be badly hit by these cuts. Conservative Members talk about people working more hours, but those carers are already working for a minimum of 51 hours a week and they cannot work more. Does my hon. Friend believe that working carers must be protected from Government cuts, because Ministers do not even seem to recognise that issue?

Owen Smith: Yes, and if the Government are to provide us with any sort of detailed, worthwhile impact assessment, they should undertake precisely that sort of calculation. They should look at what net benefit to our economy and society is made by working mothers, carers, and those whose efforts are not being calibrated by the Government, because those people will lose out as a result of the changes to tax credits.

Helen Hayes (Dulwich and West Norwood) (Lab): Does my hon. Friend agree that of the 7,700 families in my constituency who will lose £1,300 a year if the Government go ahead with this cut—three quarters of whom are working—those living in the private rented sector will find the cuts hardest to bear? The Government refuse to regulate that sector, and in my constituency people’s rent has risen by an average of 11.6% in the past year. The Government should consider further the punitive effects of this cut on those families.

Owen Smith: My hon. Friend is completely correct, but this cut does not affect only those who are renting and suffering from sky-high, exorbitant increases in private rent; it also affects owner-occupiers. The Government purport to speak for owner-occupiers, but those people will be proportionately harder hit by this measure than many others. Reduced eligibility for tax credits will mean that some people will receive more in housing benefit—there is an offsetting increase in housing benefit costs as a result of the decrease in eligibility for working tax credits, but owner-occupiers will not get that increase.

Earlier someone mentioned the impact of these cuts on our economy, and the self-employed will also be hard hit by these changes. Around 60% of small businesses, some 5.2 million across the country, are sole traders, and according to the Royal Society of Arts, 90% of the increase in jobs—the “jobs miracle” that the Government like to talk about—have been in self-employment in recent years.

The Exchequer Secretary to the Treasury (Damian Hinds): From 2010 to 2015?

Owen Smith: Well that may or may not be true, but it is a very large proportion. Without doubt there has been a welcome increase in employment and self-employment, but my point is that 60% of self-employed sole traders are currently eligible for tax credits.

Maria Caulfield (Lewes) (Con): Will the hon. Gentleman give way?

Owen Smith: I will in a moment.

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That is why the Bow Group, the Adam Smith Institute, Lord Lawson and many other respected Conservative economists think that this change is a false economy. Not only will it damage the incomes of working people; it will damage our economy. The Bow Group—which you will remember well, Mr Speaker—said that these cuts will be “devastating” for our economy.

Melanie Onn (Great Grimsby) (Lab): An employer contacted me this week in despair because employees have been reaching out to him and asking for more hours to mitigate the loss in income from the changes to tax credits. At the same time, he has to consider reducing staff numbers to meet the requirements of the new increased minimum wage. Does my hon. Friend agree that the changes will result in reductions to household incomes, as well as job losses?

Owen Smith: I fear that may be correct, and Government’s lack of forethought, analysis and scrutiny on these measures, and the way they have tried to bowl them through both Houses in double quick time, is a measure of their fear that such analysis will reveal the fundamentally misconceived economics behind these cuts, which are unfortunately designed to make an ideological political point.

Oliver Dowden: The hon. Gentleman talks endlessly about the success of tax credits. Will he explain why spending on tax credits under the previous Labour Government rose from £6 billion to £30 billion, while at the same time in-work poverty rose by 20%? Why does he think that happened, if tax credits have been such a great success?

Owen Smith: The hon. Gentleman should start by explaining to the 3,700 constituents in his constituency who will lose out as a result of the measures for which he will no doubt vote and speak today—[Interruption.] I will answer the specific question he asks. The truth is that under the previous Labour Government, when this iteration of tax credits was introduced, the steady state amount of money we spent on tax credits was £23 billion per annum. In 2009-10, after the crisis, that went up to £30 billion. The bankers’ recession saw a spike in the necessary spending on tax credits, and it has stayed at £30 billion under his Government—another measure of this Government’s rotten economic record.

Maria Caulfield: Many of my constituents have contacted me to say that they are just above the tax credit limit and that their hard-earned taxes are subsidising low pay. What does the hon. Gentleman say to them?

Owen Smith: I would first of all say to the 3,000-odd people in the hon. Lady’s constituency of Lewes who are going to be hit by the changes that they should be ringing her up and asking her why on earth she is voting for a 10% reduction in their income. I think they would be interested to hear her justification.

Steve Rotheram (Liverpool, Walton) (Lab): Does my hon. Friend agree that the changes are obviously a problem for some Government Members, and that they are in absolute denial about them? Does he agree that

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the Government’s inertia over intervention to save steel jobs and last night’s defeat in the Lords firmly put to bed the falsehood that the Tories are the party of the workers?

Owen Smith: Completely. It is one of the more risible statements I have heard from the Government. It is, once more, a measure of the contempt with which they hold certain sections of the British public that they think they can pull the wool over the eyes of people. They describe themselves, laughably, as the party of labour and the party of the workers, while they are cutting the wages of working people: 3.3 million families will be hit to the tune of £1,300; 200,000 children will be put into poverty next year, and 600,000 children over the period; and 70% of the cuts will fall on working mothers. The tax credit cuts will destroy the “economic miracle” the Tories like to talk about. Some 90% of the cuts will be devastating for the people involved. The statistics speak for themselves. After I have given way to my hon. Friend, I will describe the human impact of the cuts.

Conor McGinn (St Helens North) (Lab): Does my hon. Friend agree that there is an inherent contradiction in the Government’s policy? The parents of a young family who came to see me in my constituency last week told me that they work hard, pay their way and are trying to do the right thing to set an example for their children. Should the Government not be supporting them, rather than punishing them?

Owen Smith: Indeed they should. I cannot understand how on earth even this Chancellor, who is pretty slipshod on occasion when it comes to analysing the impact of his measures, can have allowed this one to slip through the net. A pasty tax and a caravan tax maybe, but a £4.4 billion hit on the very workers he purports to support is truly extraordinary.

Let us look beyond the statistics for a moment. On Friday, I was out in my constituency in the village of Beddau, a former pit village at the heart of Pontypridd. Entirely by chance, I met a young woman called Kirsten who was bringing her daughter Maisie home from school. Kirsten is a nursery manager in a small private-run nursery just outside the village. She works 21 hours a week. They are all the hours available, as the nursery is open only in the morning and she works all five mornings. She then brings her daughter home from school and looks after her. She earns £611 a month. That is what she earns from her 21 hours of work at £8 an hour. That is well above the minimum wage and well above the new minimum wage we will see next year. She is set to lose £1,300 of her £7,000 earnings as a result of the cuts. That is an enormous drop for her to contemplate. She said to me that she simply did not know how she would manage. She did not understand how, without the £128 she receives in tax credits each month, she will be able to make ends meet.

I sat down with Kirsten and talked through what she needs to pay out for each month: the housing association three-bedroom house she lives in, council tax, insurance, and running her car to get back and forth to the nursery and to pick up her child. There is nothing left over. The £128 she spends from the tax credits she rightly receives pays for food, new clothes and her child’s books for

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school. It is just beyond the ken of ordinary people that the Government could be asking them to pay the price for the bankers’ recession, which has led to the crisis in our economy and a Tory Government cutting the incomes of working people.

Ian Lavery (Wansbeck) (Lab): Does my hon. Friend agree, when the issue of family tax credits is all boiled down and the arguments have been fine-tuned, that this is simply an ideological attack by the Government on the lowest paid in our communities? Does he agree with the Institute for Fiscal Studies, which says that low-paid people are being specifically targeted?

Owen Smith: I completely agree. It is extraordinary for the Government to describe tax credits as “a bribe”. That is how successive Ministers, including the missing Secretary of State for Work and Pensions, have gone out of their way to describe tax credits for working people. They do not talk about protecting pensioners’ benefits as a bribe by the Conservative party to pensioners—and I would never say that; it is entirely just to protect pensioners’ benefits. By describing tax credits as a bribe, they are even seeking to demonise working people on low and middle incomes who are doing the right thing. That is entirely wrong.

Helen Whately (Faversham and Mid Kent) (Con): I am listening carefully and I hear a great deal of criticism. What I have not heard from Labour Members are proposals on how welfare should be put on a more sustainable footing, on how they would like to see work pay, and on how they would reduce the deficit and the debt. Are they instead proposing cuts to public services?

Owen Smith: No, obviously I am not suggesting that for a minute. That is a nonsense thing to say. Let me walk through what the Government are proposing.

Neil Coyle (Bermondsey and Old Southwark) (Lab): Does my hon. Friend share my concern that under the coalition Government the projected savings that were meant to come from changes to housing benefit and employment and support allowance never materialised? Savings of £10 billion were not made by the previous Government. Perhaps Government Members should be challenging their Secretary of State and calling for his resignation.

Owen Smith: Of course they should. If they had any guts they would do precisely that. There has been an abject failure on housing benefit. The bill has gone up and up and up. If the Bill is passed—I sincerely hope it does not pass after yesterday evening’s decision—housing benefit spending will go up some more. We know the Government have failed on that and they will continue to fail in the future.

Let us look, for a moment—

Oliver Dowden: Will the hon. Gentleman give way?

Owen Smith: I have given way once. I will move on and give way again in a moment.

Mr David Anderson (Blaydon) (Lab): My hon. Friend the Member for Wansbeck (Ian Lavery) mentioned the word “bribe”. Is not the real bribe in the Bill the bribe

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that will be given to the children of dead millionaires through the changes to inheritance tax, to the detriment of the people who will be hit by tax credit cuts?

Owen Smith: I am glad I gave way, because my hon. Friend makes the excellent point that politics is always a choice. Politics is about priorities. Politics is about who we stand up for, who we speak for and whose side we are on. It is very, very clear that, in the Bill and in this House, the Conservative party is on the side of millionaires and the wealthy, and are standing up against the ordinary working people of Britain, who will not forgive them for doing so.

Paul Scully (Sutton and Cheam) (Con): The hon. Gentleman talks about choices, and spoke earlier about a £4.4 billion hit. Is he proposing, instead, a £4.4 billion subsidy for the large companies that Labour Members continue to criticise on a daily basis to cover the shortfall in wages that they should be paying?

1.30 pm

Owen Smith: No, I am talking about £4.4 billion-worth of support that is offered to working people in this country, including 3,800 in the hon. Gentleman’s constituency. He has a choice to make on their behalf today. Is he going to stand up for them? Is he going to speak for those almost 4,000 families in his constituency, or is he going to roll over and vote with the Government to cut their wages by 10%? That is the choice he faces, and it is a very real political choice for him. As he is a new Member, he should think very carefully about that.

Let us deal with what the Government are proposing by way of mitigation. We heard a lot from the Chancellor yesterday evening. He looked a little ratty as he told the cameras that he was going to think again—he was obviously not very keen on having to do it—but there was at least some hint that there would be transitional measures. We have had hints over recent days as to what they might be. Let me run through a few of them and put the Government on notice that we will scrutinise extremely carefully, as we have done today, the net impact of any such measures.

First, there is the minimum wage. It is welcome that the Government propose to increase it from £6.50 to £7.20 next year and thereafter to get it up to £9.20 by 2020—it is a good measure. Unfortunately, however, even if the Government were to take it to £9.20 on 1 April—the day on which tax credit cuts are introduced—it would not offset the losses for average families, not by a long chalk. Most families on 40 hours a week with one parent earning would, if they were earning around £15,000, still lose £600 a year. The minimum wage increase is clearly not going to offset the losses.

The second element that has been talked about is childcare allowance. Even if the Government were to move straight away to the proposed 30 hours a week for England—again, a welcome measure, although it looks rather under-resourced to me, given that we were told it would cost us over £1 billion if we were to implement it and the Government are planning to invest around £300,000; we will see what happens with that—that same family, banking the £9 minimum wage, would still be around £500 worse off.

Let us build in the third element, which is of course the increase in the personal allowance. The Government have made other welcome measures in increasing the

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personal income tax allowance from £6,500 to £11,000 and they are talking about taking it up to £12,500 at the end of this Parliament. Again, that is a welcome measure, but it misses the target. Those people who earn between £3,500 and £12,500 will all be worse off if the Government start taking away their tax credit entitlement. They are two different tribes. It is completely fallacious to suggest that if we give extra money by increasing the personal allowance or the national minimum wage, we will offset the losses. Only 25% of the losses will be offset by the national minimum wage and only for 25% of the population. It is very straightforwardly a con. As we heard in the excellent evidence session before Thursday’s debate, the Resolution Foundation said very clearly that if we need to deal with the question of tax credits, the answer is, unfortunately, tax credits.

Steve Rotheram: Does my hon. Friend agree that the 6,700 families that will lose out from the tax credit cuts to their incomes will not be compensated, and that it is arithmetically impossible that the Government’s proposed changes would do that?

Owen Smith: There is no need to take just my word for that; it is precisely what Paul Johnson of the Institute for Fiscal Studies said—that it is arithmetically impossible for the Government’s offsets, which I have just listed, to compensate for the losses that these hard-working families in all our constituencies are going to face. The Government know that that is true, which is why they have been so absent from the television studios in recent days. They do not need to hear the truth from me: they know it.

Tom Brake (Carshalton and Wallington) (LD): On the issue of offsetting losses, the hon. Gentleman will be aware that in my constituency, for example, 4,000 families will be affected, losing £1,000 each, which amounts to £4 million being taken out of the local economy. Has he considered the impacts of that?

Owen Smith: I have considered the impacts. I think that reducing aggregate demand by taking money out of the pockets of working families—the people with the highest propensity to spend money locally in the economy—is a foolish thing to do. It is a false economy. We know that to be true economically, so why on earth would the Government want to do it?

Barbara Keeley: I want to add a little detail. Conservative Members seem to be raising the cases of people who do not benefit from working tax credit and are questioning it on that basis. Perhaps the example I quoted earlier will help. The carer on carer’s allowance will get £62 and is able to earn a maximum of £110, which is a disregard. That is what carers are on, and they will be hit very hard by the loss of working tax credit. These people are earning a maximum of only £172. The important point is that there are 689,000 such people—those wonderful carers committed to looking after family members. Only one Conservative Member seems to have recognised that issue, which is a massive one. It is not quite as massive as the 3 million families affected, but it is still important. Ministers need to reflect on and explain why they are doing this to 689,000 carers up and down the country.

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Owen Smith: Why on earth have the Government not conducted any sort of analysis to illustrate the benefits to our society and economy that those 700,000 carers are contributing? We all know in our hearts that they are making an enormous contribution, and we all know in our heads that they are precisely the people who are going to lose out. It is working mothers, carers and people who cannot expand their hours who are going to lose money, but they are doing the right thing; they are in work, striving hard. They might well be better off if they were not, and the crazy thing about the Bill is that in future they will be better off not working so hard. The work penalty and the disincentive to engage in extra hours and work harder, even once people have a higher than minimum wage, is screaming out at the heart of the Bill. It is a fundamental economic error, and it is being done for ideological purposes. The Tories are seeking to present those people—working people—as scroungers, and they are trying to present tax credits as benefits and a bribe.

Dr Andrew Murrison (South West Wiltshire) (Con): Will the hon. Gentleman give way?

Owen Smith: I will not—I have already given way a lot—but I will quote to Conservative Members some of their own people, who have recognised how mistaken this policy is. Let us take Lord Lawson, for example—hardly a bleeding-heart liberal, and someone I remember standing next to Mrs Thatcher during those dog days for my part of the world when the pits closed in south Wales. Lord Lawson referred in the other place yesterday to

“the great harm, or a great deal of the harm”,

being done “at the lowest end”. He continued:

“That is what needs to be looked at again; that is what concerns me.”

He said that the Chancellor would, of course,

“listen to this debate, but it is not just listening that is required. Change is required.”—[Official Report, House of Lords, 26 October 2015; Vol. 765, c. 1005.]

Let me also cite the hon. Member for South Cambridgeshire (Heidi Allen), who I thought spoke brilliantly, eloquently and forcefully last week. I shall quote just one part of her speech. She said:

“To pull ourselves out of debt, we should not be forcing those working families into it.”—[Official Report, 20 October 2015; Vol. 600, c. 876.]

We should not be forcing working families into debt to deal with the debt that the country has been left by the bankers’ recession and the failure of the Tory Government to fix it.

Oliver Dowden: The hon. Gentleman has still not answered a very simple question. If this measure saves more than £4 billion, how will the Labour party find that money? Will it cut spending on other measures such as health and education, will it increase taxes, or will it increase borrowing? There are only three options. Which one will the hon. Gentleman choose?

Owen Smith: I repeat that the hon. Gentleman should really answer the question asked by the 3,700 people in his constituency who will lose out if he votes with the Government today.