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Jack Dromey (Birmingham, Erdington) (Lab): In a free society, freedom of information is essential. Public bodies are public and should always be publicly accountable, and the powerful must always be held to account. Does the Leader of the House therefore understand the concern that is being expressed in Birmingham, and by the Birmingham Post and Birmingham Mail, about the current threat to freedom of information, and will he agree to arrange an urgent debate on what is a threat to a cornerstone of our democracy?

Chris Grayling: The irony is that the person who said that he regretted the Freedom of Information Act 2000 most was the former Member of Parliament Jack Straw, who introduced it. He said that he looked back on it as one of the things that he had got wrong. This Government are committed to the Act, but we want to ensure that it works well and fairly, and cannot be abused or misused. It is, on occasion, misused by those who use it as, effectively, a research tool to generate stories for the media, and that is not acceptable. It is a legitimate and important tool for those who want to understand why and how Governments make decisions, and this Government do not intend to change that.

Tom Pursglove (Corby) (Con): I know from my own family’s experience just how devastating pancreatic cancer can be. As November is pancreatic cancer awareness month, may we have a debate about awareness, and about what the Government are doing to help those who are suffering from this dreadful disease?

Chris Grayling: My hon. Friend has made an important point. Of course, all forms of cancer—and pancreatic cancer in particular—are deeply distressing for those who suffer from them, and for their families. It is encouraging that we seem to be taking some significant steps in terms of treatment and research on various treatments for the future. I am pleased that, notwithstanding the financial pressures that we face, we have maintained our science budgets, which—along with substantial private sector funding for research—open up a better future for sufferers, and I hope that that work continues.

Alison Thewliss (Glasgow Central) (SNP): Since the opening of today’s sitting, welcome news has emerged from China that it is to end its one-child policy. Will the Leader of the House arrange a debate in Government time on the workings of their two-child policy, with particular reference to the “rape clause”?

Chris Grayling: Of course, full details will become available. I am aware of the issue and will ensure that the fact that the hon. Lady has continued to raise this concern is communicated to my colleagues.

Andrew Stephenson (Pendle) (Con): I welcome the Government’s announcement that anti-Muslim hate crime will be recorded as a separate category for the first time by police in England and Wales, bringing Islamophobia into line with anti-Semitic attacks targeting Jews, which have been recorded separately now for some time. May we therefore have a debate on hate crime in all of its forms, and what more we can do to eradicate this from our society?

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Chris Grayling: Hate crime in any form is unacceptable. I am very much aware that although we have seen a spate of anti-Semitic attacks in recent months, there are regular attacks on mosques and Muslims in this country. I therefore think the steps this Government are taking are absolutely right. We should not tolerate hate crime against any of our communities. It should be dealt with by the full force of the law whenever it occurs, and the hon. Lady does an important service to this House in reminding us of our obligations in that regard.

Nick Smith (Blaenau Gwent) (Lab): May we have a debate on defence procurement and buying British? Why are the three new Royal Navy ships and the 500-plus armoured vehicles for the Army not being built with British steel?

Chris Grayling: On those occasions when there is a specialist metal requirement, we have to source the specialist metal from wherever it is made. However, 97% of the steel that is being put into Crossrail comes from British sources. It is disappointing that the Scottish Government have not done the same for their contracts in Scotland. The steel that is going into our aircraft carriers is also British steel, and I would ask the hon. Gentleman this question about defence procurement and British jobs: if he is so concerned about the use of British steel and jobs in Britain, why does his party now support a policy that would involve scrapping the plans for four new Trident submarines to be built in Barrow-in-Furness?

Paul Flynn (Newport West) (Lab): When can we debate the convention that serving Prime Ministers are not invited to give evidence to Select Committees? There is compelling evidence now that three Prime Ministers were unwittingly but directly involved in an enterprise that cost the taxpayers many millions of pounds. Is it not important, too, that we understand why three Prime Ministers were infatuated by the delusional fraudsters of Kids Company?

Chris Grayling: There are two points to make here. First, I think everyone on both sides of the House is deeply distressed to see what has become of Kids Company. That is not good news for any of us. The second point is to remember that, notwithstanding what has gone wrong in that charity, some people who volunteered for it did some very important work and believed in what they were doing, and I do not think we should decry that work. I also say to the hon. Gentleman that we have a Liaison Committee made up of some of the most senior people in this House and that Committee meets the Prime Minister and questions him each month. It is in my view precisely the vehicle the hon. Gentleman is looking for.

Diana Johnson (Kingston upon Hull North) (Lab): Three years ago Hull’s caravan manufacturers had to fight off the caravan tax which would have blighted their industry. Now we have the Government buying steel from the Chinese and the Swedish. I wonder if it is

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about time we had a debate in this House about an industrial policy for our country, and not every other country in the world.

Chris Grayling: Let me tell the hon. Lady about an industrial policy. An industrial policy which leads to a dramatic drop in UK steel output and a near-halving of the proportion of our economy that is taken up by manufacturing is the industrial policy we had under the last Labour Government. Under this Government we have been working to restore manufacturing and research and development, and steel production is at the same level or slightly higher than when we took office. Labour is the Opposition so its Members can of course ask questions without remembering their own record in government, but just on occasion they should look in the mirror and say, “What did we do in government?”, because actually when it comes to manufacturing in this country they made a right royal mess up.

Mr David Hanson (Delyn) (Lab): Concern about the illegal wildlife trade is growing and the Duke of Cambridge spoke out about this issue only last week. Responsibility in the Government lies within three Departments: the Department for Environment, Food and Rural Affairs, the Home Office and the Foreign and Commonwealth Office. May we have an early debate to look at how we can better co-ordinate a UK Government response to end this vile trade?

Chris Grayling: I wholeheartedly agree. To see the return of elephant poaching in southern Africa is something I find deeply distressing, and the threat now facing the rhino is profoundly distressing. I commend Prince Harry and Prince William for the work they have done in this area over the years, and I commend everyone in this House who works to highlight this very real challenge. I want future generations in this country to be able to enjoy these great creatures, to see them in the wild, and not to have to look back in history books for the times they walked the earth.

I will make sure the right hon. Gentleman’s concerns are drawn to the attention of the Secretary of State. Perhaps he would like to raise this issue at DEFRA questions next Thursday, because that Department has the biggest role in this. It is important we do everything we can to stem what is a vile trade.

Ian Lavery (Wansbeck) (Lab): Dupuytren’s contracture is a debilitating disease of the hands caused by manual labour. The Industrial Injuries Advisory Council made recommendations to the Department for Work and Pensions way back last year on why the Department should make it a prescribed occupational disease, yet no official announcement has been made. Will the Leader of the House make a statement on the reasons for the delay, which is having an impact on many disabled people in the UK?

Chris Grayling: The hon. Gentleman raises an important issue. I do not know the answer to his question, but we will have DWP Ministers here on Monday and I will make sure that they are briefed in advance on this question, so if he chooses to raise it again then, they will be well prepared to give him a proper response.

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Points of Order

11.40 am

Alex Salmond (Gordon) (SNP): On a point of order, Mr Speaker. During business questions, it was announced by Sir John Chilcot by means of a letter to the Prime Minister that it will be a further seven months before the Iraq inquiry is published. That means that it will be seven years since it was established and a full 13 years since the war started. At this time of year in particular, would it have been not only in order but a mark of respect to the families of the 179 dead British servicemen if the Government had come to the House to inform us of this decision, so that we could have explored the reasons for the delay in the inquiry’s publication and the possible legal consequences for certain individuals if the inquiry were to allocate responsibility for that illegal conflict?

Paul Flynn (Newport West) (Lab) rose—

The Leader of the House of Commons (Chris Grayling) rose—

Mr Speaker: Perhaps I can call the Leader of the House first. I should say that I am not aware of exactly when the letter was sent or received, but I have long been aware that this is a matter of great interest and concern to Members across the House. The whole situation is extremely unsatisfactory, and if the Leader of the House would like to come to the Dispatch Box, we would be pleased to hear from him.

Chris Grayling: Further to that point of order, Mr Speaker. Let me say first of all that the Government and I share the frustration of the right hon. Member for Gordon (Alex Salmond) at the amount of time that this has taken. None of us has ever sought to hide that fact. There are clearly lessons that will need to be learned from this whole process. It is in none of our interests that this should have taken so long. We were in opposition at the time, so we have no vested interest in delaying the matter. I understand his concerns, but he will understand that this process is outwith the control of the Government. Sir John’s timetable is entirely in his own hands. On the timing of this announcement, I do not know the time at which the letter was released, but it is certainly not my job to pre-announce a letter from Sir John Chilcot before he has announced it himself.

Paul Flynn rose—

Mr David Davis (Haltemprice and Howden) (Con) rose—

Mr Speaker: I just want to hear some further observations on this matter. I call Mr Davis.

Mr Davis: Further to that point of order, Mr Speaker. I think we all agree with the right hon. Member for Gordon (Alex Salmond) on this, and indeed with the Leader of the House’s comments. However, the simple fact is that there have been many rumours that the Chilcot inquiry has been delayed by Whitehall not clearing things quickly enough, by not providing enough information and by challenging the ability to release information. It would be extremely helpful to the House if we could have a statement on this issue, and I ask you

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to encourage that to happen, Mr Speaker. Frankly, this is an insult and compounds the grief of the many families who lost loved ones in that war.

Mr Speaker: I say gently that I want to hear the points of order—we will hear from the hon. Member for Newport West (Paul Flynn) in a moment—but the Leader of the House was absolutely correct to say that it was not for him to pre-empt the delivery or publication of any letters. However, in the light of what I sense to be a strong feeling across the House, it would be extremely helpful if, when the Leader of the House is in full possession of the facts, he were to consider an early, short statement, on which there would be an opportunity for questioning, at the start of next week. I merely put that thought to him now. He will have an opportunity to reflect on it. Let us hear whether he wishes to say anything further in response to the right hon. Member for Haltemprice and Howden (Mr Davis).

Chris Grayling: I simply wish to assure my right hon. Friend that I have seen absolutely no evidence of a desire in Government to stall this matter. Indeed, the Prime Minister has been as keen as anyone in this House, including the right hon. Member for Gordon (Alex Salmond) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), to see the report published, so there is no desire in the Government to slow it up. It has been a matter of frustration that it has taken so long, but it is outwith our control. I will certainly take back with me the point about an early statement.

Paul Flynn: Further to that point of order, Mr Speaker. The Committee that set up the Chilcot inquiry was the old Public Administration Committee under Tony Wright. At that time, there were misgivings about the form of the inquiry, and the suggestion was made that the inquiry should be run by Parliament directly, which would have been an entirely new form of inquiry. Would it not have been better if parliamentarians had had control of it? Furthermore, as we have had no explanation for the terrible loss of 179 lives in Iraq and for the Helmand incursion that resulted in 454 lives being lost when we believed that we would be going there without a shot being fired, can we have an assurance from Government that we will have no more talk about military interventions in the four-sided war in Syria before all those matters are reported on?

Mr Speaker: May I say to the hon. Gentleman who has taken advantage of this opportunity to make his point, which he has done with his usual alacrity, that a statement by Government to the House on this matter would afford a real opportunity for him to make his point not by point of order to me but by question to the Leader of the House? It would perhaps be an uncontroversial observation that, had there been a parliamentary Committee looking at this matter, it would not have been possible for it to do its work more slowly even if it had made a Herculean effort to do so. I say on behalf of the House, whether or not it concerns or perturbs Sir John, that he should be aware that there is a very real sense of anger and frustration across the whole House at what seems to be a substantial disservice that has been done. Perhaps we can leave it there for now, but I am grateful to the right hon. Member for Gordon

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(Alex Salmond) for first raising that matter and to other hon. and right hon. Members for underlining the strength of feeling across the House.

Diana Johnson (Kingston upon Hull North) (Lab) rose—

Jack Dromey (Birmingham, Erdington) (Lab) rose—

Mr Speaker: If the hon. Member for Birmingham, Erdington (Jack Dromey) could hold his horses for a moment, I shall call Ms Diana Johnson.

Diana Johnson: On a point of order, Mr Speaker. When Ministers speak from the Dispatch Box, I know that they have to ensure that they are factually correct. I am sorry to raise again a point of order today about a factual inaccuracy that has been made by the Leader of the House. In an exchange this morning, he said that Labour had done nothing in 13 years to deal with the issue of VAT on sanitary products. That is factually incorrect, as Dawn Primarolo, as a Treasury Minister, ensured that VAT was reduced from the top rate to 5% in 2001. I hope that the record can be corrected.

Mr Speaker: I think we should leave the exchange pretty much there, but of course if the Leader of the House wishes to respond, he can do so. The hon. Lady has made her point very clearly and it is on the record—or it will be on the record—in the Official Report. The Leader of the House will speak, but then we must proceed.

Chris Grayling: It is important to say that it is not always fair or wise to cut sentences short, because if the hon. Lady had listened to what I said she would have heard, “on zero-rating”.

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Backbench Business

House Business Committee

11.48 am

Mr Speaker: Since this is the first occasion on which these procedures have been invoked, it might be helpful to the House if I explain what is happening. This is an identical motion to that which was debated in Westminster Hall on Wednesday 14 October. When the question was put in Westminster Hall, the Chair’s opinion as the decision of the question was challenged. As the motion has now been brought before this Chamber under Standing Order No. 10(13), I am required to put the question on the motion without debate.

Motion made, and Question put forthwith (Standing Order No. 10(13)),

That this House has considered the creation of a House Business Committee.—(Mr Graham Allen.)

Question negatived.

Mr Graham Allen (Nottingham North) (Lab): On a point of order, Mr Speaker. Delighted as I am that the motion has been carried unanimously by this House—

Mr Speaker: Negatived unanimously.

Mr Allen: Yes, negatived unanimously. Mr Speaker, can you assist me in how we can take the matter forward now that the House has expressed a strong view so that we can all discuss the issue of a House business committee, which was, of course, in the coalition agreement, was promised by the then Conservative Leader of the House and is the remaining outstanding business of the Wright Committee in reforming this Chamber? Will you give me and colleagues some advice on how we can move things forward and have a genuine debate on whether we need a House business committee?

Mr Speaker: Not for the first time, and possibly not for the last, I feel that the hon. Gentleman flatters me. He does not require my advice. He is something of a cerebral constitutionalist and knows very well that there is an arsenal of weapons available to him, including all sorts of parliamentary devices that would enable this matter to be debated not in Westminster Hall but in this Chamber. He knows that he has a fellow spirit in the hon. Member for Wellingborough (Mr Bone) and a goodly number of other Members to boot. The matter will come back to this House and I have a feeling that the hon. Member for Nottingham North (Mr Allen) will want it to come back sooner rather than later, following what has just taken place. The matter cannot be ducked.

Mr Peter Bone (Wellingborough) (Con): Further to that point of order, Mr Speaker. It might be useful for you to know that I had an electronic message shortly before the motion was moved that indicated that Government payroll Members were instructed not to oppose the creation of a House business committee, so perhaps the Government might introduce a motion before the House.

Mr Speaker: Well—

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Chris Bryant (Rhondda) (Lab): That was ironic and should be in italics in Hansard.

Mr Speaker: If the hon. Member for Wellingborough spoke with his usual sincerity, some might think that he displayed an optimism worthy of Dr Pangloss. We shall wait and see. I had not noticed in the last Parliament the Government displaying any great earnestness to stick to their commitment to make proposals for a House business committee. Perhaps in this Parliament they will have remembered that commitment and will decide to act on it. Perhaps they will do so of their own volition, or perhaps they will be cajoled, exhorted, harangued and persuaded into doing so by the combined intellectual and rhetorical firepower of the hon. Members for Wellingborough and for Nottingham North.

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Tax Credits

[Relevant documents: Oral evidence taken before the Work and Pensions Committee on 26 October 2015, on Tax Credits, HC 548, Oral evidence taken before the Treasury Committee on 15 July and 21 July 2015, and written evidence published on 20 August and 22 October 2015, on Summer Budget 2015, HC 313]

Mr Speaker: I inform the House that I have not selected the amendment.

11.53 am

Frank Field (Birkenhead) (Lab): I beg to move,

That this House calls on the Government to reconsider the effect on the lowest paid workers of its proposed changes to tax credits due to come into force in April 2016, to carry out and publish an analysis of that effect, and to bring forward proposals to mitigate it.

Thank you for your ruling, Mr Speaker. On behalf of the House, I thank the Backbench Business Committee, which not only acted quickly in giving us this debate but decided that we should have a whole day to debate the issue given the importance of the matters we are discussing to many of our constituents, particularly those who have the least money.

Members will have seen from the motion on the Order Paper, signed by a large number of my hon. Friends from both sides of the House, that we want to touch on three themes today. First, we call on the Government to give us more data so that we can, secondly, consider the impact of the tax credit cuts on our lower-paid constituents. Thirdly, given that there is now a debate raging in this House as well as outside it, we wanted to give the House the opportunity to suggest means by which the Government might mitigate the measures, although the debate has moved so fast that I do not think that those on the Treasury Bench are thinking merely of mitigation.

In this opening contribution I want to touch on three themes. First, I congratulate the House of Lords not on causing a constitutional crisis, but on giving the Government a well-earned opportunity to think twice about their proposals. Secondly, I shall outline the data that we need in this place to consider how the biggest change in the Budget will impact on our constituents. Thirdly, I want to start introducing the proposals that Members are putting forward not merely for mitigation, but for reform of the tax credit proposals.

First, on the lucky break that has been dealt to the Chancellor, when the Lords rejected the statutory instrument giving the Government authority to go ahead with the tax credit changes, I began to pity that no doubt young adviser in the Treasury who had thought up the wheeze of putting the measure in a statutory instrument rather than in the Budget itself. Although on many subjects we would disagree with Lloyd George, he had a certain wisdom in deciding how to protect money resolutions in this House from interference from the other place. The convention that had been developing before and was reaffirmed with legislative force then was that if a Budget motion goes from this House, the other place might wish to debate it but could not interfere with it. I pitied the career of that young adviser who suggested a wonderful wheeze not to debate it here on the Floor of the House, but to take the very essence of the Budget in a Committee stage upstairs.

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Now, as more hon. Members have begun to realise the consequences of the tax credit changes, I began to think that maybe that official is for promotion, in that the procedure gives wonderful cover for the Government to engage seriously with us here and with our constituents on what might best be done both to meet the Government’s target to reduce the deficit and to make sure that any reduction is not disproportionately or to any extent put on those with the weakest shoulders. It is a huge opportunity and I hope that in the course of the debate we will see the changes and the movement that has taken place since that Budget debate.

Secondly, I make a plea for the data that this House requires so that it can understand what is involved for all our constituents, particularly those strivers who get up and work, doing some of the least privileged jobs in our society, and whom successive Governments of different complexions thought we should encourage rather than deter. It is worth remarking, although I do not wish to add any conflict to this debate, that we have to go back to Lloyd George’s debates to look at the information that he provided to the House on who would pay for his 1909 Budget—that Budget in which he enshrined it in our constitution that Budget measures were for this place and not for the other place.

Lloyd George provided far more information than the Government provided this year on who would be affected by his Budget. I know it was simpler then—he was after the landlords’ pay and he made it plain that they would pay for the measures, and that the Budget would redistribute not just to the poor, but to the poor who were not in trade unions and who at that point had no one to protect them. The Government have achieved a first—and I hope they will withdraw from this innovation—in starving the House of the necessary information.

What I would like to see from the Government is how we break down among decile groups—each 10% if the income distribution—the impact of this £4.5 billion cut in tax credits. May we have that information by each data group? There are three big changes that the Government wrought in the Budget statement. First, they reduced the earnings threshold from £6,420, lowering it to £3,850 next April. Secondly, they are abolishing the family element—the £500 that was put into the calculation —which will disappear in 2017. Thirdly, the child element, which is valued at £2,780 a year, will be lost for all children after the second child in a family.

Those measures will obviously affect different groups in all our constituencies. Given that there is a unity across the House on the idea that the necessary reductions in the budget deficit should be borne by those with the broadest shoulders, we need to look at the impact of those measures, both individually and collectively, on each decile group. Then we need to look at the impact for each type of family and for each year up to 2020.

To be fair to the Government, many of us wish them to include in that analysis the four compensatory measures that they argue will mitigate most, if not all, of those changes. For example, the Prime Minister has told the country that eight out of 10 families will be better off as a result of this year’s Budget. The truth is that eight out of 10 might well be better off, but practically all of our constituents who draw tax credits are in the two out of 10 who will be substantially worse off. I therefore hope not only that we will see a careful analysis of the cuts affecting individual families, but, in order for it to be

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rounded and fair, that it will include the four compensatory measures that the Government argue will mitigate the impact.

One such mitigating factor is the welcome increase in the tax threshold. When the Exchequer Secretary replies to the debate, perhaps he will be able to tell us whether all those claiming tax credits will be covered, or is the figure more like half? Let me say now—I might not have an opportunity later—that I have huge regard for him. I am sympathetic to the position he is in, because he is defending a Government brief that is on the move. I will mention a precedent that I think will cheer him. Those of us who have been in this place for some time will remember when Mrs T insisted that John Major come to the Dispatch Box to defend her policy on cold weather payments. She then heard the eruptions from the Benches behind him and decided to change the policy that afternoon, but she instructed him to tell the House that something much better was in store. I hope that the Chancellor, who is now in listening mode and thinking about what changes to make, will be similarly generous and allow the Exchequer Secretary to announce those changes, rather than seeking to take any kudos himself.

One of the big changes is the increase in the tax threshold, but only half of those who will lose out as a result of the tax credits changes will be compensated, or partly compensated, by that increase. Probably the most important positive measure that the Government will introduce in this Parliament is the significant increase in childcare for all our constituents who have children under the age of five: the number of hours of childcare for the poorest two-year-olds and all three and four-year-olds will increase to 30 a week.

The Minister who will reply to this debate has probably the most important brief of any Minister, because he now has overall responsibility for life chances. If this House is serious about ensuring that the life chances of children in the poorest households are raised to the level of children in more privileged households, we must look very carefully at how that extra money is spent and, in particular, whether our very poorest and youngest constituents get the best deal out of that childcare. The increase in childcare is probably the most important social measure that the Government are likely to introduce in this Parliament, but following close on its heels is the introduction of a national living wage.

John Glen (Salisbury) (Con): The right hon. Gentleman is making a characteristically thoughtful speech, but in discussing amelioration of the third element will he acknowledge that many employers are going further than the schedule for the national living wage uplift requires? That will be massively welcome to many people across the country and will have a material impact on the four elements he is describing.

Frank Field: Many employers are doing so, but some are not, hence the importance of the Chancellor’s making it a statutory requirement. That demonstrates the role of law when it is used cleverly. A number of employers who previously were not interested in introducing a national living wage—in correspondence with me, they said that they would not do so—are now among those that have, in a sense, jumped the gun in introducing the Chancellor’s national living wage. That is welcome.

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Mr David Anderson (Blaydon) (Lab): Is there not a problem for employers in the public sector? A number of them, including my local council, Gateshead Council, are committed to paying the living wage, but clearly they do not know whether extra funding will be made available to them so that they can do so.

Frank Field: There is clearly, as my hon. Friend says, a question about resources. We are arguing that Ministers should produce an analysis of the impact of the national living wage, but many local authorities are paying above that level now, so those workers already have that money in their wage packet. The ability of local authorities to increase wages will be limited in the years we are considering, so many public sector workers on the lowest pay will not be beneficiaries of the living wage; their pay increases will be limited by the requirement the Government have laid down. Perhaps that is a factor the Government will use in the analysis for which we are asking.

Sammy Wilson (East Antrim) (DUP): Does the right hon. Gentleman also accept that when the data are being compiled, there should be an indication of the impact the changes will have on the under-25s, who will not be covered by the national living wage?

Frank Field: Well, indeed. Our plea is to have made available the range of analysis that has traditionally accompanied any Budget statement that any Member of this House, however long he or she has served, has come to expect.

The Work and Pensions Committee has emphasised a fourth factor, which is that there may be some wage push as a result of the introduction of the national living wage. Will that be taken into account in the Government’s analysis? I am slightly sceptical about the extent of that wage push—again, it is one of the problems of having been a Member of this House for some time. When I was initiating the Low Pay Unit’s campaign for a statutory minimum wage, the official trade union position was to oppose it on the ground that there would be a mega-bill as we re-established differentials. However, when we look at the impact of the statutory minimum wage, we see a great deal of bunching of wages, and not the big increases that some people feared and expected.

Mr David Davis (Haltemprice and Howden) (Con): Will my right hon. Friend give way?

Frank Field: Yes, I give way to my right hon. Friend.

Mr Davis: I can call him my right hon. Friend, because we have known each other for 40 years. On the data the Government provide, because this is an incredibly complicated area, there are elements of data that are important but that would not normally be provided. One of them is the marginal withdrawal rate of any scheme that the Government put into effect. Government spokesmen have previously said that people can work their way out of poverty, but it looks as though some of the effects of the national living wage will result in a 93% withdrawal rate, which will mean that people cannot work their way out of poverty. Will he add that to his list of data for the Government to provide?

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Frank Field: I will certainly do that, because I want to refer to a proposal that I initially made about making a reform at nil cost. I did not do that because I wanted to be dragged to the stake and burned as a result, but because I was anxious to begin a debate. If one is asking the Government to change their mind, somebody who has made proposals might also change their mind. With any proposal, the net withdrawal rate is crucial. We in this House thought it intolerable that people should pay more than 45% on their income tax and suffer that rate of withdrawal. It is not a bad rate to aim at for poorer people when we add income tax, national insurance, and withdrawal of tax credits and other benefits. That underscores the point that the right hon. Gentleman made.

Hywel Williams (Arfon) (PC): Would the right hon. Gentleman also see merit in looking at the geographical distribution of the effects of these measures, given that as the Member for Birkenhead he will know that there are very poor communities where the effects will be very widespread? The result will be not just poorer people but poorer communities.

Frank Field: I very much agree. I know that the Exchequer Secretary also has an interest in improving Treasury data so that we can better understand tax and benefit changes. I hope that the hon. Gentleman’s plea will not fall on deaf ears.

Mr Graham Allen (Nottingham North) (Lab): Will my right hon. Friend take into account the fact that we need to have something that is saleable to the people who are benefiting from tax credits? Language such as marginal rates of return, thresholds and differentials can completely confuse not only the beneficiaries but small employers. Will he make it clear in negotiations with the Treasury that we must try to make this saleable and to keep the concept simple, so that people who genuinely need tax credits can claim them, because there is still massive underpayment?

Frank Field: There is indeed. That leads me neatly on to what the proposals for reform might be. I wish briefly to touch on four.

First, I make a plea to the Government to recognise just how quickly this whole debate is changing and to take advantage of that. Tax credit payments are here for the long run. When we began this debate back in 2010, there was enthusiastic talk about, in almost no time, a new benefit—universal credit—that would sweep away means tests and deliver a seamless service to our constituents. To be truthful but gentle about universal credit, its progress is very modest. I do not disagree with the Secretary of State in looking back at previous instances of trying to smash reform through whatever the costs, but at some stage somebody in Government has to look at how slow the progress of roll-out has been and question whether a full flowering will ever see the light of day. This raises questions about how tax credits might be reshaped, given that universal credit is not for the chop and is here for the longer term. It will not, in the lifetime of this Parliament or even the next, make tax credits redundant.

We have begun to have debates about this with the public. When I recorded a programme this morning, every time I said a word that people thought the public

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would not understand, we had to stop and start filming again. I could not say how long it took to film. We have our own language, which is a shorthand that is not understood by people outside.

Huw Irranca-Davies (Ogmore) (Lab): My right hon. Friend speaks with great authority and experience on these matters. One of the very straightforward concepts that all my constituents understand is that there is a right-minded intention to get rid of taxpayer-subsidised poverty pay. In doing so, however, we cannot say to people on low pay, “We’re going to impoverish you on that journey.” The simple concept is yes, let us talk about the instruments for doing that, but remember that it is about getting rid of poverty pay and lifting people up, so that at some future date we do not have to rely on subsidy to make it worth while to go to work.

Frank Field: I could not agree more, in that we have not had a Chancellor who has decided that it is misplaced for taxpayers to play the role in the welfare system that wages should play in our economy. That leads welfare reform into new areas about how to raise productivity, particularly among those who are lowest paid. We should not simply accept and welcome the Chancellor’s proposals for a national living wage but think about how we take it on from there. My hon. Friend is absolutely right.

My first suggestion to those on the Treasury Bench stems from the fact of the Government’s introducing a national living wage. When the people who designed tax credits got to work, nobody thought that any Government would bring forward that proposal. They therefore incorporated two aspects into the tax credits system. The first was about how to subsidise, and make up to a more decent level, poverty wages. The second was that given the life cycle and where life’s journey takes us, there are periods when people have children and their budget is stretched, and the tax credits system should play a role in that. I ask those on the Treasury Bench, when they are thinking about what they do in only a few weeks’ time in the autumn statement, to consider whether we should now grow up and accept that we are going to have a national living wage, and that the tax credits system should not only subsidise low wages but take some of the responsibility for the costs of children. I think there would be a great deal more support in the country if tax credits were about supporting children rather than the need to subsidise poverty wages.

David Morris (Morecambe and Lunesdale) (Con): Will my right hon. Friend, as I would call him outside this Chamber, make it clear that this is about tax credits and not child tax credits, as they are two different benefits?

Frank Field: There are two benefits—child tax credit and child benefit. The Prime Minister seems to misunderstand the difference between the two, because he said during the election that child tax credits would not be touched, but given that under this formula we are changing the clawback—or, as my hon. Friend the Member for Nottingham North (Mr Allen) would say, the amount of money people lose—by changing the threshold at which people begin to take back tax credits, and the rate at which tax credit income changes, we are

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affecting the value of child tax credit. There are questions about the sense of having two benefits serving the same purpose.

My second proposal is one that I guess many Tory MPs have made privately to the Government. I cannot imagine that Government Whips are different from Opposition Whips. If we had been in government making this proposal, our Whips would have been very busy last weekend phoning hon. Members to ask what they would tolerate as a minimum for reform. I would have thought that one very clear message coming back would be that bringing in these reforms next April is not acceptable

The third and more radical proposal, which again unites Back Benchers on both sides of the House, is that the changes to tax credits should apply only to new claimants. One of the problems of our popularity in shovelling around taxpayers’ money without realising that the music might stop some day and people might think the bill was not actually affordable is that in the meantime our constituents have responded to the very clear messages—in the form of incentives in the tax credits system—about what we wish them to do. In talking both publicly and privately with Conservative Members and certainly with Labour Members, I have noticed a sense that it is one thing to say there is a new contract for people who are not claiming tax credits now, but it is a totally different ball game to say to the others, “You’ve responded and you’ve done all we expected you to do, but, by Jove, we are going to clobber you now for doing so.”

Andrew Percy (Brigg and Goole) (Con): I will make two points. The right hon. Gentleman is absolutely correct that for people in the system who have changed their behaviour—in terms of the vehicle they have bought, or the house they have chosen to buy or rent—we cannot change the rules afterwards and hit the poorest hardest, as the changes would.

I also want to put it on the record that I have made my view perfectly clear—certainly to Conservative Members—that the changes cannot go ahead next April and that any mitigation should be full mitigation. Mitigation must protect the poorest households, of which, owing to our low median salary, we have an awful lot in east Yorkshire.

Frank Field: I am grateful to the hon. Gentleman for his intervention.

Sammy Wilson rose—

Frank Field: I will give way again, but I will then begin to conclude.

Sammy Wilson: Does the right hon. Gentleman agree that the Government have accepted the principle he has just espoused about those who are already in the system? With the pension changes, for example, the Government have not required those coming up to the pension age who have certain expectations to change their expectations. Why does that not apply to those who are currently recipients of tax credits?

Frank Field: I could not agree more. I think those on the Treasury Bench are picking up a very strong message. There would be very little opposition to the Government

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introducing the reforms for people who are not claiming tax credits now, but who, if they claimed them in the future, would know the rules of the game. When this place has helped to shape people’s lives, expectations and drive, it is very different all of a sudden to blow the whistle and say, “We’re changing the rules.” People both in the Chamber and in the country feel very strongly about that.

Guto Bebb (Aberconwy) (Con): On the specific issue of dealing with the changes for people coming into the system, does the right hon. Gentleman not recognise that that shows its complexity? Somebody who is offered a position paying more than enough to take them out of the tax credits system might be reluctant to take such a job, because if it does not work out they will come back into the system as a new claimant. Even with his proposed change, the system will be complicated.

Frank Field: I was waiting for those on the Treasury Bench to point out the difficulties involved with all such moves. It is important to say that we are not in the hole; the Government are in the hole. We are trying to make suggestions about how to get out of the hole. It is no use the Government turning round to us and saying, “Did you not realise that this would have this effect and that effect?” I know we will not get that from the Exchequer Secretary, but a suitable sense of humility from the Government would be welcome.

Mr David Davis: Does that point not reinforce the requirement for the changes to be made not with another yes/no measure such as a statutory instrument, but through primary legislation?

Frank Field: There would of course be a tendency for any Chancellor to say, “I’m going to make the Lords agree to my new SI.” If it was an SI that this House cheered on its way down to the other place, that might be wise. If it is an SI on which there was still deep disagreement, particularly among Conservative Members, I think it would be very unwise not to bring forward the proposal in primary legislation.

Mr Graham Allen: Is there not room for a little bit of forethought and pre-emption? We are only six months into a five-year Parliament, and this is the first of many changes that may happen. Will my right hon. Friend stress that Parliament could be seen as a partner in this process? Rather than having a crisis-management approach to social policy, can we not involve the Work and Pensions Committee, the Treasury Committee and colleagues in both Houses? The Government can set the object, but we could be allowed to say something to help them on their way. We know that there has been a general election and that they are entitled to get their laws through, but they should use Parliament as a partner, rather than have this constant crisis management.

Frank Field: I could not agree more. In my speech opening this debate, I am in a sense saying that this is a glorious opportunity for the Chancellor to get it right: both to change his image and to become a much more serious reformer on the tax and benefit front. I am sure that he did not want to land himself in this position,

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but now he has, I hope that he will be optimistic not only about the partnerships he can build, in the way that my hon. Friend suggests, but about the opportunity it gives him in beginning to take into account the effect of a national minimum wage on the welfare debate. I sometimes wonder whether he has quite realised just how significant change is and could be.

If hon. Members will allow me, I will turn to the fourth suggestion for reform. I have put it forward, largely to get a debate going, and I now wish to attack it. The suggestion was to take the Chancellor seriously when he said that reforms should be done at nil cost. I wanted to show that it would be possible to raise the thresholds—the point at which people begin to lose tax credits—to the national minimum wage at nil cost, but that would require an even greater penalty in the loss in tax credits for people above that level.

There is not a great deal of support for that idea, but I put it forward merely to stress this point. When we had a huge great uprising of Back Benchers from both sides of the House over the abolition of the 10p rate, the Government were adamant that they were not going to listen, but then, on the night before the big concessions, huge sums of money were found at the Treasury to go everywhere but to help those on the 10p rate. It is now clear that the Chancellor will put some extra money into the whole operation. If we suppose that he wants to go down the nil cost route, the extra money ought to go to protecting those who will lose, rather than to those not claiming tax credits—including all hon. Members, who are not affected—who would benefit if he raises the tax threshold further or increases the national insurance threshold.

I will make my last point quickly, not because I do not want to develop it further, but because I am conscious of the large number of hon. Members who wish to participate in the debate. If we are saying that the Government should give up £4.5 billion from savings toward the reduction of the deficit, we are required to say where that money might come from. I wish to suggest two areas. I have lifted the first from the Treasury. It is now briefing the media that one possible way of finding the extra resources for a delay and a staged introduction—that is certainly what Conservative Back Benchers are asking for as a bare minimum—of this reform, if that is what we can call it, would be to have a smaller budget surplus by 2020. I just put that forward, because it certainly seems to be a possibility for the Treasury.

My second proposal relates to pension tax relief. It is very interesting that the Chancellor has asked for views on how we might reform it. Huge sums of money are involved. I am not advocating that we should abolish it overnight. I do not think that we should treat people higher up the income scale in the same horrible way that the Government were proposing to treat those on tax credits. When Governments start changing incentives, people need to have time. If, however, we abolished it overnight, we are talking about an extra £34 billion. If we made the tax concession 15% for everybody, the figure would be more than £15 billion, and if we made it 20%, it would be £10 billion. These are mega-sums of money.

I raise that issue because I do not believe that the Government’s consultation on pension tax relief is up to speed with their pension reforms. The reason pension tax relief has been built up over a century is that

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previous Governments gave up the ghost of ever introducing a state pension that would take people off means tests. Hence, we had to bribe people to save more so that they would not be subjected to the horrors of poverty in old age. The Government are now introducing a basic state pension for the first time ever. That is an achievement.

[

Interruption.

]

I will certainly make way on the Bench for my hon. Friend the Member for Coventry South (Mr Cunningham). Shall I give him my notes so that he can finish my speech? I have never seen that before. I had always thought that if a Member was on their feet they were meant to be speaking, but never mind.

Sometimes Governments are very slow to look at how one really radical reform will have a knock-on effect on other parts of their programme. I do not think that this Government have taken into account the resources they are beginning to unlock now that the vast majority of people are going to be given a pension that will take them off means-tested assistance. Therefore, the reasons for bribing people to save in particular ways fall away, and that begins to unlock huge sums of money. I have not made proposals without also suggesting where the money might come from.

I want to end with what the tax credit changes will mean to our constituents if we are not successful today in convincing the Government to rethink radically their proposals. Having talked to my constituents and to others on television programmes, I cannot but be incredibly conscious of their fear at what the changes will do to them. People we should be saluting and cheering are sick with worry about how they are going to make ends meet and about whether they are going to lose their homes and whether they are going to be able to pay the interest on their mortgages, not to mention how they are going to protect their children properly.

Although it is important that we sometimes use technical language as shorthand, I am sure that we will never, ever forget what this debate is about. It is about some of our most vulnerable constituents, whose efforts in work we should be saluting. We should not be handing out this sentence, which terrifies them. For that reason, I hope the House will come to one mind and pass our motion and that we will get a very clear response from those on the Treasury Bench.

Several hon. Members rose—

Madam Deputy Speaker (Natascha Engel): Order. Before I call the next speaker, I am going to impose a time limit of seven minutes. Thirty Members are trying to catch the Chair’s eye and there are also going to be three Front-Bench contributions. We will start with seven minutes, but shorter speeches would be very welcome.

12.33 pm

Stephen McPartland (Stevenage) (Con): It is a great pleasure to follow the right hon. Member for Birkenhead (Frank Field), who spoke a lot of sense. I join him in thanking the Backbench Business Committee for allowing us a full-day debate.

I fully support the motion and was delighted to put my name to it. I voted against the statutory instrument because I could not support the Government. That was not an easy thing to do. I am proud to be the Conservative Member of Parliament for Stevenage, but I could not support the Government on the statutory instrument.

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I support the idea of a high wage, low tax and low welfare society, and I believe that tax credits need to be reformed. They cost more than £30 billion a year and have completely snowballed. Families visit my surgeries all the time and they are very upset about the fact that no two families are treated the same. There are huge overpayments and there are underpayments. It is an incredibly complicated system. Some £1 billion a year is lost in fraud. There are huge issues with the tax credit system, but the problem is the impact the proposed changes would have had on those families with the lowest incomes.

I accept that the Conservative party manifesto said we would reduce the welfare bill by £12 billion. We need to look at that and I will come on to it later. Much of the debate about unemployment benefits is about how they contribute to the welfare bill, but actually they make up a very small proportion of it. For example, the reduction of the benefit cap from £26,000 to £23,000 a year was incredibly popular on the doorsteps during the election campaign, but it will save less than £100 million, because it affects fewer than 100,000 families in the whole of the UK. That is an indication of how small a proportion unemployment benefits are of the overall welfare bill.

I stood up for those families whom I believe Labour has left behind. They occupy the centre ground and I want to occupy it, too. The Prime Minister and the Chancellor said in their conference speeches that they also want to occupy the centre ground. Those families get up and go to work. They are trying to do the right thing and to support their families and work themselves out of poverty. They are the families I support and I am happy to fight for them. It is on behalf of those families in my constituency and across the United Kingdom that I voted against the statutory instrument.

Why have I been so vocal on this issue? I cannot believe that the impact of the changes was fully understood. The right hon. Member for Birkenhead made a very good critique of them. I want to focus on the reduction in the threshold that enables people to apply for and receive tax credits. The reduction from £6,420 to £3,850 is an instant £1,200 cut, so anybody earning more than £6,420 would be hit by a £1,200 cut right away. That is far too much of a blunt instrument.

A teaching assistant who earns £11,000 a year has restrictions on the number of hours they can work. They do a valuable job educating the next generation of society, including future business leaders. I make no bones about the fact that I am very proud of the work they do. My wife is a primary school teacher and I am proud of her. My sister is a secondary school teacher and a large number of my family work in education and do a great job. How can they be expected to go out there and make up a £1,400 cut to their income? It is not possible. That is too much to cut all in one go. Increasing the taper from 41% to 48% would result in cuts of only £200 or £300, but reducing the original threshold would result in a £1,200 cut. I cannot support that, which is why I had to vote against the statutory instrument and why I have not since then been able to support the Government in the Lobby on this issue.

Mike Wood (Dudley South) (Con): Does my hon. Friend agree that a basic test of the fairness of this package would be for its painful parts, such as the threshold

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reduction, not to be introduced quicker than its more positive elements, including the living wage, personal allowance increases and other benefits?

Stephen McPartland: As Members can imagine, I wholeheartedly agree with my hon. Friend. People such as teaching assistants and cleaners do a great job in society and we need to be reaching out to them.

Carol Monaghan (Glasgow North West) (SNP): The hon. Gentleman mentions teaching assistants and cleaners. I should probably declare an interest, because I used to be a teacher in receipt of tax credits. When the scheme came into being I was a single parent, and it was only because I had tax credits that I was able to remain in employment. It was a very difficult time and I faced the choice of either going into unemployment and being with my child or remaining in work. It is not just teaching assistants and cleaners who are affected, but other people in society as well.

Stephen McPartland: I completely agree with the hon. Lady. I mention teaching assistants because I think they are a classic example of people who are constricted in the hours they are able to work. They can work only so many hours a week and so many days a year.

The existing mitigation includes free childcare for three and four-year-olds, but if people do not have a three or four-year-old that is pointless and no help whatsoever. There has been talk about the personal income tax allowance increasing from £11,000 to £12,500. I would like to see it go up to £15,000 by the end of the Parliament, but if people do not earn more than £11,000, it is of no use to them. People on £11,000 will still be hit by the £1,200 or £1,400 cut. That punishes people who are going out to work and doing the right thing. That does not sit right with me and I cannot support it.

David Morris: Does my hon. Friend think that a tapering system would be better suited to this policy?

Stephen McPartland: That is a possible solution and I am sure that the Treasury is looking into it. I would like to work with the Treasury on how the mitigation could work, and I hope that it will listen.

Mr David Davis: Give him a job!

Stephen McPartland: I would like to point out that I do not want a job.

Getting back to the people who are on £11,000 a year or thereabouts and who will be particularly punished by the policy as it stands, I am pleased that the Chancellor is now listening. Although I do not agree with what the House of Lords did, I accept that it has brought us to this position. I want the debate to focus not on constitutional issues but on the loss of income for people who have no ability to make it up elsewhere. How can we help those people?

I have talked about the increase in the personal income tax allowance from £11,000 to £12,500, which will cost about £9 billion. The Government spend over £700 billion a year, yet it seems as though if we cannot

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find this £4.4 billion it will be the end of life as we know it. We all know that that is not the case. There is a way in which the effects can be mitigated.

How do we reform tax credits without punishing those who are trying to do the right thing—those who get up, go to work and try to move their families forward? Some £3 billion of the £4.4 billion saving is down to the change in thresholds that I spoke about—the initial £1,200 cut. It is an incredibly broad instrument that will punish people whether they earn just over £6,420 or £19,000 and it must be mitigated and changed. We have to find a way around that initial £1,200 cut. It is too much and it goes too far.

There is talk of a discretionary hardship fund. I would certainly welcome that for people who are struggling in one way or another. There has been a lot of talk about national insurance. I would like people not to pay any tax on the first £11,000 or £12,000 of their income, but that will not be looked at fully because it would be incredibly expensive. For me, this debate is about how we can help these families.

Basic macroeconomics suggests to me that if we take £4.4 billion off the people who earn the lowest incomes, that is £4.4 billion that will be taken straight out of the economy, because it will be taken out of the pockets of people who would have spent it right away. Every pound that is taken off those people is a pound that is taken out of the shops in their local economies. It just does not make sense.

I do want to work with the Treasury. I can be a prodigal son and be returned to the fold, I am sure.

Heidi Allen (South Cambridgeshire) (Con): Can I join you?

Stephen McPartland: I think you are a little more disliked than I am.

There is huge fear out there among the public. We need to come forward with proposals as fast as we can. I want the Treasury to talk to us, listen to us and work with us. I warn the Treasury that if it does not come forward with mitigation proposals that we find acceptable, we will continue to raise the issue and try to look after the poorest in society. I accept that Britain has 1% of the world’s population, generates 4% of the world’s income and spends 7% of welfare spending. That is too much. I am proud of the Conservative party and will continue to put fairness at the heart of it.

12.43 pm

Jenny Chapman (Darlington) (Lab): It is a privilege to follow the hon. Member for Stevenage (Stephen McPartland). Other than the last sentence or two, it was a tremendous speech. I hope that those on the Treasury Bench listened to the words he uttered, because there is widespread agreement in this Chamber and out in the country with the points that he made. He made a detailed analysis of the situation and gave some sensible suggestions that we can all support.

I hope that the hon. Gentleman is able to return to the fold, because we would like the Chancellor to dig himself out of the hole that he has created for himself. He has certainly got himself in quite a situation. We are all fascinated to watch how he gets himself out of it. I think that the Lords did him a favour because had all

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these changes been passed, the anger in the nation would have been something that we have not seen in my adult life. The Government are being let off the hook in a sense, because they have an opportunity to dream up some mitigation and put this awful mess right.

However, the Government need to hurry up because the fear and uncertainty over what is going to happen are already out there. I spent Saturday morning on High Row in Darlington talking to residents about the changes to tax credits. They already know what is happening. They are already worried. They are already looking at their incomes. They are already changing their decisions, plans and financial commitments and making decisions on employment. The Government need to get on with coming up with decent ideas that will mitigate the damage that is being done, which was outlined so cleverly and succinctly by my right hon. Friend the Member for Birkenhead (Frank Field) in opening this debate.

Yvonne Fovargue (Makerfield) (Lab): Is not one of the major problems the speed with which the tax credit cut is coming in, when balanced against the speed at which the national minimum wage will rise? It has been said to me that it feels like the Government are removing the lifebelt before the life boat has arrived.

Jenny Chapman: That will probably end up being one of the quotes of the day. That is a good way of putting it.

I am speaking on behalf of the 7,200 families in my constituency who care for the 3,900 children who will lose out as a result of these changes. When the Government bring forward whatever ideas they come up with to mitigate the impact, we must have the information that we need to assess whether they will be effective.

My right hon. Friend the Member for Birkenhead outlined what data he would like to see. I would like to see a regional distribution, because I suspect that communities such as the one I represent, where wages are low, will be impacted more heavily than other parts of the country. I am also interested in the gender impact of the changes. I would like to see how much debt the Government believe is being serviced by incomes that are in part made up of tax credits. I suspect that mortgages, car loans, credit cards and other personal debts are being repaid on the back of tax credits.

Mr Jim Cunningham (Coventry South) (Lab): The problem is actually worse because there are people, particularly women, on zero-hours contracts who cannot get tax credits. What does my hon. Friend think about that?

Jenny Chapman: My hon. Friend makes a good point. It is for Ministers to respond to that intervention and I look forward to hearing the reply.

This debate is about children. It costs an enormous amount to raise a child, as many of us know from personal experience. I have read that it can take between £100,000 and £150,000 to raise a child. Child benefit meets only about 10% or 15% of that cost for people who claim it. Tax credits are a contribution from the state towards the cost of raising children.

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Mr Anderson: There are some children in this country who will benefit from the Government’s changes: the children of dead millionaires. They will get an extra £1 million tax free. Does my hon. Friend think that that is a fair transfer from the poorest to the richest in this country?

Jenny Chapman: No, I do not. That is a pertinent point. I know that we will be challenged to find the money that is needed to reverse the change. We could find it through changes to pension tax relief or, very quickly, by reversing the changes to inheritance tax that we opposed and to which we remain opposed.

I want to illustrate the points that I have made in the limited time I have left. We have had quite a high-level discussion so far, but this debate is about real people. It is rare to find a constituent who is willing for their name and personal information—particularly on a financial issue—to be shared in the House of Commons, but I had no difficulty finding people in Darlington who were willing to share their names and details, and to become the poster people for this campaign because they are so angry about what the Government are trying to do to them.

Becky in my constituency lives on Red Hall estate and earns around £16,500 a year. She is a single parent, and her son is eight years old. She stands to lose £1,951 in tax credits per year. She told me that she is already struggling and has difficulty paying for essentials such as heating and electricity. Her salary will not change when the minimum wage increases, and she will not benefit from changes to childcare because her son is eight years old. I can tell the Minister that an eight-year-old is no cheaper to support than a four-year-old.

Mr David Lammy (Tottenham) (Lab): Amen!

Jenny Chapman: Becky has already had to cut out extras. She can no longer buy herself clothes, and the reduction in income will have to come from money that she spends on food or heating her home. She said:

“The Government told us that working was the way forwards out of poverty, yet these changes will put myself and my son into poverty.”

Her very real choice will be between heating and feeding her son. Many people will also have to choose between working and not working, and that is what concerns me most. I want everybody who can work in my constituency to get out and get a job because that is good for them, and good for their kids. People should never be better off on benefits than they are in work, yet that will be the effect of this change.

Mr Lammy: My hon. Friend’s speech follows in the tradition of Eleanor Rathbone who was one of the earliest female MPs in this House from 1929, and campaigned for family allowances. Some of the anger that my hon. Friend is conveying via her constituents is because in this country successive Governments have topped up incomes, understanding the position of poor people and children. Churchill extended the system of family allowances. My hon. Friend is making a fantastic speech, but, on her last point, does she also accept that people will take one, two or three jobs, and that we will have latchkey kids raising themselves?

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Jenny Chapman: I am grateful to my right hon. Friend for that intervention, although I wish it had been a little shorter.

In conclusion, I am speaking on behalf of the cooks, cleaners, street cleaners, shop assistants, staff in cafes, restaurants and call centres, and factory workers. The Government must use the opportunity that they have been granted by the other place to put this issue right.

12.53 pm

Guto Bebb (Aberconwy) (Con): It is a pleasure to speak in this important debate, and I congratulate the right hon. Member for Birkenhead (Frank Field), and others, on securing it.

This debate is a good opportunity for us to discuss tax credits in more depth—there is possibly a degree of unanimity across the Benches, because this issue is hugely complex and must be considered carefully. We have already heard talk of the need for immediate mitigation, but we must also consider the whole area again. Eighteen years ago the right hon. Gentleman was asked to think the unthinkable. He tried to do so, and was promptly sacked for his efforts. This issue is as complex today as it was in 1997.

The Treasury will bring forward proposals in November, but that will perhaps be an interim measure and we will still need to consider carefully how to create a system that supports working families, and those who are raising children and want to do the right thing. We need a system that does not penalise people with high marginal deduction rates, and a change that will not penalise the poorest workers in society.

I feel disappointed—to say the least—that I am not in agreement with my Government on this matter, because during my first five years in this place I was proud of the changes that we made to the welfare state, and of how we tried to make work pay for those who were willing to go out, make an effort, contribute to their communities and look after their families. The most moving event of my time in Parliament was when I visited a Tesco store in Toxteth and met people who were part of an effort by the DWP to get people back into work. The pride and passion that those individuals felt about working and supporting their families was testimony to the fact that our changes were making a real difference.

There is no doubt that the tax credit system has ballooned out of control, but whether we like tax credits or not, they are an important element of supporting workers who are willing to work but whose wages are not particularly comprehensive. We should all support and applaud the decision in the Budget to introduce a new living wage, but there is a clear discrepancy between the timing of changes to the new living wage and changes to the tax credit system. There is no balance to the way in which wages will increase and the immediate withdrawal of tax credits.

I genuinely welcome the fact that the Treasury is allowing time for the new living wage to settle in. I represent a constituency of small businesses and sole traders. It has the highest percentage of self-employed people in Wales, and average wages are only £23,000 or £24,000. Small businesses that employ people in my constituency understand that we need to move to a higher-wage economy and that they must pay their staff properly. Many of them take pride in the fact that they

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currently pay the minimum wage as a means of keeping staff in place, and they appreciate that the Government are giving them time to adapt and change their business models in order to pay their staff more. It is therefore difficult to understand why we are not willing to give recipients of tax credits the same time to adapt and change to the proposed situation. The decision to cut so quickly and so deeply is problematic, and the response of both Houses has shown that people are concerned about the proposed changes.

Moving forward, we must educate Members of this House. The worst example of a crass comment on this issue came from an unnamed Conservative MP, who stated clearly that if somebody loses £30 per week as a result of these changes, they should simply go and work for an extra three hours. Having taken an interest in this issue, I was genuinely shocked by that comment, because with an 80% marginal deduction rate, an individual earning £10 an hour would need to find 15 hours’ work to make up the £30 loss. When such comments come from Members who claim to represent their constituents, we really should despair.

We must understand the trap that exists in current marginal deduction rates. I was proud that universal credit tried to reduce that marginal rate, and even prouder when I sat on the Welfare Reform Bill Committee and the then Minister stated categorically that the aim was to reduce that rate even further when funds allowed. The Prime Minister stated categorically that the Conservative party should be as concerned—if not more concerned—about the marginal deduction rate of 94p or 95p that we inherited than it should be about the 50p higher rate of tax. It was therefore incredibly disappointing to see that incentive to work, and people’s ability to keep more of the money they earn, changed by these proposals. What message are we sending to people when we say, “Go out, work an extra couple of hours, but we will take 80% of your efforts”? We must be careful about that, which is why mitigation is only a short-term response. In the long term we must look again at the whole system.

To be fair, I have had numerous conversations with Treasury Ministers, and I am grateful to the Exchequer Secretary to the Treasury who called and made my difficulties in a long queue on the A55 much more bearable by discussing tax credits with me. The Treasury has shown a willingness to listen, and it will need to respond in the short term. In the long term we must consider carefully how to create a system that is more likely to support working families in a constructive way. In the short term, he stated clearly that we should look very carefully at how we deal with the £4.4 billion gap in the Government’s finances. I, too, take the deficit seriously. We need to think about why 70% of all the benefits that come from the increased personal allowances have gone to the half of those who are in the richest, highest paid part of society. We need to ask ourselves clearly whether, in view of the fact that we are desperate to find that £4.4 billion, we can justify the extra £9 billion on increasing the personal allowance from £10,500 to £12,500. That would at least contribute towards mitigation in the short term, but we need a longer term plan as well.

1 pm

Caroline Flint (Don Valley) (Lab): It is a pleasure to follow the hon. Member for Aberconwy (Guto Bebb). He makes a very important point about how little

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people keep for every £1 extra they earn. I seem to recall that the Prime Minister once took Gordon Brown to task on that very issue. It is on film and it can be seen on YouTube. In making work pay, it is very important for people to feel that for every extra hour they work they are making a difference to their progression in their working lives.

The starting point for this debate is the Chancellor’s ill-formed proposals to reform working tax credits. The truth is that the distribution aspect to the tax credit cuts is severely regressive. The Institute for Fiscal Studies has shown that the national living wage, touted by the Government as a solution for that, at best undoes 27% of the damage.

Today, I would like to start with how the story really began. In 1997, when Labour came to power, the only help for families was child benefit, married person’s tax allowance and a child personal allowance as part of income support and income-based jobseeker’s allowance. A small number of people with disabilities also received a disability working allowance. The then Government found high rates of poverty among families with children. Tax credits were thought to be a new mechanism to support those families into work, which was the best route out of poverty. The evidence is strong that the more far-reaching tax credits and the introduction of help with childcare costs transformed prospects for millions of families. One outcome was that the lone parent employment rate rose. In 2014, it was at the highest rate on record: 65.7%. That is amazing. Of course, the vast majority of lone parents are women. Another outcome was that tax credits reduced child poverty. The Department for Work and Pensions confirmed that in the first decade of tax credits, up to 2010, child poverty fell dramatically as 1.1 million children were lifted out of poverty.

Tax credits give a benefit to employees. They are not simply a state handout to bad employers. When most employers set wages, they are blind to the private tax credit details of their employees. What is more, they cannot pay one worker one wage and the next person on the production line a different rate just because they claim tax credits. In most cases, the employer does not know. As the Resolution Foundation reported this week in evidence to the Work and Pensions Committee, if the Government remove tax credits the employer will not immediately step in to fill the void, regardless of the rises in the national minimum or living wage. The Government must know that, and it is wrong to suggest that the only beneficiaries of tax credits are bad employers.

We must challenge and address the Chancellor’s claim that the cost of tax credits has risen from £1 billion to £30 billion today. This summer, the Chancellor stated:

“The original tax credit system…cost £1.1 billion in its first year. This year, that cost has reached £30 billion.”—[Official Report, 8 July 2015; Vol. 598, c. 334.]

That claim is simply bogus. Articles by Declan Gaffney and Tim Blackwell in the New Statesmanand by many others show that the £1.1 billion figure relates to the first reforms, which began only in October 1999, halfway through the tax year and covering only three months of tax credit payments for a typical claimant. Indeed, in its first full year, 2000 to 2001, the cost was more like £10.5 billion, not £1.1 billion.

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That brings me to the question of why the tax credits bill increased. First, tax credits wrapped up within them a number of previously separate benefits. They were more generous—I acknowledge that. The tax credits we refer to today, however, include the childcare costs introduced in 2003, which no previous Government had ever met. Yes, tax credits were about challenging poverty pay. However, as my hon. Friend the Member for Darlington (Jenny Chapman) mentioned, they also aimed to address the issue facing many families, particularly lone parent women: even if they were on a reasonable wage—whatever “reasonable” is—they still could not afford to work, because of the amount of their wages that would have been spent on exorbitant childcare costs.

Ms Karen Buck (Westminster North) (Lab): My right hon. Friend is making a very powerful case. Does she agree that the important element of tax credits was that they were a means of getting lone parents in particular into work? Gingerbread, among others, has calculated that a 5% rise in employment among lone parents saves the Treasury £436 million. Getting lone parents in particular into the workplace therefore benefits the wider economy.

Caroline Flint: I absolutely agree with my hon. Friend. Missing from the debate is a consideration of the impact of the changes on other sectors of the economy, and the wellbeing and economic opportunities they provide to people by being in work. As I said, the employment rate for lone parents went up to 65.7% in 2014, which is brilliant. The worry is whether it will go back down, rather than improving further.

The total tax credits that families receive relate to their income. The 2008-09 recession had a dramatic effect on wages. As wages fell, many families either qualified for tax credits or saw their tax credits rise. It is notable that during the John Major recession unemployment rose to a peak of 10.7% by 1993, whereas in the recession of 2008-09, many employers reduced hours or did not increase pay to keep staff in work. I understand why they did that. In the House, we had debates in which we said that we appreciated that employers were trying to deal with a difficult situation and were trying to hold on to people in work. As a result, however, more people either claimed tax credits or received a higher amount.

As I said, unemployment during the John Major recession rose to a peak of 10.7%. In the 2008-09 recession, as a result of a number of factors, including employers keeping people in work, unemployment rose to only 8.5%. Recent figures show that the number of employees earning less than the living wage has risen by 45% since 2009. Combining the two, it is clear that people remained in work but needed more support through tax credits. That is not a conspiracy; this is the reality of an economy adjusting to finding itself in difficult situations, and families finding themselves in difficult situations and the state being there as a safety net to help them. Without tax credits, the rise in unemployment in that most serious recession, which we all experienced, could have been much worse. I think that that goes a long way to explain the cost of tax credits today.

This week, given the vote in another place, the Chancellor says he is in listening mode. We must address how we support people into work and to stay in work, so that they can make progress on improving their living standards and the life chances of their children. I agree with

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everything my right hon. Friend the Member for Birkenhead (Frank Field) and other colleagues from across the Chamber have said. I will not repeat that, but let me add a final few points.

To move forward, a number of things have to happen. First, the Government must be straight about the figures relating to tax credits. Only then can we have a sensible conversation. Secondly, the Chancellor needs to provide a proper assessment of the impact of any new proposals on incentives or disincentives to work for those who receive tax credits. I asked the Chancellor on Tuesday why, if he stood up for working people, a proper assessment had not been not published with his last proposal. He did not answer. I am afraid that I feel that that was because he is afraid to face the facts. Thirdly, the Chancellor needs to ask what impact the new proposals will have on child poverty. Fourthly, we need to look more widely across Departments at what support actually helps people to get into work, stay in work and make progress in work. I founded the first all-party group on childcare 18 years ago, when I came into this place. The childcare offer has improved, but it is still not good enough for many working families. Those are the questions I need answers to for the 5,300 Don Valley families who are really worried about the future of their tax credits and their ability to hold their head up high and say, “I am in work. Help me to support my children.”

1.8 pm

Neil Parish (Tiverton and Honiton) (Con): It is a great pleasure to speak in this debate and I thank the right hon. Member for Birkenhead (Frank Field) for initiating it. It has been a very good cross-party debate. I also want to thank my hon. Friend the Member for Stevenage (Stephen McPartland) and the hon. Member for Ogmore (Huw Irranca-Davies) for their contributions.

Dare I say that I am becoming a little more mature in years? I am now the Chair of a Select Committee and can afford to be a little more independent. It is not, however, always easy to further one’s ambitions in a party if one stands up for what one believes to be right. We are standing up for what we believe to be right. It is fundamental that people who work are better off than those who do not. As a Conservative, I believe that we should be encouraging people into work because they will be better off, but if we are not careful, the policy will drive people back on to benefits and take us in the opposite direction from where we want to go.

I support what the Chancellor has done in taking millions of people out of tax, raising the thresholds, halving the deficit, driving the economy and creating vast employment in the country. I come from a constituency with only 1% unemployment, but the average salary, for full and part-time employees, is £18,700 and the number of families claiming both working and tax credits is more than 22%. In addition, the average house price is £190,000—the prices are quite high because it is a beautiful part of the country to live in. However, we have to make sure we support people who are working hard across the country. That is why we need to take this opportunity.

I disagree entirely with what the House of Lords did, but it has given us an opportunity to reconsider. May I be so bold as to say that it does not matter how many

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spin doctors and people who are clever with figures we have? When someone on a low income who relies on tax credits knows that that money is being taken away from them, it is absolutely real. I hate to say it, but on this occasion, the Government and the Chancellor have to be absolutely certain about how many people will be affected and what we will do about it.

I very much support the national living wage, but the Government and the Chancellor need to help the many small companies in our constituencies to pay it. As people get more in their pockets and more from their employment, we can reduce tax credits and the state subsidy on employment. We all get that. We all know what has got to be done, but we cannot do it at the speed we are doing it and take money from perhaps millions of people. It is simple arithmetic. For someone on a low salary, £1,300 is a huge amount of their disposable income—we must remember that this is about disposable income.

I am optimistic. I have always been optimistic in my life because I believe there are always solutions, and I believe there is a solution to this because the Chancellor is a very clever man. I am sure he is listening and will come back to the Chamber with some proposals. These people, whether they are cleaners or classroom assistants, whether they work in the health service, the private sector, the tourism industry or on farms, are all hard-working, and we must be a party and a Government who support hard-working people. We have done that up until now, and we have just lost our way a little, but we can come back out of the wilderness and put this right.

Stephen McPartland: Does my hon. Friend agree that the Conservative party is at its greatest when supporting people getting on in life and providing a safety net for those who need it?

Neil Parish: I could not agree more with my hon. Friend, and I am in politics today to try and make that happen. It is why many of us on the Conservative Benches are prepared to stand up and be counted. It is right that we do so, and our constituents expect it. The Chancellor will say, “We must eradicate the deficit”, and yes, we must, but if we are six months or—dare I say it?—a year late in doing that, people will understand.

Heidi Allen: My hon. Friend is absolutely right. In the last week, I have received hundreds of emails and letters, as hon. Members might expect, and I have been struck by one thing. When we talk about the debt and the deficit, we are not talking about the Government’s debt and deficit; it is the people’s debt and deficit. I have had countless letters from wealthy people telling me this is wrong. It is absolutely right that they be part of this conversation too about how to repair the damage to our economy. It is their vote, as much as it is that of the person losing money in tax credits.

Neil Parish: That is right. To coin a phrase, we are all in it together. It is right that we reduce the deficit and balance the books—we cannot go on borrowing forever, because it will be our children, grandchildren and, at this rate, great grandchildren who will pay it off—but we have to do it fairly. I do not apologise for repeating that work must pay, and we must make sure that those in low-paid work can carry on their lives.

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Ian Blackford (Ross, Skye and Lochaber) (SNP): May I remind Government Members that £375 billion of our debt was the result of quantitative easing? The Bank of England has had to step in and use monetary policy measures because of the failure of the Government’s fiscal measures.

Neil Parish: I will not get into an argument with the hon. Gentleman about quantitative easing, although I rather fear we would not have the employment we have today had we not used some of those tools. Whether they were overused is a matter for debate—I suspect in the history books—but I suggest that QE helped with employment, and that we have got the economy running smoothly and in the right direction.

I make the same plea that I am sure hon. Members from across the Chamber will make. I ask the Chancellor please to consider how we might mitigate the impact of these changes and raise the national living wage so that people are earning more as tax credits are taken away. People will accept that. It is not a crime to be low paid. We have got to put this right, because the Conservative party and the Government’s reputation is at stake.

1.18 pm

Neil Gray (Airdrie and Shotts) (SNP): It is not normally my business to welcome Conservative contributions in the House, but I have to acknowledge and welcome the contributions from the hon. Members for Stevenage (Stephen McPartland), for Aberconwy (Guto Bebb) and for Tiverton and Honiton (Neil Parish). It goes without saying that SNP Members agreed with almost everything they said. They were brave and very welcome contributions—perhaps more welcome on the Opposition Benches than the Treasury Bench. That will probably be the only time I welcome Conservative contributions in this Parliament.

I am sorry that the SNP amendment was not selected, but I am still grateful to have this further opportunity to set out the SNP’s opposition to the cuts. I will devote a large part of my speech to addressing the proposals put forward by the right hon. Member for Birkenhead (Frank Field). We have much to agree on. His proposals are marginally better than the Chancellor’s, but they do not protect all low-income households from the Chancellor’s ideological wrecking ball that he is taking to social security. I am glad the right hon. Member for Birkenhead said he was proposing his measures speculatively. I hope that we will see greater consistency from the official Opposition in challenging the Tory tax credit cuts. I think that we can do much better.

We formed a strong and united opposition on Tuesday because we spoke with one voice against these cuts. Since Monday, however, we have had three different positions from the Labour party on tax credits. First, there was a push for a delay in the other place on Monday night, with opposition to scrapping the cuts outright. Secondly, to the credit of Labour Members, they joined the SNP in completely opposing the changes on Tuesday. Today we are presented with a watered-down opposition, which would still remove a significant amount of money from low-income households.

Brendan O'Hara (Argyll and Bute) (SNP): Does my hon. Friend agree that, in 2015, making families rely on an unelected Chamber to protect their tax credits from

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this Government is a ridiculous position to be in? Does he further agree that the interests of Scotland’s low-paid would be far better served if all welfare were devolved to the Scottish Parliament immediately?

Neil Gray: It goes without saying that I agree with and welcome my hon. Friend’s intervention.

Under the plan of the right hon. Member for Birkenhead, every household earning more than £13,100 would continue to lose out—and in a more brutal fashion than under the Chancellor’s plan. The House of Commons Library briefing highlights that under the right hon. Gentleman’s plan, a full-time single-earner household with two children and an income of £16,000 would still lose out by £700 annually. The level at which tax credits would be removed thereafter is 65p in the pound. We are still going to see the budget balanced on the backs of low-income households.

Frank Field: I put forward a number of proposals. If the hon. Gentleman had been in the place a little longer, he might realise that words such as “mitigate” are words used to unite people with different views—including even those who want to see a whole withdrawal. I would like to ask the hon. Gentleman to follow carefully, when the record is published, the words of the Secretary of State for Work and Pensions when I asked him whether Scotland—under existing arrangements, without waiting for any further devolution—would be able to use its revenue-raising powers to compensate everyone in Scotland for the changes in the event that the Government do not move on tax credits. The reply was yes. Will we see the Scottish Government using their revenue-raising powers not merely to put motions on the Order Paper, but to make sure that nobody in Scotland suffers from these tax credit cuts?

Neil Gray: It is worth saying, first, that I hope that the Labour party is looking to work with the SNP wherever possible to oppose cuts that are going to impact on low-income families. I make my contribution today, as far as possible, in the interests of consensus. We need to work together effectively to oppose what is coming down the line from this Conservative Government. On the issue of tax-raising powers, the fiscal framework has not been agreed. We have no idea what might be coming forward and no idea whether it will be possible to use these powers to raise taxes in the way suggested. I thus think that the right hon. Gentleman introduces an element of obfuscation when he uses that example. The Library briefing shows that we will still see the budget balanced on the backs of lower-income households.

Mike Weir (Angus) (SNP): My hon. Friend will remind the House that the Scottish Government have already spent £100 million in mitigating other attacks on the poor from this Government.

Neil Gray: Absolutely—£100 million on the bedroom tax and a further £40 million ensuring that the council tax cuts did not affect low-income households in Scotland in the way they did in England. I hope that, after today, Labour will return to where it was earlier this week when it stood side by side with the SNP in opposing Tory cuts.

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The SNP will oppose these ideological, regressive and utterly punitive tax credit cuts with every opportunity open to us—and we do so again today—because we realise the damage caused to family incomes, levels of poverty and child poverty in these isles and to social cohesion in every community in Scotland. The Scottish Government analysis, discussed today at First Minister’s Question Time in the Scottish Parliament, shows that 250,000 households in Scotland will lose, on average, £1,500 from April. Thereafter, when the all the changes are fully implemented, that could rise to an average of £3,000 per household. These changes are fundamentally regressive: they disproportionately target those in low-income households and punish them on account of this Government’s ideological obsession with austerity.

For our part, the SNP stood on a manifesto that was fundamentally anti-austerity and that plotted a more responsible path for bringing down the deficit. We argued for a 0.5% increase in spending per year for this Parliament, which would have released £140 billion in total to invest in capital projects and other measures to narrow income inequalities. Our plan would have brought the budget deficit down to 2% by the end of this Parliament, while protecting public services at the same time—a far more measured and reasonable way to balance the books. Our plan was backed by an IMF report from June this year, which highlighted that reducing income inequality not only leads to reduced poverty, but boosts growth. By extension, the policy of cutting tax credits and thereby increasing income inequality will drive more of our citizens into poverty. It is, in fact, going to harm growth.

Kevin Foster (Torbay) (Con): Will the hon. Gentleman give way?

Neil Gray: I am pushed for time and I know that colleagues want to enter the debate, too.

As well as being socially destructive, this policy is, as an extension of IMF thinking, economically incompetent. No mention was made of these wholescale cuts to tax credits in the Conservative manifesto. There were just two references to tax credits, but neither referred to anything like the proposals in front of us now. I reiterate that the changes were the central plank of this Chancellor’s first Budget since the election. He has based all his sums on the back of these cuts. One would have thought that they would merit at least a passing reference or a hint at what was coming down the line.

The Chancellor’s summer Budget was a prime example of obfuscation, suggesting that these cuts to tax credits would be compensated for by the rise in the minimum wage. That was absolute nonsense. The reality is that the full rise in the minimum wage will not come into effect until 2020—four years after the tax credit cuts start. Even when the full rise comes into effect, it will still not mitigate the tax credit cuts. Why did the Government decide to undermine and sabotage the real living wage campaign by labelling their minimum wage rise as such?

I wish to conclude by addressing some of the language used in previous debates. Many of us have rightly been focusing our time on pointing out that these cuts will impact on working households, and lambasting the fact

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that many working households will be dragged into poverty by these tax credit cuts. I suppose I have been as guilty as others, as we attempt to show the Government that their rhetoric on making work pay is a complete sham when considered in the light of the tax credit cuts. There should be no distinction between working or non-working households that are in poverty or living on low incomes. We cannot continue to allow ourselves to be dragged into the Tory mantra of the deserving and undeserving poor. Nobody deserves to live in poverty—nobody. So referring to “hard-working families” or “the working poor” is unhelpful. We do not know the circumstances whereby people are unable to work, and we should not judge them in the way some do routinely in terms of “there by the grace of God go I”. None of us knows when we may find ourselves out of work. We should be working to address poverty wherever it is manifested and wherever it is likely to be worsened—as it will be by this Chancellor’s tax credit cuts.

1.28 pm

Mr David Davis (Haltemprice and Howden) (Con): It is a privilege to speak in this debate. I am one of its co-sponsors, but the entire credit for the idea belongs to the right hon. Member for Birkenhead (Frank Field). He rightly identified the need for a cross-party, less partisan and, as it turns out, non-binding debate to allow everyone properly to explore these issues in the national interest without being fettered by feelings of joining one side or the other in the playground of politics.

The result has, I think, been good. I think this has been the best debate so far of a number on this subject. It falls on us all to be honest about it. This policy was a mistake. One can only think that, because I am sure that nobody in any party would intend deliberately to impoverish the working poor with dependent families—I am afraid I do differentiate in this context.

Neil Gray: Will the right hon. Gentleman give way?

Mr Davis: Not for the moment.

The problem was compounded by the method employed—the measure was introduced by statutory instrument, and is therefore unamendable—and by a lack of sufficient information. As four or five Members have already pointed out today, there was no proper impact statement. Had the measure been introduced in primary legislation and thus been amendable, and had the Government provided proper information, the measure would not have gone to the House of Lords in its current form; it would have been reformed in this House, and that is what should have happened.

I subscribe to the Government’s wish to balance the books by 2020, which I consider to be an eminently sensible and responsible aim. However, I also subscribe to the view that we need to protect the poor at all costs. The question is, how do we identify what this policy does? I wanted to find some examples that would enable us to assess both sides of the argument—not just the attack, but the Government’s line as well—and I thank the Chancellor’s Parliamentary Private Secretary, my hon. Friend the Member for Kingswood (Chris Skidmore), for being so helpful in that regard. I put some of the points that he made in defence of the policy to the House of Commons Library, and I shall now give a couple of examples that the Library supplied to illustrate its impact.

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The worst-case example that I could find was that of a working single parent with two children, who, without the mitigating effects, could be £2,000 a year worse off in virtually every year until 2020. That is an unbelievable sum to take from a family who are already poor. If the family were eligible for mitigation, in particular housing benefit, the sum could be reduced to roughly £700—the fine detail is unreliable—but, again, it would be lost in virtually every one of the next four or five years,

The great battle over the 10% rate when Labour was in power involved sums that were a quarter of that amount. The great battles over the poll tax, which I remember only too well, involved sums of that size. The impact on a family who are already on the poverty line, by definition, is unspeakable and unthinkable. I grew up in a rather poorer era, and I remember children being hungry on Fridays when the bills were just a bit too big, or it was cold and the heating costs were too high.

Guto Bebb: My right hon. Friend touched on the issue of housing benefits mitigating some of the tax credit changes. Is that not another problem with the policy? Someone living in rented accommodation and receiving housing benefit would receive mitigation under the current system, but someone who had bought their own property would not.

Mr Davis: Exactly—and before anyone suggests that a person who owns his or her house is better off, let me say that many people in that category have fallen into it and got out of it later. The idea that someone earning less than £20,000 a year, and with two children to support, should lose £2,000 is simply untenable.

The right hon. Member for Birkenhead suggested that there were four possible strategies, but in my view there are three. The first possibility is that we shift the burden elsewhere. The right hon. Gentleman proposed that we should shift it up the income scale, and Lord Lawson said the same during the debate in the House of Lords. I shall not elaborate on that possibility, because I think that there are better ways.

The second strategy is to find savings elsewhere. Here I strongly disagreed with the right hon. Member for Birkenhead, who almost encouraged the Chancellor to go hunting for the pensioner pound. It will not be today’s pensioner pound; it will be tomorrow’s. I think it would be very unwise to remove the tax benefits of investing in pensions and undermine what we have left of our private pension scheme. I am protected, because virtually all my pension is paid for now; it is the next generation that will have to worry.

Frank Field: I thought that my argument would appeal more to Conservative Members, because it was a free-market argument. When Governments have guaranteed a minimum, it is not our business to put our sticky fingers into other people’s lives and tell them how they should save or not save. Once there is a minimum pension agreement for everyone, how and when people save should not be a question for the House.

Mr Davis: I shall not go too far down that road. Let me simply say that middle-class pensioners are now paying one of the highest effective income tax rates in the country. People who have saved a lot for their

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pensions and gone above the lifetime allowance must pay 55%. I think we ought to be a bit careful, because if we let the Treasury get at that deferred income, it will take as much as it can.

The third option, which I think is probably the winner—although not by itself; it would have to be modified—is to stage the cuts. I believe that the right hon. Member for Birkenhead lit upon this strategy as well. The cuts would be staged to match movements in the minimum wage and the living wage so that people would not lose.

The Government’s figures for 2020 seem broadly to balance, although they are not perfect. We shall have to work through the mitigation carefully, and that is where the impact statement comes in. Those figures do two things. They protect the working poor, but they also achieve the deficit reduction, which is vital. If we hit the deficit reduction target by 2020—this point was made by my hon. Friend the Member for Stevenage (Stephen McPartland)—each saving of £4 billion a year is not critical. It represents less than 1% of the economy. The really critical issue is how the financial markets see the position. The financial markets do not care about the trajectory from here to 2020; the fact that we get there is good enough. We do not need to worry about the £4 billion a year in between, but we do need to worry about the final outcome. My argument, therefore, is that we should cut the tax credits in step with the minimum wage and the living wage.

The criterion is what is important here. The criterion that the Government must meet is that there should be no losses for the least well off in any of the three intervening years. The poorest, the working poor and their dependants cannot afford to lose one pound. I was never a great fan of the minimum wage, but I was persuaded that it was worthwhile.

Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP): Will the right hon. Gentleman give way?

Mr Davis: I am afraid not. I have already taken two interventions, and if I take another, I shall lose time.

One of the things that persuaded me that the minimum wage was worth while was the information in social data that it cut crime. We must not lose sight of the social impact of changes such as this: the distress caused to families, the breaking up of families, and the pushing of families towards food banks and, worse, towards loan sharks and petty crime. We have to think about those things, because there is a cost to them as well.

The Institute for Fiscal Studies told the Work and Pensions Committee, which is chaired by the right hon. Member for Birkenhead, that the Government could hit the 2020 target on a staged route. That is what we should aim for. We can achieve the fiscal target, while still remaining faithful to Conservative “one nation” aims. That, after all, has been the leitmotiv of the last few months for us. If we do that, the Chancellor will have good reason to be proud of his achievement.

1.38 pm

Huw Irranca-Davies (Ogmore) (Lab): It is very rewarding and refreshing to follow the right hon. Member for Haltemprice and Howden (Mr Davis), and other speakers as well.

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If Ministers take anything from what has been said today, it should be a call for them to pause for a moment, to deliberate on the impact that the proposed changes will have on many working families in our communities, and then to work with Parliament and Select Committees on the ideas being presented. I do not have all the solutions today, but the appeal made by the right hon. Gentleman was, in effect, a political version of the Hippocratic oath: we should try to do good for our constituents, or at least do no harm, before proceeding with this policy. The evidence for that is very clear.

I thank my right hon. Friend the Member for Birkenhead (Frank Field) for initiating the debate, and for setting out so eloquently not just some of the basis of the problem that confronts the Government, but some of the possible solutions. They may not be binding solutions, but they are possible. It is as clear as day, and has been made clear by Members on both sides of the House, that the Minister needs to speak to Cabinet colleagues and other Ministers and rethink this policy. There has been talk today about lost sheep wanting to return to the flock. I suggest that those lost sheep are in some ways on the sunlit uplands. They are saying, “Come and join us up here.” They are not lost; they can see the way forward. We need to make sure we do no harm to our constituents.

I am sure the Minister is very aware of the impact of this, but let me explain the impact in my constituency. The number of working families currently claiming tax credits is in excess of 4,000. The number of working families with children claiming tax credits is nearly 3,500. The number of children in those families—low-paid families—is nearly 6,000. That is why my mailbag at the moment and my emails every night are full of letters from people who are terrified, for good reason, of what is coming down the track. It is not because of scaremongering; it is not because of unreal expectations of what might happen. They know; they are seeing daily the analysis of the situation for them and their families. They have read the analysis in Conservative-supporting papers, not in my newsletters or briefs submitted by the Joseph Rowntree Foundation, the Children’s Society or others.

Mention has been made of the impact on different communities, and it certainly does have a differential effect, but let me lay out the effect in Wales. The number of working families in Wales claiming tax credits who will be potentially affected by this directly in their pockets is over 167,000, and over 250,000 children will be affected. We cannot do this; a quarter of a million children in Wales will be affected by what we are doing to their families and what we are taking away from them directly. It is as clear as day that we have to change our way on this policy.

Let me look at one particular aspect where this hits really hard. We know that on average a fifth of women’s income is made up of welfare payments and tax credits, compared with around a tenth for men. Benefits make up twice as much of women’s income as they do of men’s. Women are disproportionately represented in many of those low-paid sectors we have talked about already, including hospitality and retail. When we go out and enjoy ourselves and have that coffee on our

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shopping excursion, we are typically served by women, not men. Other such sectors include care and domiciliary care and similar professions. Women are also more likely to be working part time. Nearly 80% of employees in those sectors where we so often say we respect the people who work in them, such as health and social care, are women.

You can see where this is going, Minister: we are hitting directly those who are most unable to go out and find another job, another few hours, or some other means of support for them, their family and their children. We are going right at the most vulnerable in our communities—and in huge numbers. Analysis by the Resolution Foundation suggests 1 million single parents in work will be left £1,000 a year worse off.

All of this has to shout out that Ministers going forward at such a rate of knots has created an almighty, cataclysmic mess. I ask the Government to slow down a little, listen to what has been said today, and work with parliamentarians and outside agencies who operate on the frontline with some of the people who will be affected. I ask them to work as well with the Select Committees. This issue is too difficult for the Government to address on their own.

The aim is to make work pay, and that is excellent, but it has to pay for everybody, not just some. At the moment, the crude impact of this on our communities will be devastating. It will wash right through not only individual families but the wider communities and will have a regressive, knock-on effect on spending power in those communities.

I ask the Minister to consider the options put forward today and to look at what other options there might be. There is no way on earth it is saleable politically to do this and, more importantly, there is the basic human issue of, “Do no harm to your constituents.” I cannot go and sell what is being proposed on the doorstep in my constituency. I will not do it. I want to tell these people, “It is worth going out to work, go and get a job if you can, go and upskill if you can, and we will make it worth your while.” That is our job here.

1.45 pm

David Morris (Morecambe and Lunesdale) (Con): I very rarely stand up in the House of Commons and congratulate an Opposition Member on initiating a debate of such magnitude, but I thank my friend the right hon. Member for Birkenhead (Frank Field). Many in this Chamber see him as a leading light on the welfare of the people of this country. I remember very plainly from before I was in politics the right hon. Gentleman being sacked for thinking the unthinkable, and here we are debating tax credits.

The tone of the debate is very measured. We are hearing balanced views from all sides. Tax credits were brought in for the right reasons, but they spiralled out of control. When nine out of 10 people can claim a tax credit, we have to ask ourselves whether it is a sweetener for working or a benefit, as it was originally set up to be.

Mark Durkan (Foyle) (SDLP) rose—

David Morris: I give way to the hon. Gentleman, who is another hon. Friend.

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Mark Durkan: I thank the hon. Gentleman for giving way. In acknowledging the contribution of the right hon. Member for Birkenhead (Frank Field) in securing this debate, will he also acknowledge the role of the other place in creating an entirely different context for this debate, because we would not have been hearing the tone he has remarked upon had it not been for Monday night and the position forced on the Chancellor?

David Morris: I disagree with my hon. Friend on the debate in the other place, because I think it was unprecedented that that motion was passed. However, I have my own words to say about that in another context, which he will probably read about over the weekend.

We were in a position where almost everyone was on a tax credit. They were a stepping-stone to gainful employment. The right hon. Member for Don Valley (Caroline Flint) said it right: employers do not know if their employees are on tax credits. I know that; I employed over 100 people and some were claiming tax credits, but I found that out only down the line in certain circumstances. So it is mainly a hidden benefit.

I applaud what the Chancellor is trying to do. I do not think this idea of a £1,300 average loss to 3 million households stacks up, because it is based on estimates. We do not know what is going to be in the spending review. However, we do know what has already happened by raising the personal tax allowance to £11,000 in April, with the aspiration for it to be £12,500 in 2020. That will help out and create a tax break worth about £1,000 to people all across the country. We are also offering 30 hours of free childcare, which amounts to £5,000. Fuel duty has been frozen, too, and the economy is on the up.

Caroline Flint: I hear what the hon. Gentleman says about 30 hours of free childcare, but I think most people listening in the Gallery or outside will think that is for all children in any form of childcare. We need to have an honest debate. That is 30 hours of free childcare only for those three and four-year-olds in nursery education. That does not begin to help those families that have different-age children, and the cuts to working tax credits fundamentally affect families who get access to support with their other childcare costs to enable them to take up a job and stay in work.

David Morris: I thank the right hon. Lady for her eloquent intervention. She demonstrates that there is confusion in the whole sphere of tax credits and child tax credits. When tax credits were brought in, they helped families who were struggling in a time of great austerity. It has to be acknowledged that we are still in a time of great austerity, but the economy is now on the up and we are seeing projections that we are starting to come out of recession mode and that we will move into a lack of deficit within the next five to 10 years.

What do all these figures mean? Put simply, they mean that we have to balance the books and we have to look at every possible way of doing so. We have to think the unthinkable, as my right hon. Friend the Member for Birkenhead—I keep calling him my “Friend”—did all those years ago. I do actually have faith in the Chancellor. I know him personally, and he is a good, decent, caring man, despite what we read in the newspapers and despite what is said about him. I know that he will

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be watching this debate and hearing what we are saying. He will be thinking about this. Yes, nine out of 10 people were claiming tax credits. My right hon. Friend the Member for Birkenhead said that these measures could benefit eight out of 10 people, but we must care for the other two people in every 10 and ensure that we get the right deal for them.

1.51 pm

Steve McCabe (Birmingham, Selly Oak) (Lab): Like most people, I would prefer the Chancellor to scrap his tax credit proposals and go back to the drawing board. This is not because I am against the phasing out of tax credits. I am prepared to accept that there might be an argument for new measures of support, and if we can raise living standards for working families without tax credits, that would be a desirable aim. I also note in passing that freezing the value of tax credits is a clear indication that they are on their way out anyway. The truth is, however, that the Chancellor has made a pig’s ear out of this. He has blundered, and low-paid hard-working parents are going to pay the price for his mistakes.

If we can take the Prime Minister at his word, I think he suggested during his six non-answers yesterday that there would be some attempt to address this mess in the autumn statement. Normally, his word would be good enough for me, but of course this is the same Prime Minister who gave his word on national television that tax credits would be safe. Is it any surprise, therefore, that within five months of the election, people are beginning to wonder about the long-term future of this Government? Conservative Members have taken to telling us that they have a mandate. Let us just remind ourselves that this is a Government that did not expect to win, and that secured less than 40% of the popular vote—trade unionists, please note! This Government have a limited mandate, and if there are many more shenanigans like this tax credit debacle, they will have no moral authority.

As I said, there might be an argument for phasing out tax credits, and if the Government could give us a clear indication of their determination that wages and living standards will rise to compensate for that, I think most people would accept the change. In a still-fragile economy, however, there is no sense in taking money off the working poor before their wages have risen. It is also a mistake for some Conservative Members to attempt to demonise Gordon Brown, and to demonise tax credits as a policy instrument. The Adam Smith Institute recently pointed out that working tax credits were the best form of welfare we have, and that simply cutting them would serve as a disincentive to work and hurt those at the lowest levels of society. It also pointed out that the new minimum wage structure, which the Chancellor deliberately misleadingly calls a “living wage”, will do little to help those affected by these cuts. The institute states:

“Enticing more people into work was one of the stated aims behind the Working Tax Credit…and attacking it for achieving this end is somewhat perverse.”

I want to consider what changes the Chancellor might make. I have read that he might speed up the increase in the personal tax allowance, but that could cost about £12 billion, and 70% of that benefit would go to those in the top half of the income distribution curve. It would actually be worth less than £1.25 a week for working families. I am not at all convinced that, in these economically difficult times, such a costly measure would be the best way to help the low-paid.

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The House of Commons Library has produced a simple way to calculate the impact of the combined effect of the reduced threshold and the increased taper, which form the centrepiece of the Chancellor’s plans. A family on £20,420 with two children will, in combination, be £2,200 worse off. The consequence is that 3.3 million working households will be losers, more than 8,000 of whom are in my constituency.

The Chancellor could decide to change the disregard level. That would not undo the damage he plans to inflict, but it would mitigate the effects. As Barnardo’s points out, such a change could mean that a single parent working 18 hours, with two children below school age, could lose only £376 rather the £805 the Chancellor currently plans to take from them. He could also scale back plans to increase the taper from 41p to 48p, which would mitigate the impact on those struggling to make a living. He might decide to turn the clock back and recognise family responsibilities in the tax system by reintroducing some kind of tax allowance for children as a feature of our tax system. He could also use the autumn statement to revisit his plans for inheritance tax cuts and the tax cuts he has already given to millionaires. If we are all in this together, as somebody over there once suggested, it is time we had some evidence to back up the empty statements.

As the former higher education Minister, now Lord Willetts, points out in his book “The Pinch”, the balance is wrong. Young people and young families are taking far too big a hit, and we need to restructure our welfare system. My hon. Friend the Member for Nottingham North (Mr Allen) has suggested that the Chancellor and the Government should involve Parliament in such plans. I would like to suggest that they also involve my right hon. Friend the Member for Birkenhead (Frank Field) and his Work and Pensions Select Committee. We desperately need a system that promises fairness and support for young people and families, and that encourages and incentivises people. Above all, however, the Government must make it clear that it is their sincere intention to row back from this mad cliff edge that they are now on.

1.57 pm

Will Quince (Colchester) (Con): I support the principle of mitigating the effects of the proposed tax credit changes on the lowest-paid workers. I agree with my hon. Friend the Member for Stevenage (Stephen McPartland) that sometimes even friends need to be critical, as long as they are constructive. I would also like to thank the right hon. Member for Birkenhead (Frank Field) for securing the debate.

I support the principle of reforms to tax credits. We need to get on top of our welfare bills. This financial year, central Government will spend more on debt interest repayments than on the education of our children or on the defence of our nation. We cannot keep on spending indefinitely. As my hon. Friend the Member for South Cambridgeshire (Heidi Allen) has said, we cannot keep adding to our debts and asking our children to pay them off. The hon. Member for Ogmore (Huw Irranca-Davies) talked about doing no harm, but we must also be mindful of the harm to our constituents of not tackling the deficit and of burdening future generations with more debt. I take his substantive point, however.

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The current tax credits system is not sustainable, however well-intentioned it might have been. Costs have skyrocketed from £4 billion in 1999 to £30 billion this year. This has had the effect of depressing basic wages and subsidising businesses, instead of driving investment in skills and training. The former Labour Chancellor, Alistair Darling, has said of tax credits:

“One of the unintended consequences is that we are now subsidising lower wages in a way that was never intended”.

We all know that the welfare system provides a safety net for the most vulnerable in our society and for those on the lowest incomes. I fully support policies that move Britain to a high-wage, low-tax, low-welfare economy, but I am concerned that the proposed tax credit changes could be very tough on some of our lowest-paid families. More needs to be done to ease the transition for those losing tax credits next year.

Many families who have worked hard and done the right thing—everything we have asked them to do—will immediately be hit with a drop in their income next year. The Government have introduced a package of measures to increase the pay of the lowest paid: the new national living wage, which will go up to £9 by 2020; the doubling of free childcare—although, having a child of three and a half, I take the point of the right hon. Member for Don Valley (Caroline Flint) that the measure is restricted to three and four-year-olds; and the raising of the income tax personal allowance to £12,500. None the less, I am well aware that many of those actions do not take effect immediately in 2016.

I am also concerned about the effect that the tax credit cuts might have on some of those who work in the public sector. Like my hon. Friend the Member for Stevenage, I have a wife who is also a teacher. Many of the biggest employers in Colchester are in the public sector. Public sector pay over the next few years has been frozen at 1%, which means that many of these workers who rely on tax credits to top up their income will not benefit from rises in private sector pay. Moreover, cost-saving measures in the public sector mean that those workers cannot easily take on more hours to raise their income.

I have had concerns about some of these measures since the summer Budget and have met the Chancellor and Ministers to raise my points with them. They have listened carefully to what I have had to say, and I know that they are alive to the concerns of Members who want to ensure that the most vulnerable and the lowest paid are protected. That is why I welcome the news that the Chancellor will be taking steps to ease the transition of some of these changes on the poorest workers and those on the lowest incomes. I look forward to seeing more detail on the extra measures in the autumn statement.

In general, I urge Treasury Ministers carefully to assess how we can introduce transitional measures. That will give families more time to adjust to the changes in tax credits and allow time for the additional policies that I have mentioned, such as free childcare and progressive rises in the living wage over this Parliament, to boost families’ incomes.

I care deeply about helping the lowest paid and making sure that work always pays. I welcome the thrust of the Government’s drive to move us to a low-welfare, low-tax, high-wage economy, but more consideration needs to be given to those low-paid workers who are trying to do the right thing and who could be caught with a gap in their income when tax credit changes kick-in.

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2.2 pm

Dr Rupa Huq (Ealing Central and Acton) (Lab): I also add my congratulations to my right hon. Friend the Member for Birkenhead (Frank Field) on securing this debate in a week of such high drama on this subject. I am very encouraged by the things that I have heard from some Members on the Government Benches, and I hope that that is conveyed to their leadership.

Yesterday’s headlines made for confusing reading. The Guardian went for “Osborne ready to change tack on tax credits.” The Express plumped for, “Defiant Osborne says that tax credits will be cut despite defeat in Lords.” It is not the first time that there has been confusion over this issue. Before the election, the Conservative manifesto promised to “work to eliminate child poverty.” Two months later, the Government scrapped existing targets and child poverty measures. That is not just moving the goal posts, but ripping up the pitch.

The Prime Minister said:

“We must eliminate the scourge of poverty.”

That is difficult to reconcile with cuts set to put more than 200,000 working households into poverty. Those cuts are being put into effect to fund an inheritance tax cut that will benefit the 60,000 wealthiest estates, which probably explains why we no longer hear the words, “We are all in this together.” This is all such high drama, and we do not know what the next instalment will be.

Christina Rees (Neath) (Lab): I have been a bit confused as well. The only thing that is clear is that in Neath we have more than 6,000 families on tax credits, and more than 5,000 families with children, and these measures will drive them into poverty.

Dr Huq: I think that we have a similar number—6,500 families—in Ealing Central and Acton. It is the children whom we should be thinking about. They are not just columns on a spreadsheet, but real people.

There was great drama at PMQs yesterday. The leader of the Labour party asked the Prime Minister six times about these plans and whether working people would be worse off next year, and six times, the Prime Minister refused to answer. Even The Sun—not the most Labour friendly paper—referred to that exchange. As my hon. Friend the Member for Islington North (Jeremy Corbyn) said: