Draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) 2015; Prison and Young Offender Institution (Amendment) 2015; Social Social Security (Housing Costs Amendments) 2015; Feed-in Tariffs (Amendment) (No. 2) 2015 - Secondary Legislation Scrutiny Committee Contents


Letter from Rt Hon. George Osborne MP, Chancellor of the Exchequer, to Rt Hon. Lord Trefgarne, Chairman of the Secondary Legislation Scrutiny Committee

Your Committee has asked for more information on the Tax Credits (Income Threshold and Determination of Rates) (Amendment) Regulations 2015, which have been approved by the House of Commons.

As I know you will be aware, for Statutory Instruments of this kind the Government does not usually publish an impact assessment, hence the delay in responding to your Committee. However, I am happy in this instance to provide you with new information on the impact of our reforms to inform your role in scrutinising secondary legislation as it passes through your House.

I attach an impact assessment[19] which includes a decile breakdown of how losses from the changes are spread across the tax credit income distribution. I trust it will inform your deliberations, and I am content for your Committee to publish it, as you see fit.

The changes to tax credits included in this Statutory Instrument are an integral part of the new deal this Government offers to working people. It means Britain moving from a high-welfare, high-tax, low-wage economy to a lower-welfare, lower-tax and higher-wage one. This Government was elected with a clear mandate to bring about this change.

Tax credit expenditure more than trebled in real terms between 1999 and 2010; and increased by £9.6 billion a year in real terms between 2004/05 and 2014/15. In 2010 nine in ten families with children were eligible for tax credits, reduced to six in ten following the coalition's reforms in the last Parliament. The reforms we now make will reduce this to five in ten, and wind tax credit spending back only to what it was in 2008.

Alongside the changes to tax credits, we are introducing the National Living Wage, which will be worth over £9 an hour by 2020, and increasing the personal tax allowance, as part of a single, thought-through coherent plan.

Taking tax and benefit changes into account, it means a renting family with two children where both parents work 35 hours a week on the minimum wage will see their income increase in cash terms by more than £5,500.

The Office for Budget Responsibility also predicts a wider ripple effect of the National Living Wage, as it pushes wages up across the income scale, benefiting six million people. Already we see over 200 companies agreeing to pay at or above the National Living Wage early, helping to fuel wage growth of 4.4 per cent in the private sector, according to the latest figures.

I trust this information will be of use to your Committee.

12 October 2015

Letter from Rt Hon. Lord Trefgarne to Rt Hon. George Osborne MP

Thank you for your letter of 12 October, with which you enclosed an impact assessment in relation to these draft Regulations.

The Committee considered the instrument at its meeting yesterday, alongside your letter and enclosure. We agreed to bring the Regulations to the special attention of the House, on the ground that they are politically important and give rise to issues of public policy likely to be of interest. Our report will appear on 16 October, and we shall publish your letter and the enclosure.

We noted your explanation that the Government do not usually publish an impact assessment for statutory instruments of this kind. You will appreciate, I am sure, that in our scrutiny of secondary legislation we look to Government Departments to provide adequate information alongside statutory instruments which will allow the House to understand the effect of changes proposed on those individuals and organisations affected. A well-crafted impact assessment is very helpful in this respect; if a Department is not formally required to prepare one, we nonetheless look to the Explanatory Memorandum for solid information in this regard.

The impact assessment which you sent us in this case shed more light on the effects of the proposed changes than was provided by the Explanatory Memorandum laid in September. However, the Committee was concerned that the assessment could have done more to set out the short-term impact on household incomes; and also that the presentation of some of the material, notably on distribution, was difficult to understand, even for those used to economic analyses.

We are making your letter and the enclosure available to the House, which will no doubt refer to it when the debate on the Regulations is held. As the Committee carries forward the scrutiny of secondary legislation, we shall continue to reflect on the adequacy of impact assessments or, in their absence, of relevant material in Explanatory Memoranda in enabling the House to consider the statutory instruments laid before it.

14 October 2015

19   See: http://www.parliament.uk/documents/lords-committees/Secondary-Legislation-Scrutiny-Committee/DraftTaxCreditsRegs2015-ImpactAssessment.pdf  Back

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