Tax Credits — House of Commons, 2015-10-29
Topic: Social Welfare
Elizabeth Anne McInnes (Labour, Centre-left): I thank my right hon. Friend the Member for Birkenhead (Frank Field) for bringing this debate to the House A wiser Chancellor would not have cut tax credits to some of the poorest families in Britain in the first place, but I believe that the right hon. Gentleman now has some wriggle room and that he can put right the mess he has created for Britain’s families. The Child Poverty Action Group believes that the proposed changes to tax credits will damage work incentives and increase child poverty. I think we have got the message loud and clear that the cuts will mean that work pays less The changes affect recipients of working tax credit, who by definition are in work. Analysis by the House of Commons Library finds that 3.2 million people will lose an average of £1,350 next year, and although doubt has been cast on that figure by the hon. Member for Morecambe and Lunesdale (David Morris), I find that, generally, Library staff are fairly thorough and reliable. The same Library analysis finds that more than 750,000 families earning between £10,000 and £20,000 a year will lose up to £2,184 next year. More than 580,000 families—Britain’s poorest working families, earning between £3,850 and £6,420 a year—face being taxed for the first time. They will lose 48p in tax credits for each pound they earn. Some low-income families will keep just 3p in every extra pound they earn after the changes are made. Child poverty will increase as £4.4 billion is taken from low-paid families. The cuts are not compensated for by other changes, such as the so-called national living wage, the rising income tax threshold or the free childcare offer. Importantly, the impacts of the cuts have not been thoroughly assessed. Some working families now face an effective 97% tax rate on each extra pound they earn: they will lose 32p in income tax and national insurance payments, 17p from entitlements to other benefits, and 48p in tax credit entitlements, leaving them with just 3p in the pound At his last party conference speech before becoming Prime Minister, the right hon. Member for Witney (Mr Cameron) argued against high effective tax rates on low-income families, saying, "if you’re a single mother with two kids earning £150 a week, the withdrawal of benefits and the additional taxes mean that for every extra pound you earn, you keep just 4p. What kind of incentive is that?" What has changed? Two thirds of poor children live in a family where somebody works, and it is inevitable that taking £4.4 billion away from low-income working families will force more children into poverty. Child poverty is rising: independent projections from the Institute for Fiscal Studies show clearly that the falls in child poverty rates seen at the beginning of this century are at risk of being reversed. In my constituency of Heywood and Middleton, the number of working families with children claiming tax credits is 5,500 and the number of children living in working families receiving tax credits is 9,700. In the neighbouring constituency of Rochdale, the figure is 14,900. Nearly 25,000 children across the borough of Rochdale will be affected by the changes My constituent Emma Divine emailed me to say: "I’m dreading going back to work. I’m a single mother of three children and I know I’m going to go back soon, but I’m scared how we will survive—I’m already struggling as it is." Another constituent—a public sector worker—wrote to me to say that she provides essential public services and that tax credits are an important part of her household income. She said that although she would gain from the £80 increase in personal tax allowance, overall she would be much worse off, especially, as she said, if we "take into account the fact that the government only wants me to get a 1% pay increase over the next few years." Those women and many more like them speak to the reality of life for the working poor—something that some in this House are comfortably insulated from. Indeed, when I worked for the NHS, child tax credits helped me. They helped me to remain in full-time employment because I was able to afford a childminder for my school-age son Of course we welcome the higher minimum wage and the increase in free childcare provision, but, as many hon. Members have pointed out, that only goes so far. We need to get work incentives right. That is critical to tackling in-work poverty. What we need to do first is push employers to pay the living wage—the real living wage, not the Government’s new national minimum wage, which is lower and does not apply to workers under 25. We need to tackle the causes of low pay before we start to cut tax credits I agree with my hon. Friend the Member for Darlington (Jenny Chapman) that the vote on Monday may have done the Chancellor a favour, giving him breathing space and a chance to put this situation right by supporting working families instead of penalising them for doing the right thing. Although the right hon. Gentleman may have only just discovered that the House of Lords is unelected, I hope that he will take this opportunity to reverse the tax credit cuts.