Tax Credits — House of Commons, 2015-10-29
Topic: Mixed Topics
Hywel Williams (Plaid Cymru, Centre-left to left): I congratulate the right hon. Member for Birkenhead (Frank Field) on securing the debate. When he first proposed it, he wrote to me and a number of other Members and I readily agreed. That was, of course, before the storm broke. We have moved on, as he acknowledged in his remarks earlier Unfortunately I am old enough to have worked not only with tax credits, but with family credits and even family income supplements. The inherent problems with such systems was apparent from the start. There have been low-wage subsidies, to a lesser extent than now, initially with tapers of well over 100%, and the cost to the taxpayer was apparent. These problems have not gone away As I said in the debate on 20 October, I have no problem in principle with removing low-wage subsidies, so long as we ensure a decent living wage for all; family support to make up for the variation in income when people have families of different sizes; and proper, affordable childcare provision, available universally, particularly in deprived and rural areas where the current provision is very poor and patchy. For rural areas in Wales, support for small businesses is extremely important to enable them to earn and to pay a living wage. Those are the sorts of changes that I would like to see. Then I would gladly agree to the Chancellor’s proposals I do not have much of a problem with tapers. Tax credits should lessen as people earn more and, as I said, tapers over 100% are, thankfully, a thing of the past, but the disincentive effects remain when high rates of combined tax credits and benefit withdrawal reduce people’s incomes substantially. The Chancellor’s proposals will worsen this effect. What incentive will there be for working harder and earning that extra marginal pound if it melts away in reduced tax credits and benefits, as we heard earlier in the debate? The figure of 93p in the pound was mentioned As the minimum wage or the national living wage rises, the taper reduces tax credit payments—an obvious point—and the cost to the taxpayer goes down. All this is well known and well understood, but what the Chancellor intends goes well beyond what is normal and what is acceptable. Had he been happy to operate the tapers as they are and keep the thresholds as they are, he would have gained tax revenue. Had he been satisfied with that course of action, people earning more would be paying more tax and claiming less in tax credit. Significantly, many would be claiming less housing benefit, which is a problem that Members on both sides of the House recognise. However, he has deliberately gone further. Tax credits will be withdrawn earlier and at a faster rate. That is on top of the freeze on tax credit levels for four years, as set out in the Welfare Reform and Work Bill, and the decision to limit the child care element to the first two children in a family With regard to childcare, what discussions have the Government had with the Welsh Government, because provision in some parts of Wales differs significantly from provision in England? If we are tailoring a system to promote proper childcare, there needs to be consultation with not only the Welsh Government, but the Scottish Government and the Northern Ireland Executive. I am also concerned about the effects on the under-25s. My concern is that these measures will reduce work incentives and deepen child poverty—we have heard the figure of 200,000 for the number of children who will be pushed into poverty There are also geographical effects, as I mentioned in an earlier intervention on the right hon. Member for Birkenhead. There are communities in Wales in which a large percentage of people take advantage of tax credits, so whole communities will be hit as tax credits are cut. That is particularly true in west Wales and the valleys, which at European level is recognised as a very poor region that is subject to various European grants. Actually, it is on a par with parts of former-communist, eastern Europe. Many people in those communities claim tax credits in order to go out to low-paid work, and I am concerned that they will be struck hard. Therefore, adding to what the right hon. Member said, I repeat my call for data to address the geographical distribution of the effects of these measures, and not just the effects for poorer families individually. Let me turn briefly to some of the other points the right hon. Member for Birkenhead made. As I have said, I hope that data and childcare have been discussed with the Welsh Government. There is almost a philosophical point here, which is that we recognise the value to society of bringing up children, because they are the next generation who will be caring for the elderly—perhaps my social administration slip is showing. I am a veteran of many campaigns to save and secure child benefit, and as far as I am concerned that is one of the central arguments Postponing the introduction until after next April is clearly a good idea. Restricting it to new claimants is something that I would agree with, although that would put them in the difficult position of going out to work for reduced tax credits, and I have already mentioned the disincentives to taking up work that that might provide, so we have to be very careful Pensions tax relief has been mentioned. I am afraid that I am also a veteran of previous debates on tax credits. That was one of the suggestions my party made when Adair Turner was reviewing pensions. Of course, the circumstances are different now. Certainly, we could have seen that happen then, which would have meant that the Government might not be in the position that they are in now.