Poverty Wage Trap (Hansard, 6 February 1973)

§ 4. Mr. Meacher
asked the Secretary of State for Social Services how many families he estimates are currently subject to a poverty-trap surtax of at least 50 per cent.

§ Sir K. Joseph
I would refer the hon. Member to my reply to him on 1st February.—[Vol. 849, c. 458–9.]

§ Mr. Meacher
Is the Secretary of State aware that his figures reveal that 250,000 very low paid workers are paying a poverty tax surcharge at a level which is not reached again until the middle of the surtax range, on incomes of £10,000 a year, and that about 50,000 very low paid workers are paying a tax levy of over 100 per cent., so that they lose money when their incomes rise, which makes a farce of his means test policy? Will the right hon. Gentleman acknowledge that the Government's recent extension of the family income supplement entitlement period merely postpones the injustice of the poverty wage trap and that until he forgoes his means test obsessions he will not end it?

§ Sir K. Joseph
It is true that, as the hon. Gentleman says, about 4 per cent. of the earning households with two parents and children are at risk of a poverty trap of over 50 per cent., in theory. I emphasise "in theory", because the hon. Gentleman's calculations rely on the instantaneous withdrawal, simultaneous with the increase of earnings, of the benefits received by a family, and that 204 simply does not happen. Secondly, the withdrawal of benefits is a corollary of the high benefits now available to poor families.

§ Mr. Redmond
Does my right hon. Friend agree that probably the best answer to the problem is to move on to a tax credit scheme and to be sure that the sincere objections from certain women about family allowances do not hold up the scheme completely?

§ Sir K. Joseph
The answer to the last part of my hon. Friend's question is "Yes". I agree with his general argument about the benefit that a tax credit scheme might give, but I should not like to leave the impression that that would automatically remove the problem connected with, for instance, free school meals.