HC Deb 20 May 1991 vol 191 cc630-2
13. Mr. Sumberg

To ask the Secretary of State for Social Security what is his estimate of the number of low-income families which faced marginal deduction rates in excess of 100 per cent. in 1978–79 and the latest year for which figures are available.

15. Mr. Brazier

To ask the Secretary of State for Social Security what is his estimate of the number of low-income families which faced marginal deduction rates in excess of 100 per cent. in 1978–79 and the latest year for which figures are available.

Mr. Newton

I refer my hon. Friends to the reply that I gave my right hon. Friend the Member for Selby (Mr. Alison) earlier today.

Mr. Sumberg

I am grateful to my right hon. Friend for that answer. His earlier answer set out our commendable record. Is he aware that this weekend the Labour party dropped its pledge to low-income families to introduce a lower rate of tax for the poorest in our community? Is not that another example of the chaos and confusion in the Labour party on its proposals to help the lowest paid?

Mr. Newton

It is becoming increasingly difficult to understand the Labour party's commitments on these matters, except that they would clearly cost an amount that the country could not afford.

Mr. Brazier

Does my right hon. Friend agree that on taking office in 1979 we found that one of the worst effects of the previous Labour Government was that many people would have been better off on the dole although they were working long, hard hours in low-paid jobs? Does he agree that the Government's great achievement is that they tackled that problem with a combination of better family credit payments and reductions in taxation for the low paid? It would be a great shame if a future Government were to reverse that.

Mr. Newton

I very much agree with my hon. Friend. One of the worst defects of the social security system as we originally found it was that it did not pay large numbers of people to work at all. That is not satisfactory from anyone's point of view, including that of those people. I regard the fact that we have reduced that number so greatly as a major gain.

Mr. Pike

Is not the Secretary of State concerned about low-income families who may be forced to take out an essential loan and then find that the capital for that loan is taken into account as income, thereby losing them their entitlement to benefit? Is not that wrong and does not it penalise low-income families?

Mr. Newton

I must admit that I am not certain what point the hon. Gentleman is making. However, the availability of interest-free loans under the social security system in certain circumstances is an important advantage to many people compared with people just above the social security income support level who have to borrow at commercial rates.

Mr. Wilson

Is the Minister aware of a written reply that I received from his Department recently which set out a table of the marginal benefit increases for earnings between £100 and £150 a week? That table revealed the extraordinary fact that an average family with two children paying average rent and average poll tax and with entitlement to benefit would receive, if its income rose from £100 to £120, a benefit increase of £2.12 a week. Those getting what seems like a windfall increase from £100 to £150 a week would have a real increase in income of less than £7 a week out of £50. They are incredible marginal rates compared to those for top earners. What does the Minister propose to do to give a real incentive to those low-paid people who are so hard hit by the system as it stands?

Mr. Newton

I suggest that the hon. Gentleman extend his researches from the unemployment trap, which started these exchanges, to the poverty trap, which is the result of the high marginal deduction rates to which he referred. There, too, he will find that, because of the changes that we have made, the numbers of people subject to the highest marginal deduction rate —80 per cent. and above —have been drastically reduced.