HC Deb 30 November 1992 vol 215 cc9-11
9. Mr. Spring

To ask the Secretary of State for Social Security what estimate he has of the number of low-income families facing marginal deduction rates in excess of 100 per cent. (a) in 1978–79 and (b) the latest year for which figures are available.

Mr. Lilley

In 1985, the earliest year for which information is available, 70,000 families had marginal deduction rates of more than 100 per cent.

As a result of the reforms of social security, this year almost no families have marginal deduction rates of 100 per cent. or more.

Mr. Spring

Will my right hon. Friend confirm that his Department has organised successful campaigns since 1989 to increase public awareness about the take-up of family credit? Does he agree that those campaigns were most useful in spreading awareness and increasing the take-up of that vital benefit?

Mr. Lilley

I can, indeed, confirm my hon. Friend's point. Family credit is a unique benefit, with little or no counterpart elsewhere in Europe. It serves a valuable function in helping people back into work, when they have only a relatively low earning ability initially. We want the benefit to be widely known and recognized—it is in the interests of families, as well as taxpayers, for people to shift from full-time reliance on income support into work, with family credit.

Mr. Raynsford

Does the Secretary of State recognise that, for households in low-paid work, receiving assistance with housing costs and community charge costs, the marginal rate of withdrawal of benefit has risen from 62p in the pound in 1979 to a current rate of 87p in the pound? How can the Secretary of State justify the deep poverty trap into which he has plunged hundreds of thousands of households. Will he say how many have been affected by that totally unjust poverty trap?

Mr. Lilley

As the hon. Gentleman knows, we wish, as he does, to see any disincentive effects of the social security system diminish. That was the prime objective of my right hon. Friend's reforms in 1985–86. It was one reason why we moved from assessing income on a gross basis to a net-of-tax basis. The tax changes introduced by my right hon. Friend the Chancellor, particularly the 20 per cent. band for the lowest paid—previously, the band was up to 33 per cent.—has resulted in a reduced disincentive effect on their earnings combined with benefit. All those factors have reduced the number of people facing the highest rates of effective tax when on low incomes. I hoped that the hon. Gentleman would welcome that, not wish us to go back to a system under which many people suffered withdrawal rates of more than 100 per cent.

Mr. Streeter

Will my right hon. Friend confirm that there have been more than 2.5 million successful claims for family credit since it was introduced in 1988? Is that not powerful evidence that that important benefit, which supports people in work, is supporting many thousands of low-paid workers in this country?

Mr. Lilley

My hon. Friend's facts are entirely correct. The recent figures from the Institute of Fiscal Studies suggests that the take-up rate has been improving, and that those who do not take up the benefit are predominantly those who have the lowest entitlement to the money and, therefore, lose least by not taking it up.