HC Deb 21 May 1998 vol 312 cc1087-8
2. Dr. Phyllis Starkey (Milton Keynes, South-West)

What representations he has received on the working families tax credit. [41673]

The Chancellor of the Exchequer (Mr. Gordon Brown)

The working families tax credit has been welcomed by a wide range of individuals and organisations. It guarantees every working family an income for full-time work of at least £180 a week. No family with earnings below £220 a week will pay income tax.

Dr. Starkey

May I pass on to my right hon. Friend the positive feedback that I have received from families in my constituency about the working families tax credit proposals? I should like to share with him the situation of a constituent. The lady's husband had been unemployed for some time and decided to try to improve his work prospects by going to university. She went back to work as soon as her son was born, and she and her husband were caught in such a poverty trap that the stress contributed to the breakdown of the marriage. She is currently £4.50 a week worse off in work than she would be if she were on benefit. As a result of the Budget proposals, and especially the working families tax credit, she would be £21.75 a week better off in work than on benefit. She certainly values the Government's measures to help people such as her who are trying to improve the lives of their families through their own efforts. [Interruption.] That is in marked contrast to her experience under the previous Government.

Mr. Brown

I am grateful to my hon. Friend. It is amazing that Opposition Members do not like hearing about people being better off as a result of changes to help working people. The working families tax credit reduces the number of people who are on the high marginal tax rate and eliminates the 100 per cent. plus marginal tax rate, which was so damaging to work incentives and created a poverty trap. At the same time, it will end the situation in which 500,000 people were receiving benefits and paying tax at the same time. That did nothing for the relief of poverty. The minimum wage that the Government will introduce, the child care tax credit, which will accompany the working families tax credit, and the reduction in national insurance will mean that many people such as my hon. Friend's constituent will be better off. That will be the result of the Budget and the Government's other measures.

Mr. Ian Bruce (South Dorset)

The Chancellor speaks as though those tax changes are here now. Will he tell the House and the country when they are to be introduced? When is the child care tax credit to come in? The Secretary of State for Social Security has been out launching that yet again, and my constituents think they can claim it now.

Mr. Brown

The hon. Gentleman will be able to write to his constituents and tell them that the child care disregard is being improved this year and that the full child care tax credit will be introduced next year. Child benefit will rise next April, which is the time at which the minimum wage will be introduced. The combination of those measures will mean that people such as the constituent of my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) will be up to £20 a week better off.

Ms Patricia Hewitt (Leicester, West)

Does my right hon. Friend accept that one of the barriers that many of my constituents face in trying to move into employment is the fear that an increase in in-work benefits will be cancelled out by a reduction in other benefits, particularly housing benefit? Will he ensure that the welcome introduction of the working families tax credit is accompanied by very close working between the Inland Revenue, the Benefits Agency, the Employment Service and local authorities, so that claimants get a seamless service that ensures that they really are better off as they move into work?

Mr. Brown

I am grateful to my hon. Friend. Systematically, this Government intend to remove every barrier that prevents people who want to work from getting the benefit and opportunity of work. That is why we have our welfare-to-work programme, why we have abolished—housing benefit is affected by this—the 100 per cent. plus marginal tax rate that many poor people face, and why, at the same time, we shall continue to examine, including in our review of public expenditure and housing benefit, every barrier that prevents people from getting the benefit of work. Our aim is to make people better off for working and to ensure that everyone who wants to work has a contribution to make and is rewarded for it.