HC Deb 16 November 1998 vol 319 cc592-3
4. Mr. Julian Brazier (Canterbury)

If he will make a statement on the number of families who are currently eligible for family credit. [58369]

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle)

In May 1998, 767,000 families were receiving family credit, which is 72 per cent. of those eligible but 84 per cent. of the maximum take-up if measured by expenditure.

Mr. Brazier

Can the Minister confirm that the programme currently costs about £3.5 billion, which is £1.5 billion less than the projected cost of the working families tax credit that should replace it? On what assumptions on employment is that projection of substantial increased cost based? Is it assumed that there will be a rise in such employment, or simply that the tax credit will reach much further up the income scale?

Angela Eagle

The working families tax credit, which will replace family credit in October 1999, is more generous. That is why it will cost £5 billion instead of the current cost of family credit. That will mean that it makes work pay for 400,000 more low-paid families.

Mr. Steve Webb (Northavon)

Does the Minister accept that one of the great strengths of family credit is the fact that it copes well at the time of relationship breakdown, in that, typically, the money is paid to the mother in a couple, and therefore continues when the relationship breaks down? Does she accept that, when family credit is abolished and replaced by a benefit paid, typically, to the father in a couple, that will produce hardship for mothers and children at the time of relationship breakdown?

Angela Eagle

In fact, couples can choose who the working families tax credit will be paid to. The hon. Gentleman should also know that, in 50 per cent. of such families, the mother is the main breadwinner, so, generally, the benefit will be paid to her anyway. The hon. Gentleman is worrying overmuch about a system that is far more generous than is the existing system to those who are low-paid and want to work.

Mr. Bill Rammell (Harlow)

Does the Minister agree that one of the biggest problems with the current social security system is the fact that it places barriers in the way of people who want to work? Can she confirm that, under existing family credit regulations, people can be worse off if they work more hours, and can she confirm that that distortion will be removed by the working families tax credit? Will she reassure the House that the Government will progressively work, through the social security system, to ensure that such anomalies are ironed out once and for all?

Angela Eagle

I agree with my hon. Friend; he is exactly right. The working families tax credit has far more generous tapers in income than does family credit—down from 70 per cent. to 55 per cent—so the credit is withdrawn in a more generous way. It is also more generous in that it begins higher up the income scale, at £90 instead of £79 for family credit. It starts to tackle the unemployment traps, the benefit traps and the significant barriers to work that those who are on low pay or who may work part time currently face.

Mr. Iain Duncan Smith (Chingford and Woodford Green)

The Minister has failed to answer the question asked by my hon. Friend the Member for Canterbury (Mr. Brazier). Every year, the Government will spend on working families tax credit £1.5 billion more than has been spent on family credit, and in doing so they will make a mess of many of the main features of family credit. The Minister still has not said that the Department of Social Security or the Treasury have figures to show by how much the working families tax credit will increase employment and how much the Government will save in the medium or long term as a result of introducing that tax credit. Will she give us the answer now? What is the saving? How many extra jobs?

Angela Eagle

The hon. Gentleman is against working families tax credit, and has said that he will abolish it. That will mean a tax increase for 1.5 million hard-working families of up to £17 a week.

Mr. Duncan Smith

The Minister has not answered the question. The question was, what forecast has the Department made? If the Department is saying that it is prepared to spend an extra £1.5 billion a year, it must be predicated on an assumption of a saving elsewhere or more jobs; which is it? Or is the answer, "It may do this or it may not"? We have heard of the green shoots, but now this seems to be a policy of "The Darling Buds of May".

Angela Eagle

I think that the green shoots of economic policy were spoken of by a Conservative Chancellor, not a Labour Chancellor. [Interruption.] If the hon. Gentleman will be quiet for a minute, I shall answer his question. The working families tax credit removes barriers to work and creates incentives for those who are on low pay to work. It is not intended to create more jobs. It is simply intended to make work pay for those people currently on benefit, who face levels of marginal deduction from benefit of considerably more than 100 per cent.—the legacy of the uncaring Conservative Government.