Working Families Tax Credit

HC Deb 03 February 2000 vol 343 cc1192-5

4. Mr. Tom Clarke (Coatbridge and Chryston)

How many new claims for working families tax credit have been made since its introduction; and if he will make a statement. [106884]

The Chancellor of the Exchequer (Mr. Gordon Brown)

Up to the end of December 1999, there had been 630,000 awards for the working families tax credit, of which 300,000 were for families who were not in receipt of family credit at the time of the claim. The average gain to working families is £24 a week.

Mr. Clarke

I thank the Chancellor for that reply and I assure him that many low-paid families in my constituency have benefited greatly from the working families tax credit. Indeed, some low-paid families have seen their incomes rise by more than £30 a week. I wish to encourage the Chancellor, who rightly enjoys an international reputation for challenging child poverty, to continue to address, in his Budget, that challenge to domestic child poverty in constituencies such as mine and in every constituent part of the United Kingdom.

Mr. Brown

I am grateful to my right hon. Friend, who has fought hard on international development issues and on national issues to relieve the plight of those in poverty. He will be interested to know that 130,000 families in Scotland will benefit from the working families tax credit. Some families will get up to £50 a week extra. The Inland Revenue telephone line and the special working families tax credit telephone line have received nearly 2 million calls from people inquiring about the working families tax credit; that is why most people will conclude that it is a worthwhile and necessary innovation.

In the spirit of conversion from previous mistakes, the Conservatives might remind themselves that the policy that they cannot support in Britain was perfectly acceptable to Ronald Reagan in the United States.

Mr. David Ruffley (Bury St. Edmunds)

May I draw the Chancellor's attention to the remarks of the Office for National Statistics and the OECD to the effect that his treatment of the working families tax credit as a tax cut is a clear breach of standard accounting rules? When will he stop fiddling the figures?

Mr. Brown

That is absolutely wrong. In the same way as the Conservatives considered mortgage tax relief, we have considered the working families tax credit. In the same way as these matters are being debated in America and elsewhere, and in the international organisations, they are now the subject of discussion here.

Conservative Members do not like to admit that they are opposing a £24 a week tax cut for ordinary families. It is about time that, instead of trying to get out of the commitment that they should make to working families, they started supporting the working families tax credit.

Ms Sally Keeble (Northampton, North)

Is my right hon. Friend aware that the working families tax credit has been important in my constituency not so much in itself but because, even if people get only £1 of it, they can get the child care credit which has transformed the lives of many women in my constituency, who say that they are £60 or £65 a week better off? Will he ensure that when the literature is produced for the working families tax credit, it will make much clearer the benefits of the child care credit? Will he comment on the fact that the Conservative party would destroy that benefit—if their promises are to be believed—thus throwing those women out of work and back on to benefit, damaging their families in the process? [Interruption.]

Mr. Brown

They do not like hearing it, but Conservative Members are opposed to the measure that is taking more children out of poverty than any other. If only a few children were released from poverty by the working families tax credit, we would all support that; but 800,000 children are being taken out of poverty as a result of this and related measures.

The number of people claiming the child care benefit has doubled as a result of the publicity, and we will advertise it widely so that it is available for mothers and fathers who have to make the choice between working and staying at home. I should have thought that, with the new evidence that 800,000 children are being taken out of poverty, the Conservative party could support what the Republicans support in America: an earned income tax credit such as we have.

Mr. Matthew Taylor (Truro and St. Austell)

The Chancellor talked once again of tax cuts for families, but did he not have a huge Conservative deficit—not least the legacy of the former Chief Secretary, the right hon. Member for Kensington and Chelsea (Mr. Portillo)—to overcome? The real figures show that tax has risen, but the Chancellor, like his predecessor, likes to choose indirect taxes as the means of increase. Would we not have a more honest debate if the Chancellor restored the index measuring the overall tax burden, including indirect taxes, so we could see whether it is the Chancellor or the former Chief Secretary who increased indirect taxes most?

Mr. Brown

The hon. Gentleman is obviously very interested in the statistics, so let me tell him that the tax burden on the ordinary family with one child has fallen, and is falling, from 21.5 per cent., to 20.9 per cent., to 20.4 per cent. and to what will be next year the lowest tax burden on ordinary families for 20 years. He should support that.

The hon. Gentleman is right about the Conservative party: we must unite on that, and remind the country that the current Conservative Front-Bench spokesmen on tax are the very people who, in the Conservative Government after 1992, put VAT on fuel, introduced the escalator, reduced the married couples allowance from 40 per cent. to 15 per cent., introduced the air passenger tax and implemented 22 tax rises: the biggest rises in tax that the country has seen.

It seems from yesterday's performance, when the shadow Chancellor made his tax guarantee, that he has learned nothing from past mistakes. With all those tax rises behind him, he is not the Conservative party's solution: he is its problem.

Mrs. Louise Ellman (Liverpool, Riverside)

Does my right hon. Friend accept that the benefits of the working families tax credit in areas such as Liverpool go alongside the benefits of employment opportunities provided by, for example, Government regeneration programmes and the ability of the Merseyside objective 1 area to spend £850 million of European funding, especially on business support? Does he recall that the working families tax credit was opposed in the House not only by the Conservatives but by the Liberal Democrats?

Mr. Brown

Perhaps the Liberal Democrats need to rethink these matters. In the north-west and Merseyside, nearly 170,000 people will benefit from the working families tax credit. We now have a strategy, through the new deal, to give people new job opportunities, and through the working families tax credit, to make work pay. The child care credit makes it possible for people to work who might not otherwise be able to; and the tax changes that we are making, including the cut in the basic rate of tax, make it possible for work to pay even more for these families. We will, in the Budget, be introducing further measures that make it possible for people in the areas that have been hardest hit by unemployment in the past, because of 20 years of Tory Government, to get the jobs they want.

Mr. William Ross (East Londonderry)

How many claims for working families tax credit come from farming families? Would not that number of claims be reduced if the Chancellor and his right hon. Friends drew down the compensatory funds that are available for farming from Europe, owing to the changes in the value of the pound?

Mr. Brown

I am grateful to the hon. Gentleman for raising this issue. I know that substantial numbers of claims have come in the past and still come from farming families. Self-employed people are also eligible for the working families tax credit and there has been a distinct increase in the number of applicants. That is the right of people in any area of this country. In Northern Ireland, 50,000 people are now eligible for, and claiming, the working families tax credit.

Furthermore, the second biggest group of people claiming investment allowances, which we introduced in 1997, is the farming community. So we are doing what we can, within the resources that we have, to help farming families.

Mr. Howard Flight (Arundel and South Downs)

On working families tax credit, the Chancellor clearly believes that he has been brilliant. Can he explain why the working families tax credit has to be paid out to people whom the Inland Revenue know are not eligible? Can he explain why people earning more than £38,000 a year can be eligible to receive it? Can he explain why more than 1 million people have a marginal tax rate of 69 per cent? Can he explain why employers have to spend £100 million on administering the credit? The OECD has made it clear that it should be treated not as a tax cut, but as a social security spending increase, as it is means-tested. The Royal Statistical Society has said that the Chancellor is failing to put the national accounts on a reliable footing. I suggest that the right hon. Gentleman's skills in creative accounting have misled even himself.

Mr. Brown

If the hon. Gentleman has any allegations about fraudulent claims for working families tax credit, let him put them to the proper authorities. Every other issue he raises shows how little he understands the working families tax credit. This is a benefit that will be paid through the wage packet because it shows that work pays. I thought that the Conservative party was interested in showing that work paid. It will encourage mothers who otherwise would not be able to work to have the resources, through child care, to do so. I should have thought that the Conservative party would want women to have that freedom. It will increase the number of jobs in the economy, and will benefit the very small businesses in which the hon. Gentleman says he is interested.

The Government are ensuring that work pays for these people. I should have thought, on the basis of the Conservative party's new analysis of policy, that it would accept that it has been wrong over the working families tax credit, and change its policy.