Working Families Tax Credit (Hansard, 9 November 2000)

§ 1. Mr. Nigel Griffiths (Edinburgh, South)
What his latest estimate is of the number of families benefiting from the working families tax credit.[135947]

§ 13. Mr. Michael Connarty (Falkirk, East)
What his estimate is of the impact to date of the working families tax credit in reducing child poverty.[135961]

§ The Chancellor of the Exchequer(Mr. Gordon Brown)
The working families tax credit was launched in October 1999. It is already benefiting more than 1.1 million low and middle-income working households with children—about 300,000 more than received family credit, which the working families tax credit replaced—and, on average, those families receive £30 a week more than they would with family credit. The working families tax credit is one of the measures that we have introduced to tackle child poverty. We estimate that, during this Parliament, our measures will raise more than 1 million children out of poverty.

§ Mr. Griffiths
Does my right hon. Friend realise that thousands of families in Edinburgh and more than 1 million nationwide receive, on average, £76 a week from the allowance, and that they live in fear of the Tory proposals to scrap the allowance because the shadow Chancellor is more concerned about Tory hard-right policies than with hard-working families?

§ Mr. Brown
I am grateful to my hon. Friend. In his constituency, 1,044 families benefit from the working families tax credit and there has been a 49 per cent. fall in unemployment, in part as a result of the measures that we have taken to make work pay. In the shadow Chancellor's constituency, unemployment has also fallen by 49 per cent. and, no doubt, the right hon. Gentleman will want to congratulate the Government on that. As for the future of the working families tax credit, we are determined to expand the benefits to more people by getting more people back into work. Unfortunately, as my hon. Friend has pointed out, not only would the Conservatives abolish the new deal, but they would abolish the working families tax credit. The shadow Chancellor said, on 20 September 422 1998, of the attitudes of his party to such matters, that Conservatives have become inextricably connected with uncaring social attitudes. That is exactly the position that the abolition of the working families tax credit would represent.

§ Mr. Connarty
Further to the question asked by my hon. Friend the Member for Edinburgh, South (Mr. Griffiths), my right hon. Friend the Chancellor will be aware that in the Falkirk district, more than 2,000 people receive the same average sums through the working families tax credit. Will my right hon. Friend send a clear message to the people of the district that, at the election, they can choose a Labour Government who are committed to getting people back into work through the new deal and paying them a supplement through the working families tax credit, or they can choose the abolition of both schemes, which will put them back on the dole and back into poverty?

§ Mr. Brown
The choice is between stability, steady growth and employment creation under the Labour Government, creating rising living standards, and a return to stop-go, boom-bust under the Conservatives, who would abolish the new deal and the working families tax credit. I believe that when people see that under the Labour Government, even in the constituencies of Conservative Members of Parliament, there has been a huge reduction in unemployment, they will not want either the new deal or the working families tax credit to be abolished. I realise that there are divisions within the Conservative party on such matters, but, no doubt, they are being resolved within the No Turning Back group, albeit without the presence of the shadow Chancellor, who has given up membership of one extreme right-wing faction in the hope of leading a rather larger extreme right-wing faction: the Conservative party.

§ Mr. Michael Portillo (Kensington and Chelsea)
Will the Chancellor confirm that he quite wrongly counts the working families tax credit as though it were a reduction in tax, which it is not, and that he does that for one simple reason, which is to massage the tax burden figures? Will he also confirm that, even on his own figures, which were revealed yesterday, the tax burden has risen from 36.9 per cent. last year to 37.3 per cent. this year? On what basis, therefore, did the Prime Minister tell the House of Commons last week: the tax burden this year is falling.—[Official Report, 1 November 2000; Vol. 355, c. 703.] at a time when he must have known what the new figures were? Will the Chancellor now correct the Prime Minister and apologise to the House?

§ Mr. Brown
The figures are published in the normal way in the pre-Budget report and the Budget. Perhaps the shadow Chancellor will answer for what happened under the Conservative Government—[HON. MEMBERS: "Answer."] That is interesting: none of them want to defend the last Conservative Government, especially the shadow Chancellor, who introduced VAT on fuel and the fuel escalator. Tax and national insurance, as a share of gross domestic product—[HON. MEMBERS: "Answer."] I am just about to give the information. The figure was 37.3 per cent. in 2000–01. That is the figure that we announced yesterday. Under the Conservative proposals 423 and projections published before the election, the tax take in 2001 was not 37.3 per cent. but 37.6 per cent, so if there had been a Conservative Government, there would have been a higher tax burden now.

§ Mr. Portillo
It is notable that the Chancellor does not wish to defend what the Prime Minister said last week. I do not know whether that is because he knows that the Prime Minister got it wrong and there is no defence, or whether the right hon. Gentleman is at fault for not having told the Prime Minister that the tax burden is rising, leading him—inadvertently no doubt—to mislead the House.
Will not working families be concerned about the total national burden of tax? Will the Chancellor confirm that that burden has risen by 2.6 percentage points since he came to office, which is about the equivalent of £25 billion, which is about the equivalent of 10p on the standard rate of income tax? Will he explain why the Prime Minister promised us before the election that he had no intention of raising taxes?

§ Mr. Brown
We have cut the basic rate of income tax. The right hon. Gentleman should be congratulating us on cutting it. We have introduced a 10p starting rate of income tax. We have introduced the working families tax credit, which is a tax cut for ordinary families. In the Budget in March, we shall be raising the children's tax credit. Perhaps the shadow Chancellor will tell us whether he will continue with the children's tax credit or whether—like the new deal and the working families tax credit—he will abolish it. Sooner or later the Conservative party will have to do what it promised it would do, which is to publish the figures and tell us exactly which cuts, which changes, and which services are at risk.

§ Mr. Geoffrey Robinson (Coventry, North-West)
May I congratulate my right hon. Friend on the great success of the working families tax credit and on bringing 1 million children out of poverty? I know of his personal deep care and concern in that regard. May I also congratulate my right hon. Friend on the sheer brilliance of his pre-Budget report, which has demonstrated yet again the remarkable success of his management of the economy—a success which has enabled him to make great steps forward in areas of social justice while continuing incentives for industrial enterprise?

§ Mr. Brown
I am grateful to my hon. Friend. It is the balance between enterprise and fairness that is essential for the future of the United Kingdom. It is by matching enterprise to fairness that the Government have created 1.1 million jobs. We have seen youth unemployment fall by half. Long-term unemployment has fallen by more than half. We have more women in work than ever before, with 70 per cent. working. At the same time, unemployment is falling in every region. Unfortunately, if we were to return to a Conservative Government, they would abolish the new deal and return to the policies of stop-go and boom-bust. Unemployment would again rise, as happened under the Conservatives.