Clause 10 - Entitlement
Tax Credits Bill
3:00 pm
Professor Steve Webb (Northavon, Liberal Democrat)
I was at primary school at the time, which puts it in context.
What is the point of extending tax credits to a group of people who, with the exception of housing benefit, have not been in the means-tested benefits system since they began work? There could be an anti-poverty argument, but poverty rates are lower among childless people than among couples. The Government gave a figure—I cannot remember whether it is in the regulatory impact assessment or the summary of responses to the consultation—of 1 million childless families who are in work and in poverty. How many of those 1 million will fall within the scope of the working tax credit? Will it cover people who work more than 30 hours or the over-25s?
I am not being facetious, because if poverty is the issue and 1 million childless people are in work and in
poverty, one would hope that the mechanism designed to address that was catching most of them. My hunch is that the poor people in work are young people starting out on a career and people who are unable to do a full-time job, which means that they perhaps do a part-time job that they combine with caring. As the hon. Member for Arundel and South Downs pointed out, the Institute for Fiscal Studies states that cross-sectional poverty rates are higher among people who are unable to do a full-time job. There may be an issue about the dynamics of poverty and how long they stay poor, and I know that the Treasury has a view on that.
The question is whether this is an effective anti-poverty measure, and we have not had sufficient information from the Government about that. How many of the 1 million will it catch? If we are going to pay tax credits to everyone who is childless, but we are going to take all the family support away from the pay packet and deliver it to the mother, or whoever, through a bank account or direct payment, one is left with a rump of £15 a week, although sometimes it would be quite a lot more than that, and other times it would be next to nothing. Nevertheless, that is the average figure that I have in my head for the residual working credit. I hesitate to say, ''Is that all?'' because that is a lot of money to some people, but compared with the sums that families with children have been paid, it is radically smaller. However, we will need the whole bureaucratic infrastructure of payment through the pay packet to deliver payments of £15 a week.
The regulatory impact assessments suggest that we will pay fewer payments because some families with children will get no working tax credit. On the other hand, we are bringing in new people such as childless couples and single people, and those numbers roughly offset each other. The number of people receiving payment through the pay packet will be roughly the same although they will be different people. We shall have the same number of payments through the pay packet as we have at present, which is more than 1 million for each pay period, to deliver £15 a week. If we are worried about childless people and money for adults, we could tweak the tax system, although not in the crude way that I mentioned on Second Reading, by looking at the lower rate band and thresholds to get money to these people in a way that imposes no burden on business or the Inland Revenue in making those 1 million payments.
The amendment would stop working credits going to childless people. In many ways it does not go far enough, because if the working credits go only to families with children, one would not want a separate payment. All families with children are being paid a child credit, and one probably wants to lump it on the child credit and be done with it. The issues raised by the amendment are correct, and I should be grateful for clarification from the Minister as to how many of the 1 million childless families would get lifted out of poverty.