Tax Credits (Working Families)

Part of Opposition Day — [5th Allotted Day] – in the House of Commons at 4:05 pm on 7th July 2015.

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Photo of Shabana Mahmood Shabana Mahmood Shadow Chief Secretary to the Treasury 4:05 pm, 7th July 2015

I beg to move,

That this House
believes that people should be given support and incentives to find employment and stay in employment;
notes that, at a time when the recovery is still fragile for many, the impact of a significant reduction in in-work tax credits could increase hardship and undermine the importance of making work pay;
believes that any meaningful effort to address the real causes of high welfare costs should tackle the underlying drivers of low pay, housing costs and insecure working conditions;
further notes that the threat of a £5 billion reduction in child tax credits would see 3.7 million working families lose an average of £1,400 a year in income;
and urges the Chancellor to guarantee that any assistance in the July 2015 Budget is focused solely on people on middle and low incomes.

I am pleased that we have finally come on to our Opposition day debate. It was postponed last week and has been delayed today owing to the emergency debate on English votes for English laws. It is important that we have this debate ahead of the Budget, because what the Government decide to do tomorrow in relation to tax credits will show up the rhetoric they have been using since the election and prove whose side they are really on. It is not the side of working people. They say that they are now the workers’ party. Indeed, the Chancellor’s op-ed in The Sun this weekend started with the line:

“We were elected in May as a party for working people; that’s how we’ll govern; and that’s who my budget this week is for.”

On reading that line for the first time on Sunday morning, I would have choked on my cereal were it not for the fact that it is Ramadan and I am fasting. Saying it—asserting it—simply does not make it true. It is about what we do and the choices we make. If the decision the Government make tomorrow on tax credits is as we expect, it will prove that their rhetoric is very far removed from the reality.

We know from what the Chancellor said over the weekend that £12 billion of savings from the welfare budget have been found. It is reported that a substantial chunk of that money will come from cuts to tax credits. Certainly, the Government’s attempts to discredit the tax credits regime suggest that they are laying the groundwork ahead of tomorrow’s Budget. The independent Institute for Fiscal Studies has suggested that the Government could cut the childcare element of child tax credit back to its 2003-04 level, saving £5.1 billion per year. The IFS says that a £5 billion cut in tax credits in this way would mean some 3.7 million families losing £1,400 a year on average and would push a further 300,000 children into relative poverty. Those are huge sums of money for working people on low pay—people who are trying to do the right thing, who are at the mercy of a labour market that, at the lower end, is insecure and of high housing costs that keep going up and up. Without tax credits to help them through, those who are working and stuck on low pay simply cannot make ends meet.