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Tax Credits

Private Members' Business – in the Northern Ireland Assembly at 3:30 pm on 13th October 2015.

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Photo of Mitchel McLaughlin Mitchel McLaughlin Speaker 3:30 pm, 13th October 2015

The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. The proposer of the motion will have 10 minutes to propose and 10 minutes to wind. One amendment has been selected and is published on the Marshalled List. The proposer will have 10 minutes to propose the amendment and five minutes to wind. All other Members who wish to speak will have five minutes.

Photo of Phil Flanagan Phil Flanagan Sinn Féin

I beg to move

That this Assembly notes the reliance of thousands of low- and middle-earning families on the tax credits system to top up their earnings; deplores the recent attack by the British Government on the tax credits system, which will reduce further the income of thousands of working families and drive them into greater poverty, as well as making it more difficult for people to move into employment; further notes the proposed introduction of an increased minimum wage by the British Government but recognises the study by the Institute for Fiscal Studies that shows that the impact of cuts to the tax credits system is much greater than the increase proposed in the minimum wage, which falls significantly short of the wage required for someone to have a decent standard of living.

Go raibh maith agat, a Cheann Comhairle. Cuirim fáilte roimh an díospóireacht tábhachtach seo agus tá mé sásta a bheith ábalta labhairt ar an díospóireacht tábhachtach seo inniu. Many families here are reliant on the tax credits system to top up their earnings. Some are dependent on tax credits as a result of being in low-paid employment, and others need it because they cannot get enough hours to make enough money to bring them out of poverty. The current tax credits system, whilst not perfect, is a good system as it provides a safety net for many workers who may well be earning the minimum wage but are underpaid or underemployed to such an extent that they require additional financial support from the Government to have a decent standard of living.

For many employees working in large companies, the tax credit system amounts to corporate welfare whereby, instead of employers paying their staff a decent living wage, the taxpayer has to step in and pay the difference. That is unfair on employees and on taxpayers. Companies earning hundreds of millions of pounds in profit every year should pay their staff enough so that they earn above the current threshold for tax credits. Employees in such profitable companies should not be living in poverty. Tax credits can also be paid to unemployed people with children.

Despite the success of the tax credit system in raising living standards and helping to prevent and take children out of poverty, which is scandalously high, the British Government, intent on imposing further unfair austerity measures, are changing how the system works. The recent Budget announced by George Osborne will lower the threshold at which payments to families start to reduce. Current tax credit payments start to reduce — what they call "taper" — once a family income reaches £6,420. From April 2016, the threshold at which payment starts to reduce will be £3,850. There are 109,000 claimants in this part of Ireland who earn about the £6,420 threshold and have a tapered tax credit award. Once the threshold is reduced to £3,850, those claimants will have their tax credit award reduced further. An additional 12,000 claimants will become subject to the taper once the threshold is reduced to £3,850. That information was published in a report produced by the Social Security Agency last month. It revealed that, in total, by 2019-2020, £105 million a year will be removed from the pockets of the least well-off through the changes to the tax credit system. Not only will that have a devastating, knock-on impact for those directly affected — 120,000 families will lose out by, on average, £918 a year — it will result in further constraints on the domestic economy. Every economic publication that I have studied on the matter clearly shows that those with least money spend what they have, usually in the local economy, which supports and sustains local employment and returns money in a cyclical fashion around the local economy. That is in direct contrast to what happens to money given to already wealthy people. As those people already have enough to meet their needs, they tend either to save or invest that money, hire a top-class accountant to make sure that they do not pay tax on it or buy luxurious items that are neither produced nor sold locally. Either way, that additional money brings little in the way of economic stimulus to the local community.

The proposed cuts to the tax credit system can in no way be claimed to be tackling people whom the Tories and their cheerleaders wrongly describe as "work-shy". Those affected by the cuts are, by and large, working people who are underpaid or underemployed but are, nonetheless, in employment. They deserve the support of a Government, instead of being pushed deeper into poverty and destitution.

Some, usually to the right of the political spectrum, will claim that the increase in the living wage will counter the cuts to the tax credit system, but they are wrong. I support the introduction of a proper living wage to all employees and believe that working people should be paid a rate that enables them to sustain a decent standard of living. I do not think that a Government should have to step in to top up the earnings of somebody in full-time employment, but too many employers avoid that responsibility, and now the Tory-led Government in England are shirking their responsibility to protect people in poverty once more.

Statistics released yesterday by the Office for National Statistics (ONS) in London show that a much greater proportion of workers here are paid below the living wage than in any part of Britain. That is the actual living wage, by the way, and not the new rate falsely promoted by neo-liberals and the Tories, which is actually just an increased minimum but still a poverty wage. The statistics from the ONS show that we cannot be lumped into the simple considerations of an economic policy designed to meet the needs of a small section of the population in the south and south-east of England.

Tory millionaires and billionaires sitting round a Cabinet table do not have a clue about the realities of everyday life for working families and for low and middle earners. They think — maybe they do not care — that everyone was born with a silver spoon in their mouth. That is not the case. Even though the people sitting round that table have considerable assets and considerable wealth, not everybody else in society has. Almost 40% of jobs in places like the north coast, Fermanagh and Omagh, and Mid Ulster district council areas are paid below the living wage. Compare that with parts of London where 5·2% of jobs are paid below the living wage. Proportionately, eight times as many people in some of our district council areas are paid below the living wage than is the case in London.

Statistics generated by the Asda income tracker reveal that the average discretionary income in London is now £254 a week, whereas here the figure is not even half that, at a mere £95 a week. The households below average income report published by the Department for Social Development last month shows that 21% of individuals or 376,000 people are in relative poverty. Countless families depend on the small amount of income that they get through the tax credit system merely to keep their heads above water.

The Institute for Fiscal Studies (IFS) has carried out an extensive piece of work on the impact of the cuts to the tax credit system and the countering increase to the minimum wage, which, by the way, only benefits people who are over 25 and is a measly 50p an hour. The findings of the IFS paint a very bleak picture. The IFS found that, among households with someone in paid employment, those eligible for benefits and tax credits are estimated to lose an average of £750 a year as a result of the changes to the tax and benefits system, yet they will gain, on average, only £200 per year through the increase to the minimum wage. On average, those affected by the changes will be compensated by only 26% of the total amount that they lost through the cuts to the tax credit system by the increase to the minimum wage and will be worse off, on average, by £550 a year. For me, that is not a glowing commendation of the policies being pursued by the Tory Party in England, which, unfortunately, we are subject to here.

There has been an ongoing debate here about welfare cuts and proposed changes to the welfare system. It is important that we, as an Assembly, stand up and send a clear message that we are opposed to these measures and that they will have a deeply negative impact on the people we represent.

[Interruption.]

Maybe some people want to make an intervention; I am not sure. I can see Gregory's lips moving, but I do not see him rising in his place to get up and down. Maybe the DUP will contribute to the debate.

Photo of Phil Flanagan Phil Flanagan Sinn Féin

It would certainly be welcome to see Members from all parties rising in their place to contribute to the debate and to send a clear message to David Cameron and George Osborne that we do not accept their political ideology of cutting money that is going to the most vulnerable people in our societies.

People who are working hard, living in poverty and trying their best need a hand up; they do not need a foot on their head to keep them down. Unfortunately, those are the policies that are being forced on us. We need to adopt a different approach where we invest money to bring people out of poverty. There is an alternative to the proposals that are in front of us. We need to see people being paid a proper living wage. If we give more and more of our people a living wage, that would seriously help to tackle poverty, which is a serious problem in our society. The proposed cuts to the tax credit system are a regressive step. They will take us back a generation in terms of the number of families and children living in poverty.

I welcome the amendment from the Ulster Unionist Party. I do not have any great opposition to it. I am prepared to listen to what it has to say. I do not think that the House should divide on the matter. I encourage people to support the motion and, if they want, the amendment. I commend the motion to the House.

[Interruption.]

Photo of Roy Beggs Roy Beggs UUP

I beg to move the following amendment:

Leave out all after the second "Government" and insert "and the increase to the personal income tax allowance but recognises the study by the Institute for Fiscal Studies that shows that the impact of cuts to the tax credits system is much greater than the increase proposed in the minimum wage, which falls significantly short of the wage required for someone to have a decent standard of living; and calls on the Chancellor of the Exchequer to ensure that working households on low wages are not financially worse off following the introduction of the Government’s changes.".

Why did I think that an amendment was needed to this motion about tax credits? When I read the motion, I really was quite shocked. The motion "notes", then it "deplores" and then it "further notes". I do not think that it is the responsibility of an Assembly to note, deplore and note. The Sinn Féin motion does not seem to be trying to change the proposals; it is just whingeing, moaning and complaining from a distance, a bit like what they do by boycotting their Westminster seats. This note-and-deplore motion raises valid concerns, but it is not focused on seeking to make the Chancellor change the proposals or alleviate the problems, hence I have tabled the amendment. It seems rather pointless to have a motion of which the first section "notes" the reliance of many families on tax credits, the middle section "deplores" the changes that will adversely affect low-paid working families and the final section "further notes" that the Institute for Fiscal Studies has highlighted that the increase in the minimum wage will not fully compensate for the reduction in tax credits. There must be more that the Assembly does than noting, deploring and further noting. There was no call for action in the motion.

Otto von Bismarck is credited with having said:

"Politics is the art of the possible, the attainable — the art of the next best".

We must seek change through striving for achievable goals.

The motion echoes Sinn Féin policy in their opposition to welfare reform to date. There are links between the Tax Credits Bill and welfare reform in how it will impact on some of those who are less well off. Sinn Féin opposed the Welfare Reform Bill at Stormont earlier this year. Even with the mitigation proposals emanating from Stormont House, to date they have failed to present achievable objectives. As such, they are grandstanding, and vulnerable citizens are at risk from the full implications of the unmitigated GB Welfare Reform Act, without any protections or additional support. Where is the art of the possible, the attainable and the next best?

For too many, Northern Ireland is a low-wage economy. That means that tax credits are even more important here than in other regions. As was said by the proposer of the motion, that has been recognised in the statistics. We should not be surprised by that. Indeed, 'The impact of Summer Budget 2015', a paper by NISRA, the Social Security Agency and DSD highlights the scale of changes afoot in Northern Ireland.

Some 109,000 households earning above the £6,420 threshold for tapered or reduced tax credits and some 121,000 households in Northern Ireland in receipt of tax credits will exceed the £3,850 threshold. It has been estimated that for them the tax credit changes will result in average reductions of £17·60 per week or £918 per year. However, that may be much more severe in individual families or sections of that group.

The Prime Minister told the 'Andrew Marr Show' on BBC One that we were moving to an economy where you got paid more and paid less tax. Rather than paying more in tax and getting money back in tax credits, that was a better system. He insisted that a family with someone earning the minimum wage would be better off overall as a result of the changes made by the Government to tax thresholds, benefits, tax credits and the minimum wage.

In the amendment, we largely retained the original motion but, for completeness, added the issue of increased tax thresholds. Changes to tax thresholds are part of the cumulative changes in the Prime Minister's argument, but I am adding it for completeness and, ultimately, to use it against him. Even when it is added, I and my colleagues have concerns that, when you take the cumulative changes — the national living wage, increased tax thresholds and the reduction of tax credits — many working households will be worse off.

Such a situation should not be allowed. Potentially, many households on lower wages will be even worse off. Many of those families will have no cushion to fall back on. How will they survive with such reductions? As a society, we must ensure that work pays, and it must pay right from April 2016, not at some future date when the national living wage reaches a certain threshold.

Those in receipt of tax credits should not be worse off as a result of these changes. We will be working to gauge their effects and lobbying so that that is recognised and further changes are put in place before we reach the critical date of April 2016, when these changes are due to take effect.

Some very influential MPs appreciate the dangers of what is being proposed. David Willetts, the former Skills Minister in the Conservative Government, who was recently elevated to the House of Lords, was reported as stating that changes to tax credits in the Budget meant that the welfare system was no longer making work pay. What a damning statement from a Conservative grandee.

The Labour MP Frank Field, Chair of the Work and Pensions Committee at Westminster, and a recognised expert on welfare, suggested to the Prime Minister that he should adjust the threshold and taper to protect those who would be adversely affected by the tax credits and other cumulative changes. He has suggested that this can be achieved without significant additional moneys being required. More information is required on that one.

Boris Johnson, the Conservative MP, Mayor of London and rival to George Osborne as a potential future leader of the Conservative Party, and who made the proposals, has indicated his concerns with the cumulative effects of the changes, which will adversely affect many households. I note also that the Conservative leader in Scotland, Ruth Davidson, has rightly stated that more information is required. There are concerns even there.

Another Budget statement is due from the Chancellor later this year, so there is still an opportunity for refinement and changes to tax credit and other regulations. Changes could help protect the low paid, who may be affected adversely by these cumulative changes. I, for one, urge Members to support my amendment so that we do not just note, deplore and further note but go on and urge the Chancellor of the Exchequer to ensure that working households that rely on tax credits are not worse off as a result of the introduction of the Government changes to tax credits, the many other changes to the tax system and the cumulative effect that these changes would have on their lives.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

Go raibh míle maith agat, a Cheann Comhairle. I, too, welcome the opportunity to speak on the motion and the amendment. We are quite happy to support the motion and the amendment. I wish to highlight the wide-reaching and devastating impact that the proposed reduction of tax credits will have on low- and middle-earning families here and on our economic growth in general. As it stands, over 127,000 households are in receipt of tax credits. In many cases, they are vital in topping up earnings and ensuring that people can make ends meet.

The current proposals seek to reduce the tax credit income threshold from £6,420 per annum to £3,850 from April 2016. This new threshold is a significant reduction, being nearly half of the previous threshold. So, in very real terms, the new threshold will result in an income cut of £17·60 a week and a loss of over £900 per year. In my opinion, this accurately reflects the vital source of income that tax credits are to families here in Northern Ireland who rely on them in their daily lives.

Of particular concern is the effect that the new tax credit changes will have on Northern Ireland's children. As Members have noted, the current family element of child tax credit is worth £10·50 per week and its loss will amount to £545 per annum. This, in combination with the reductions mentioned above, is a substantial loss to families who depend on tax credits to function. The reduction is all the more horrifying when we consider that 101,000 children are already in poverty. This has resulted in nearly one quarter of Northern Ireland's children living in poverty.

The British Government justification for these changes seems to rely solely on the fact that they have introduced an increased minimum wage or, as they would call it, the national living wage. Since this announcement, the SDLP has been highly sceptical of the Tories' commandeering of this term. We recognised early on that, while any increase in the minimum wage is to be welcomed, it is wrong to claim such as the national living wage as we know it. It is wrong to claim that it will offset the pressures being created through reductions in the tax policy.

The dangers were recognised by the Institute for Fiscal Studies in its analysis of the new policy, which noted a serious reduction in household incomes. The institute noted that, on average, the new so-called national living wage will only compensate 26% of the losses that households with someone in work will face. They will be £550 worse off per year. That is in contrast to those currently living without the national living wage, who face losses of £750. Despite the seeming benefit, the gap will close as time moves on, as the institute noted. The national living wage offers such little compensation because the boost to gross wages is smaller than the announced fiscal tightening. Even at that, the national living wage will not benefit the households that are being most damaged by tax reductions.

The SDLP believes that the institute made a clear case for the positive outcomes that in-work benefit have brought to workers. In the face of the British Government's national living wage, we have called for a robust discussion on the proper implementation of a true living wage, and we hope to discuss it in the Chamber in the future.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

A true living wage must recognise the cost of living, not what the market can bear. Mr Speaker, thank you for allowing me to contribute today. We support the motion and the amendment.

Photo of Stewart Dickson Stewart Dickson Alliance

I support the motion and the amendment by the Ulster Unionist Party. We should be glad that it has now clearly broken its links with the party that is introducing this legislation in Westminster.

The issue is one that genuinely affects my constituents and constituents of Members around this Chamber. Many of them have come to me expressing grave concern about the change in the tax credit system. It provides considerable financial support to many of the poorest people in our society, often subsidising, as many people do not realise, employers and wages that are far too low to live on, helping to top up incomes to a liveable level. The tax credit system, therefore, is a vital part of maintaining a decent standard of living for people. However, there are a number of issues with maintaining a large tax credit system. First, tax credits are inefficient, often simply returning the tax that has already been deducted from previous payslips, with the assistance of a large system of bureaucracy. Secondly, tax credits seek to treat rather than cure a central issue: that is, poverty wages. Indeed, tax credits can and do subsidise some of the biggest names in the high street. Those are often the names that aggressively avoid tax.

In those establishments, a full-time worker or even one on a zero-hours contract is working all the hours that they can, but they still cannot afford a decent standard of living. Nonetheless, tax credits play an important role for part-time workers. Tax credits are a vital lifeline to alleviate poverty for workers and children alike. It is for that reason that I utterly deplore the way in which the Conservative Government are going about cutting tax credits in a cruel, uncaring and, indeed, may I suggest, deliberate manner. Again and again, the Tories wheel out the same explanation how they basically are pulling the carpet from under the poorest working families in our country. Apparently, the shiny new national living wage, which we all know is just a rebrand of the minimum wage, is to make up for losses from tax credit cuts, while they happily turn a blind eye to their tax-dodging multinational friends.

Although I welcome an increase in the minimum wage, I reject the cynical attempts of the Tories to trick us into thinking that this is some form of living wage. Furthermore, there is research from the Institute for Fiscal Studies, as others have said. It is simply arithmetically impossible for the increase in the minimum wage to compensate for the loss in tax credits when the gross increase in employment income and the higher minimum wage is about £4 billion but welfare spending as a whole is due to fall by £12 billion. That means an average loss of £200 a year; but, for some, it is upwards of £1,000.

To further insult the intelligence of the electorate last week, the Prime Minister, Mr Cameron, vowed an all-out assault on poverty, despite the fact that his tax credit changes are due to abandon an estimated additional 200,000 children into poverty by 2020.

Indeed, if there is anything that we have learned since the Tory Party secured its majority in May, it is simply this: that compassionate Conservatism is truly dead. The Tories are an undisputed nasty party of British politics, completely out of touch with real life. How can a cabinet of millionaires, who have never known want or financial troubles, ever claim legitimacy in understanding the problems that face my constituents, the ordinary people of Northern Ireland?

Nonetheless, we can make a difference in the lives of those who struggle to earn a decent income and wage in Northern Ireland. We do that by growing our economy, fixing our healthcare system and implementing the welfare mitigation measures that have already been secured. If anyone thinks that the Tories are going to cave in on welfare, they are clearly misguided. Tax credits, however, is an issue on which they are weak. The basis on which they have been concocted is weak. The constituents of Tory MPs, I understand, are already voicing their misgivings on this clearly ideologically-driven and charged policy.

Maybe if all the Northern Ireland MPs turned up to vote, we could put further pressure on the Government. We know that Sinn Féin does not bother to put its pressure on the Government by voting, but where were the missing SDLP and UUP MPs when the vote on the welfare of their constituents was taken? Was it not that important to them? This House was capable of filling its Benches by two parties to vote for money for special advisers. I do not see too many Members here when it comes to dealing with the real people that we all represent: our constituents.

Photo of Dolores Kelly Dolores Kelly Social Democratic and Labour Party

Mr Dickson was doing very well until the last couple of points, I think. He seems to forget that the Alliance Party's sister-party, the Liberal Democrats, was part of the Tory-led coalition Government that introduced many of the initial cuts to people's benefits. Maybe that is a part of the Alliance Party's history that it would rather forget. However, he is right to point out the absence on the Benches opposite of Members who milled in, in their numbers, to ensure that the money for special advisers was retained. It is interesting that not too many of them were holding their noses going through the Lobby as they were voting for Sinn Féin. The only stench at that time was the stench of money, when they went through those Lobbies in their party's interests.

Unfortunately, it is a sad fact that, in my constituency — I suggest that it is so in all our constituencies — households of families with children will be hit hardest by the tax credit reductions. In 'The Irish News' today, there is an excellent article about Facebook. Mr Dickson also referred to the corporation tax loopholes that prevail amongst many of the friends of the Tory cabinet. The article states that Facebook has to pay a corporation tax bill of around £5,000: full stop. That is less than the tax that an average worker on a salary of £26,000 would pay. Surely, there is something inherently wrong about that. Mr Dickson is right to point that out.

I think that there is a slow burner of Tory Back-Bench rebellion. I do not think that Tory MPs will be able to sustain that and face many of their constituents, particularly in the north of England where families will be hit harder and quicker than many others in the south of England. Therefore, Mr Dickson is right to point out that MPs should be present in their numbers to vote down these odious Tory plans.

What we see across the water is that Mr Cameron has said that he is not going to stand again as Prime Minister. We see the wannabes line up to take his place.

Of course, they are all trying to move further and further to the right. They are waging war against people on benefits but not against their employers. This is hitting working families hardest: these are not people who do not want to work; they are people who are in work. Quite often, the money from tax credits goes towards the payment of childcare.

It is lamentable that the Executive were taken to court by the Committee on the Administration of Justice over their anti-poverty strategy and found guilty. That is a damning indictment of this Executive. Let us not hear the wailing cries about what others should or should not be doing. We should want to find out more and hold to account the Executive parties, in particular the two big parties. They have the responsibility to adopt an anti-poverty strategy that can allay some of the worst excesses of the Tory plan for people here who are finding life very, very tough.

I am sure that we all know people — not just constituents but people in our family — who are weighing up whether it is worth their while to take a job or whether they need to stay on benefits. We all know that working is of benefit to individuals' self-esteem and to their role in life. By working, they provide a role model for their children. However, when deciding whether to take a particular job, people have to weigh up the financial pros and cons and whether their family might suffer as a consequence. Very often, people are having to make very real, tough decisions. Our party is, therefore, very much behind the motion. Not only does it highlight the discrepancies and the failed ideology of the Tories, it accepts that it is not enough to wail and cry. When it comes to the friends of the Tory Cabinet, we will look for and support any ways of closing the loopholes in Westminster.

Photo of Basil McCrea Basil McCrea NI21

I join others in saying that I am surprised that the Chamber is so empty for what is, I think, a really important debate. In fact, I was a little surprised that, when the cut in tax credits was announced, it did not achieve as much prominence as welfare reform, which has dominated political discussion and the popular press. To my mind, tax credits have a much deeper impact on our society and on what we are trying to do, because they affect people who are in work and trying to make something of their lives, so it is useful that we are having this debate. I hope that the issue is being addressed in other areas, too, because, if you take such an amount of money out of our economy, you will not only create hardship but you will, I suspect, run the risk of civil unrest. I do not say that lightly.

I listened to David McWilliams, an economist in the South famous for predicting the crash. He was saying, and I have a great deal of sympathy with this, that the whole balance of an economy lies in giving some incentive for people to work harder, and, if they work harder, they will get more money. That is a positive. I am not totally socialist in my outlook on that; I want to reward people who work for a living. However, I also have to say that, if the gap between those who have and those who do not have increases exponentially, as it appears to be doing now, ultimately, you will have an unstable place that you will not be able to sustain.

An issue raised by a number of contributors is that the Tories appear to think that everything is equal across the land. What works in London does not work in the Midlands and most certainly does not work in Northern Ireland. I was not at the Tory conference — I do not think that I have ever been to one — but I heard hear from people coming back that the Tories are very pleased with the way that the economy is going. They point to the figures and say, "Our policies have worked; look at the way things are going", and they will point to here.

Photo of Dolores Kelly Dolores Kelly Social Democratic and Labour Party 4:30 pm, 13th October 2015

I thank the Member for giving way. Is it not a fact that real wages in Northern Ireland have dropped by 9% in the past number of years?

Photo of Mitchel McLaughlin Mitchel McLaughlin Speaker

The Member has an extra minute.

Photo of Basil McCrea Basil McCrea NI21

I thank Mrs Kelly for that point. The key issue, and perhaps she is aware of this, is that there are Members of the Assembly — Ministers — who keep telling us that the economy is going really well here. However, this very helpful briefing from the Department for Social Development that examined the median household income in Northern Ireland states that it increased from 2002-03 to 2008-09 but that it has been in decline since. In fact, median income levels in Northern Ireland for 2013-14 are lower than in 2002-03. We have gone right back. When people tell us that things are getting better when they patently are not, we have a problem.

I stayed on for this debate, despite the absence of numbers, in order to say that this is a very real and pressing issue. I am not sure how, given the sums of money concerned, the Assembly can address it. However, if we do not, the people of Northern Ireland will look at government in general, including us, and say, "You are not making my life any better; you are making it worse."

The big issue that we have to address is how this is put on the negotiating table. I am not sure; perhaps those involved in the talks can say whether it features or not. For all the talk about welfare reform, it is only part of the issue: tax credits are fundamental. It is insidious when you try to convince people that they should go out and get work —

Photo of Stewart Dickson Stewart Dickson Alliance

I thank the Member for giving way. I appreciate what he is saying, specifically about the talks, because the reality is that tax credits will pile on top of the misery of welfare reform. However, we in Northern Ireland have substantially mitigated welfare reform. Therefore it is important that we deliver the welfare reform package that was agreed at Stormont House and at Stormont Castle, because, if we do not, we will have even more misery once the tax credit cuts hit us as well.

Photo of Basil McCrea Basil McCrea NI21

I agree with Mr Dickson on that, but his intervention highlights the thing that I find most strange. The mitigation that we have for welfare reform and the effort that we put into it, which I personally think we have to take, are in stark contrast to tax credit cuts, which we appear to have ignored in their entirety but which are just as detrimental to the people of Northern Ireland. Whoever is doing the negotiations needs to address that issue.

Photo of Leslie Cree Leslie Cree UUP

I will be very quick, because I realise that I do not have much time. In his summer Budget on 8 July this year, the Chancellor announced a range of measures to be taken in order to achieve the £12 billion per annum reduction in UK benefit spend by 2019-2020. Included in the measures was a package of reforms to tax credits, including reducing entitlements for many households.

Tax credits are reserved matters, and changes could be introduced in Northern Ireland without the approval of the Assembly. Tax credits are calculated on the basis of hours and gross income. A household needs to work for a set number of hours in order to qualify for working tax credit, and their gross household income is then used to calculate how much tax credit a household is entitled to.

We are told that approximately 20% of our population is living in relative poverty; therefore a reduction in tax credit will have a significant impact on their lives. Several Members touched on that. The Chancellor said that the new national living wage and the raising of the income tax threshold will offset the loss of tax credits, but there is little clarity on how the phasing of the changes will work out.

The Institute of Fiscal Studies advised in a recent assessment that, while there may be strong arguments for introducing the new living wage, it should not be considered a direct substitute for benefits and tax credits aimed at lower-income households. A higher living wage will certainly help those in employment, although there is some doubt about whether it will increase the UK's GDP. I believe that the reduction of tax credits could increase hardship and undermine the importance of making work pay.

I turn to some of the comments that we heard this evening. First, in bringing forward the motion, Mr Flanagan referred to the £105 million in reductions by 2019, which is an average of £918 per annum for each family. He supports the living wage, but said there should be no cuts to tax credits. He said that people in Northern Ireland are eight times more likely to be below the living wage than those in London. He welcomed the Ulster Unionist amendment.

In moving the amendment, Mr Roy Beggs referred to the Sinn Féin motion, which he said really only whinged and noted various things; no action was called for. He quoted the Prime Minister and the "better pay, less tax" vision, mentioned the higher tax threshold and the Tory peer on no longer making work pay. He was concerned about that, and maybe several Back-Benchers were of the same mind. Our amendment calls for action, and people will not be less well off in the meantime.

Mr Bradley supported the motion and the amendment. He referred to 120,000 Northern Ireland households on tax credits and the losses, again, of £900 per annum. He mentioned the effect on children and said that 101,000 children were already in poverty. He said that the SDLP was sceptical of the national living wage and what it would actually mean.

Stewart Dickson then took the Floor and made the point that tax credits were inefficient and were really a return of tax already paid. Nevertheless, they were important at this time. He referred to the shiny new national living wage, which he saw as a rebranded minimum wage. He referred, this time, to 200,000 children in poverty. He said that the Tories were out of touch with reality on the ground, and that they would not cave in on welfare.

Mrs Kelly said that families with children would be hardest hit. She referred to the north/south split in Great Britain and the Tory opposition to the welfare reforms. She also referred to the legal action on the anti-poverty strategy here against the main parties.

Mr McCrea, bringing up the rear, referred to tax credits and said that they had a deep impact on lower-paid working people here. He talked about the likelihood of civil unrest if this continues in the way it is. He said that Tories were pleased with the way that the economy had picked up, but said that that was not the case. He said that we appear to have ignored tax credits on the bigger scene. I can tell Mr McCrea that they were touched on in the talks this morning. Thank you very much, Mr Speaker.

Photo of Mitchel McLaughlin Mitchel McLaughlin Speaker

Thank you, very much. You were paying attention to the other Members.

Photo of Alex Maskey Alex Maskey Sinn Féin

Go raibh maith agat, a Cheann Comhairle. First, I thank all the Members who participated in the debate this afternoon. As Basil McCrea pointed out, he, and I think all the parties, recognise that this is a very important issue and one that requires fairly significant debate. I thank the Research and Information Service for providing the paperwork and the research pack for Members' benefit. It is worth reading and considering in the time ahead. Obviously, this afternoon just gives the parties an opportunity to express their views on the issue and highlight the major problem that we all have to face.

We have no hesitation in accepting the amendment tabled by the Ulster Unionist Party. In fact, it is interesting that Roy Beggs spent a fair wee bit of his contribution criticising my party, and Leslie Cree followed that up and also decried the fact that the motion noted, acknowledged and so on and so forth, but did not make any specific recommendation that we do a, b or c. That was quite deliberate on our behalf, because we simply wanted to air the issue and get maximum consensus around the Chamber.

In fairness, and I say this respectively to Ulster Unionist Party colleagues, their amendment does not exactly represent the clarion call to mobilise the masses. It basically asks the British Government to try to be kinder to people who may fall foul of their tax credit changes and other tax measures. Nevertheless, it is recognised and respected by our party as a genuine attempt on behalf of the Ulster Unionist Party to add to the motion.

We are very pleased to accept that amendment, and we share the concerns of the Members from the Ulster Unionist Party about the impact that the tax credit changes will bring to bear on many people who will be even more vulnerable following their introduction.

I will actually go further and say to Mr Beggs that most of what he said actually vindicates the Sinn Féin position on trying to challenge and face down some of the welfare cuts that have been proposed by London. Indeed, if the Member will acknowledge it, as late as today at the talks, our party made it very clear. In terms of dealing with welfare issues and budgetary and financial matters, we specifically highlighted the changed environment since the last general election, with the election of a Tory Government, who are now introducing a whole range of other cuts, including the attacks on the tax credit system, which, everybody around the Chamber today has acknowledged, will have a negative impact on the people who we all represent in the various constituencies.

I thank the Members for their contributions. While we may always disagree on some nuance or minor detail, nothing has been said in the Chamber today by any Member from any party that has taken away from the intention behind the motion, which is to highlight what can only be described as an attack on the underemployed and the underpaid — people who, for the most part, are trying to rear a family, go to work and make ends meet.

There are a number of figures presented. The Institute for Fiscal Studies actually says that, even if you take it in the round, with the introduction of what it calls the living wage, about a third of that will actually go back directly to the British Government in lieu of additional tax revenue raising. There are also more limited obligations on welfare benefits and tax credits. Right away, you can see that attempt by the British Government to say, "We're taking this off you, but, here, we're looking after you. We're giving you this other money on the other hand". It still works out less.

The conservative figures — I do not mean the Conservative Party — tell you that families could lose anything from £550 to £900-plus a year after that. Again, no matter what way you look at it, people who are on low pay or low income or who are working a limited number of hours will all suffer as a consequence of those latest announcements by the British Government.

All our party says is that, yes, people who go to Westminster can go to Westminster. We do not "not bother" — somebody said earlier on that we "do not bother" to go. We actually bother a lot to get a mandate, which mandates us not to go to Westminster. That does not mean to say, by any stretch of anybody's imagination, that we do not work, lobby and fight very hard for those who will be adversely affected by British Government legislation. I do not think we have been found wanting on that in any respect. Our voice has been, and will continue to be, heard, and the people who we represent will be effectively represented. I wish well to anyone who goes to Westminster and wants to challenge the British Government. They are entitled to do that. That is their mandate, and good luck with it. However, today and in the short time ahead, all of the parties in the Assembly have our own opportunity to do something about the tax credit cuts that are being imposed on people out there, whatever about how we agree or disagree in our attitudes to welfare.

I heard Stewart Dickson earlier talking about the welfare reform misery. Again that is another acknowledgement that what is coming down the line to people in relation to welfare cuts is not a happy prospect. What we all have to do is work and do our best to mitigate that. There has been a row over the issue for the last number of years. It was a very central part of the Stormont House Agreement talks. That still needs to be on the table in the current round of talks, and it will be. We all still have a responsibility to tackle that problem, which was made worse by the Tory Government in their last number of announcements on their Budget and their projections for the time ahead.

We have a direct responsibility and opportunity in the upcoming talks to tackle, to the best of our ability, the issue of the cuts to welfare, which the British Government are trying to impose on the most vulnerable in our society, and the cuts to the tax credit system. Let us vow to do what we can. We may disagree on what we can do or the extent to which we can do it, but one thing that we can do is unite in our opposition to those tax credit cuts and our opposition to the British Government's continuing assault on the welfare system and attacks on the public services. Do not forget that our block grant is going to be reduced by about £1·5 billion over the next four or five years. This is something that we cannot escape from. I think that Basil McCrea said that people out there will be looking to us to see what we can do to mitigate the worst excesses of Tory rule from London. That is what we have a responsibility to do.

As I said earlier, my party made it very clear today that a big focus for us in the upcoming talks around the financial side of things in terms of the negotiations will be around tackling the welfare cuts. It will be about trying to do what we can around the whole issue of tax credit cuts. I invite all the other parties to join us in doing that.

Photo of Roy Beggs Roy Beggs UUP

In the discussions, will he and his party present achievable objectives? I understand that that has been one of the difficulties to date.

Photo of Alex Maskey Alex Maskey Sinn Féin

All I would say in that regard is that significant progress was made during the Stormont House talks. Whatever about how the wheels fell off the wagon after that, we are very satisfied that very clear and specific proposals were on the table that were agreed by the parties. Today, as the Member will be aware because he was at the meeting, we made it very clear that the landscape has changed since the last election. We will certainly get round the table to try to hammer out the best that we can all do to defend the most vulnerable in our society.

The Member took a few minutes of his time earlier to criticise my party for not having, as he said, specific plans or proposals. We had proposals and specifics, and we dealt with them in the Stormont House talks. I invite the Member to bring forward your party's views. Your party, in this afternoon's contributions, talked about the problems around the tax credit cuts and welfare. Let us hear any ideas that you have. You cannot simply rely on criticising Sinn Féin for not having a plan. If you disagree with the welfare and tax credit cuts, you have a responsibility to bring your proposals to the table. In our bilateral discussions with your party, we have raised that with you. We have asked you to produce your own goods, but we have not heard anything yet. However, the talks, hopefully, will commence in a much more intensive way in the next week or two, and you will have the opportunity to put your proposals on the table.

Photo of Basil McCrea Basil McCrea NI21

Will the Member give way?

Photo of Basil McCrea Basil McCrea NI21

Very briefly, I pay tribute to Sinn Féin. It is a good motion that you have brought forward. You have raised the issue. The stark reality is that £1,000 out of anybody's wage is a significant factor. Even here, if you lose £1,000, you have a problem. We need to fix it.

Photo of Mitchel McLaughlin Mitchel McLaughlin Speaker

The Member's time is almost up.

Photo of Alex Maskey Alex Maskey Sinn Féin

I appreciate that contribution from the Member. It just underscores the importance of bringing such a motion forward today. We are more than happy to accept the amendment. I take encouragement from all the contributions today; the Members who spoke recognise the burdens that the tax credit cuts will impose on families who are working hard to put a loaf on the table.

Question, That the amendment be made, put and agreed to.

Main Question, as amended, put and agreed to. Resolved:

That this Assembly notes the reliance of thousands of low- and middle-earning families on the tax credits system to top up their earnings; deplores the recent attack by the British Government on the tax credits system, which will reduce further the income of thousands of working families and drive them into greater poverty, as well as making it more difficult for people to move into employment; further notes the proposed introduction of an increased minimum wage by the British Government and the increase to the personal income tax allowance but recognises the study by the Institute for Fiscal Studies that shows that the impact of cuts to the tax credits system is much greater than the increase proposed in the minimum wage, which falls significantly short of the wage required for someone to have a decent standard of living; and calls on the Chancellor of the Exchequer to ensure that working households on low wages are not financially worse off following the introduction of the Government’s changes.

Motion made: That the Assembly do now adjourn. — [Mr Speaker.]