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Tax Credits

My hon. Friend is right. As he knows, the integration of the tax and benefits system has removed stigma and enabled people to move from unemployment into work. It has supported families, helped reduce the number of children in poverty and made sure that we have a flexible system that responds to families’ needs. The choice is between a fixed, unresponsive, unfair system and a flexible system that responds to family changes. Within that equation, as he rightly identifies, we need to strike a balance on behalf of the taxpayer and define the limits of that flexibility. In the present system, all drops in income are automatically adjusted when we are notified, so that the family does not lose out. If there is any rise in income over £2,500 a year—a sum lower than that is not notifiable—the family should report an increase of income in year. That strikes a balance of generosity on behalf of the taxpayer and recognises our partnership and the responsibility of society to support children in families, while limiting the cost of the system for the taxpayer.