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Tax Credits

My Lords, I thank the noble Lord for that. I do not think that I misheard him. I do not disagree with him on negative income tax, but I understood him to say that tax credits did not have disincentive effects. Obviously, I accept that he was talking particularly about America, which may have had longer to refine the operation of the system. My point in encouraging people to study this IFS report is that as tax credits operate in the United Kingdom, there are significant disincentives to work, particularly for the poorest in our society. The principle is that it is quite wrong that the poorest people in society should face a much higher marginal tax rate than the richest people, which is the situation that we have at the moment. In Britain, we have 2 million workers who face a marginal tax rate of more than 50p in the pound and 160,000 who face a marginal tax rate of more than 90p in the pound, which is a very serious indictment of a Government after nine years in office.