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Tax Credits Up-rating Regulations 2009

I thank the Minister for introducing the orders, which we look forward to each year. The orders are not themselves controversial, but as the Minister knows, he never gets away with quite an easy ride as finishing at that point. I have three issues to raise with him. First, there is uprating for inflation. I am well aware that tax credits are not uprated by inflation but there is a requirement for the Treasury to review tax credits each year in line with the general level of prices and to publish the result of that review, which it has done. The Treasury decides which general level of prices to use; I understand that it uses the RPI—at least, it has used 5 per cent in its calculations in the document attached to the Explanatory Memorandum. Perhaps the Minister will confirm that. With social security benefits that are income related, the Treasury uses the Rossi index; generally, it is lower than the RPI but last year it was higher. Tax credits are in effect income-related benefits. Why does the Treasury use the RPI rather than Rossi as its baseline for general prices; what is the logic of that? Linked to that, will the Minister comment on deflation? Tomorrow, we expect the RPI to go negative; doubtless Rossi will follow in due course. I do not ask the Minister to forecast the path of the RPI. Most commentators believe that when we get round to this autumn’s numbers, which will be used to drive a number of benefits, we will have a fall of as much as 4 or 5 per cent in the level of the RPI. Will the Minister set out the Government’s policy to items such as tax credits when we hit a period of falling prices? Will they leave tax credits the same in nominal terms, which would imply a significant real increase, or will they consider reducing the nominal amount to recognise the fall in price level? The second issue concerns the impact of tax credits on the Government’s child poverty targets—we have debated that and the Minister referred to it. When the tax credit changes were announced in the last PBR, it was claimed that there was no additional contribution to the child poverty targets because the reduction in the number of children in poverty was measured from the 2007 Budget and did not change between the Budget of 2008 and the PBR of 2008. The PBR was a sort of standstill in terms of child poverty. The Government have reduced the numbers since 1997 but the latest figures for 2006-07 showed an increase in the number of children in poverty and the signs are that the latest statistics will show further rises. The Government’s target was to have lifted 1.7 million children out of poverty by 2010 with an intermediate milestone of 850,000 by 2004. They have lifted to date—or to the latest date for which statistics are available—only 600,000: they missed the 2004 milestone and most people believe that they will miss the 2010 target by a mile. The latest research from the Joseph Rowntree Foundation and the Institute for Fiscal Studies shows that the number of children in poverty with parents in work has risen as a percentage of all children in poverty and that more than half of all children in poverty are now in families with working parents. That suggests that the tax credit programme as opposed to the benefits system is failing to have any real impact on the child poverty figures. It also shows that the Government have failed to create an environment in which work lifts families out of poverty. We firmly believe that in the long run work is the only viable route out of poverty and we thought that the Government shared that view. However, the statistics suggest that the Government’s policies are running in the opposite direction. Will the Minister update the Committee on the Government’s approach to halving child poverty by 2010? That target does not look achievable. The Joseph Rowntree Foundation and the Institute for Fiscal Studies calculated recently that, using benefits or tax credits alone, it will cost £4.2 billion to achieve the 2010 target. I do not think we will be kidding ourselves that, in the context of the shaky finances we find in our country, the Government could even contemplate that scale of redistribution. So what will they do? My third topic is the role of the Social Security Advisory Committee. I was pleased to see that during last year, the Treasury gave up its obstinate refusal to allow the SSAC to report publicly on its work on tax credits. Doubtless, that has something to do with the change of Chancellor, but, whatever the reason, the decision is welcome. Somewhat later than expected, a revised memorandum of understanding was entered into in January of this year. The SSAC’s reports on tax credits should now be made publicly, but we do not have a report before us to assist in our consideration of these orders. Was the SSAC given those draft orders for comment and has it raised any issues? If so, why is there no report in the public domain?