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Tax Credits Up-rating Regulations 2009

Like those of the noble Baroness, Lady Noakes, our questions and comments focus on the appropriate index for uprating and the outlook for inflation on the one hand and the affordability and complexity of child credits on the other. On the indices, people perhaps do not realise that retail prices are already clearly falling. Because we are mesmerised in this country by looking just at the 12-month rate, unlike a lot of professionals in the market who look at all sorts of indices including three-month rolling figures, the retail price index has already fallen by 3.8 per cent over the past four months and clearly has a good deal further to fall. Deflation has well and truly arrived. In particular, what will happen next year to these upratings? For what it is worth, my central forecast is that money GDP over the next year will fall by 10 per cent; that is, a 5 per cent real fall in economic activity and a 5 per cent fall in prices. As the noble Baroness said, it is very much common ground among all serious commentators that we are looking at a period of falling prices. Can we have a categorical assurance that however fast prices fall over the next year, benefits will not be cut? As regards whether or not the policy instrument is working, do the Government not see that tax credits are not getting through to the people who need them? They are far too complex, and there is too much error and fraud. In addition, too much is going to people who do not need them at all, particularly to those who are well up the income scale with family incomes of as much as £50,000 a year. Is that really a priority for public expenditure in today’s recession and these difficult economic times? Clearly, the Government are failing abysmally on the child poverty target. Does the Minister recognise—the noble Baroness did not mention this—that this is a relative target? The Government have failed partly because of the rapid increase, under them, of incomes at the top end of the income scale. When will the Government do something about excessive greed and rapidly rising incomes at the top? Unlike the Conservatives, we on these Benches do not think that giving tax breaks for dead double millionaires through inheritance tax is either affordable or sensible in a recession. That sort of policy will only make the achievement of the child poverty target much harder. It is a relative target, which depends on relative incomes. Do the Government recognise and will they face up to that fact?