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Tax Credits Up-rating Regulations 2009

I am grateful to noble Lords who have spoken on the order for the succinct way in which they presented their enormous questions. I shall be involved in a rather less succinct reply if I am not careful, although I am not sure that the noble Baroness is really inviting me to range over the full philosophy behind tax credits and cover every issue since their introduction. I seek to concentrate primarily on the very interesting questions which were raised. At the same time, I hope to be sufficiently broad in my answer to meet both her points and those made by the noble Lord, Lord Oakeshott. If I might say so, he invited me to embark on even wider consideration. I am not sure that this is the place to debate the proposals on inheritance tax, but a passing reference might be in order. I hope that at the end of that I will have convinced my noble friend Lord Jones of the value of what we sought to achieve. On the question of which index we use, tax credits are part of the tax system, and we use the same indexation measure as other parts of the tax system, namely the RPI. Income tax allowances and rate bands are increased every September by the September RPI each year, unless Parliament determines otherwise. Child benefit uses this RPI because that is the uprating used for other non-income related social security benefits. There is a problem with Rossi because, as the noble Baroness says, it would produce rather different figures. At present and in the immediate future, Rossi excludes housing elements, which is appropriate for benefits such as housing benefit and council tax benefit, which are aimed to support housing costs. It is not appropriate for tax credits, which is a further reason why we should use RPI. There is nothing new in that. The noble Baroness suggested that we have been very limited in our onslaught on the challenging issue of child poverty, as did the noble Lord, Lord Oakeshott, who was not overly complimentary about the Government’s progress thus far. I understand that it is the function of the opposition parties to indicated their ambitions, should office ever arrive for the Liberal party or, even less likely, for the Conservative Party, when they would have to translate such ambitions into action and face up to issues in somewhat different terms than merely asking questions. It is clear that in the PBR 2008 we recognise the need for help now, as far as low-income families are concerned. Low-income families and children will benefit not only from these upratings but from wider measures on personal taxation and VAT. I know that the party of the noble Baroness in particular—I am not sure that the Liberal party was that far behind—was somewhat scathing about the 5 per cent reduction in VAT.