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Tax Credits Up-rating Regulations 2009

What I seek to emphasise is that we had been concerned to introduce the lower VAT rate because we are all well aware that VAT disproportionately affects lower income families. They will have benefited from our position on VAT. We are going to introduce a range of changes over the next few months, but the noble Baroness is right to say that we need to take stock of the very significantly changed financial and economic position. Where I think she is seeking a great deal of the Committee is in asking me to speculate on the implications of a negative retail price index. Not that I am not tempted to do so, but time is a wonderful thing and we do not have it in unlimited quantities. My noble friend is sitting eagerly beside me, ready to introduce the next debate. There are other items on the agenda today, and not just the Treasury is to have the chance to display its constructive wares on behalf of the Government. More important is that the noble Baroness’s question is fundamentally important. It involves Budget judgments for which we have to wait only a matter of three to four weeks before they are delivered. Those judgments will need to evaluate a situation which has been transformed since last year, and of course will set out the Government’s forecasts and plans on uprating. However, she will rejoice in one factor, and that is that a negative RPI means that even if uprating did not take place, a negative RPI would be an advantage for families because of the consequent drop in the cost of living. Although we have a range of monumental problems around the credit crunch and the recession to which the Budget must be addressed, one of the plus factors for families is that a move towards negative inflation—which the noble Lord, Lord Oakeshott, also predicted with finality and, I am sure, great accuracy—may change the lengths to which their existing incomes will actually stretch. However, the noble Baroness will be the first to recognise that a debate on the financial situation and macroeconomic policy is a little beyond the range of this Committee and marginally above the pay grade of the Minister replying to this debate on child benefits. In response to the more general points, I recognise the anxieties expressed about the 2010 target. The noble Lord, Lord Oakeshott, followed the noble Baroness in upbraiding the Government on it. The target was always an ambitious one and in difficult times it will prove to be even more so, but since 2007 we are expecting to have lifted around a further 500,000 children out of poverty, while before that year we had lifted 600,000. We recognise that the target we set for 2010 is yet to be attained and that there are real challenges attached to it, but I am absolutely confident that my noble friend Lord Jones will give the Government full credit for their achievements thus far in lifting children out of poverty through child tax credits and other related measures. There has been substantial investment in tackling this issue, which we are sustaining. Prevention is at least as important as cure in the form of support. The problem with prevention is that in a period of savage decline in the global economy and the increase in unemployment in all advanced countries, including the United Kingdom, extra burdens will be placed on the Government in terms of giving help to those in very real need. Changes will be introduced over the coming months. We have proven our commitment thus far to achieving our ambition of removing child poverty and to the targets for 2010 and 2020. However, in these difficult economic circumstances, I do not underestimate the fact that those targets will become even more difficult to achieve. However, on the broader strategy, the Committee awaits with keen interest, as undoubtedly do all noble Lords, the Government’s strategy as outlined in the Budget, for which we have to wait only three or four weeks. As regards the rise in tax credits over time, the guaranteed minimum income—my noble friend asked about this—for a working couple without children has risen by 52 per cent in real terms since 1999 from £117 per week to £232 per week as a result of consistent increases to the national minimum wage and to the working tax credit. I am sure that my noble friend will recognise the value of those changes.