There is no doubt that the Government’s measures to reform the tax credit system are difficult and bracing. But they reflect the fact that these credits are completely out of control. Having been set up by Gordon Brown just a few years ago at a cost of four billion pounds, they are now costing thirty billion and if left unchecked would rise to forty billion.
The Government’s plans to reduce the deficit and tackle the high levels of debt which our country is now servicing were endorsed in the General Election and are essential if the success of our economic plan is to be maintained. This is a plan that has delivered more people in work than ever before and 900,000 new businesses in the last five years.
Although this is a very tough measure, it is greatly compensated by other changes in the tax and welfare system. We are trying to change Britain from a high welfare, high tax and low wage economy to a lower welfare, lower tax and higher wage one. From next April the national living wage which is being introduced will mean a £900 a year pay increase for someone working full time on the minimum wage. By 2020 it will reach more than £9 an hour.
These reforms are part of a single coherent plan which involves a new living wage, lower tax and an increase in the personal allowance, the threshold that will rise to £11,000 next April. Independent analysis shows that eight out of ten working households will be better off as a result of the personal allowance, living wage and welfare changes announced in the Summer Budget.
As I said on television last weekend, it will of course be necessary to keep this measure under review to ensure that those who are negatively affected by it are adequately compensated through the other measures I have mentioned. In particular, rather than people affected being informed by the Inland Revenue just before Christmas I think it would be helpful if local benefit offices were able to engage with those affected individually, since in many cases there are ways of shielding people from at least some of the negative effects.
For those of my constituents in Royal Sutton who may be affected, I shall be engaging directly with the benefits office to ensure that all advisory services are there to serve them as required.