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6.45 pm

Mr. Hendrick: Clearly, stability is important in any relationship. Is the hon. Gentleman seriously telling us that, given the fact that his party is committed to £16 billion worth of cuts, it is prepared to pay £1.3 billion to encourage people to get married?

Mr. Ottaway: First, I do not know where the hon. Gentleman got his figure of £16 billion. There will actually be £8 billion worth of tax cuts. Like the Prime Minister, the hon. Gentleman can pluck artificial figures from the air. We have made it quite clear that we are committed to £8 billion worth of public expenditure cuts and, as a result, will be able to deliver £8 billion worth of tax cuts.

The Economic Secretary to the Treasury (Miss Melanie Johnson): Perhaps I can help the hon. Gentleman with the exact source of the £16 billion. A Conservative press notice last July said that the Conservative party believed that the Government were overspending some £600 per head of population which, multiplied up, came to £16 billion. The Government did not produce that figure; the Conservative party itself released it.

Mr. Ottaway: The spin machine in Millbank has got to try a bit harder than that. In the long term, we hope to give substantially more than £8 billion worth of tax cuts to the British people; that is where the Economic

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Secretary got that convoluted concept. Unlike the Prime Minister and the Chancellor, we are precise and accurate about what we intend to do. Before the last election, the Prime Minister said that he had no plans for any tax increases at all but, in this Parliament alone, we have had something like 45 tax increases. When it comes to accuracy, the Economic Secretary had better put her own house in order before she starts criticising our party.

As I said, the children's tax credit does not replace the married couples allowance; nearly 5 million people entitled to the MCA are excluded from claiming the CTC. I must tell the Paymaster General that I am raising that matter because the Chancellor said that the children's tax credit would replace the married couples allowance. Clearly, it does not and, as a result, millions are worse off. In truth, it is another Labour stealth tax.

The children's tax credit did not replace the married couples allowance; it was introduced a year after the MCA lapsed. As a result, everybody had to pay higher taxes--yet another Labour stealth tax. The children's tax credit is not available to higher rate taxpayers, as it tapers out quite quickly once the threshold is reached. That is another stealth tax and another breach of the Chancellor's pledge to eliminate means testing. It is quite remarkable that the Chancellor, who said at his party conference that he was pledged to eliminate means testing from the welfare system, has presided over the biggest increase in means-testing in recent history.

Fourthly, the credit discriminates against one-earner families. It contains a perverse anomaly that we raised during the Committee stage of the Finance Bill last year. A higher rate taxpayer earning £45,000 per annum will have lost all entitlement, yet a family with two earners on £30,000 each, making a household income of £60,000 a year, will get the credit. Thus, a family with £60,000 a year gets it, whereas a family with £45,000 a year does not. In the debate on the Finance Bill last year, the Government said that they would look into the anomaly, recognising the force of the Opposition's arguments, but they have taken no steps whatever to rectify the anomaly.

Miss Johnson: Would the hon. Gentleman remove the right to independent taxation, which is the basis of our present tax system and allows a man and a woman in the same household to be taxed independently? He is criticising a much-prized feature of our tax system.

Mr. Ottaway: I am not criticising that at all. Independent taxation was introduced by a Conservative Government, and we are proud of it. I was pointing out that the Government had made a pig's ear of the system as a result of their independent taxation. How anybody can design a credit which gives a benefit to the better off but not to the less well off is beyond me. I see that the Parliamentary Private Secretary, the hon. Member for Gravesham (Mr. Pond), is grinning at that proposition. I am happy to give way to him, but I see that he considers it appropriate to walk off, as he does not want to back up the Government's argument.

I come to my fifth point. Because of the Government's incompetence, there is likely to be a low take-up of the credit. The complexity of the forms to claim the children's tax credit is proving to be too great for many people. It is believed that there are about 2 million eligible families who have not applied for it. The figure comes from a

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written answer from the Treasury in February 2001. If Ministers want to bring the information up to date and tell us how many people are entitled to receive the credit but have not claimed it, I look forward to hearing from them.

Miss Johnson: I intended to deal with that later when I replied, but I shall update the figures now for the hon. Gentleman. Some 3.5 million forms have already been returned by people claiming children's tax credit. That represents more than 85 per cent. of the eligible PAYE population. Claims are still coming in and we expect a steady flow throughout the year. People who claim later will not lose out, as their CTC will be backdated to the start of the tax year. We are delighted that the take-up rate is so high. The February figures quoted by the hon. Gentleman predate the start of the financial year and of the new tax credit. That may well account for the discrepancy, but it is a pity that he has come to the House without getting the figures updated.

Mr. Ottaway: What a cheek for the Minister to tell us that hundreds of thousands of people entitled to claim the credit have not done so, and for her to claim that that is an achievement on the Government's part. It is a disgrace that hundreds of thousands of people are entitled to the credit but have not applied. It ill behoves the Minister to take that attitude.

Mr. Hendrick: I thank the hon. Gentleman for giving way again. He says that it is a disgrace that hundreds of thousands have not claimed CTC, yet his party criticises the Government for using publicity to the extent that they have.

Mr. Ottaway: The reason why so many people have not claimed the credit is that the application forms are complex and hard to understand. That is why a simplified system under a future Conservative Government will be welcomed by all, particularly the hundreds of thousands of people who are entitled to claim but have not done so.

Mr. Bennett: I have been listening carefully to the hon. Gentleman, and it is nice to witness his conversion to concern for the under-fives and their families. Can he explain why, for the 18 years of the previous Conservative Government, no attempt was made to use the child benefit provisions to pay different rates to children of different age groups?

Mr. Ottaway: We gave the married couples allowance, which was a universal benefit. [Interruption.] We did not eliminate it. It was there--

Miss Johnson rose--

Mr. Ottaway: I have not given way to the hon. Lady. I am answering the hon. Member for Denton and Reddish (Mr. Bennett).

Mr. Bennett: We are not discussing the married couples allowance. We are dealing with a special benefit for families with children under five. I want to know why the Conservatives did not have that interest between 1979 and the last election. If they were so concerned, why did they not introduce a provision under the child benefit

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regulations that allowed them to pay a higher rate to particular age groups of children? Why the conversion now? Is it because they are in opposition?

Mr. Ottaway: It is because the Conservative party is prepared to look to the future. We do not intend to dwell on the past and drag out old recriminations about why we did not do this or that, or whether amendments were tabled to previous Finance Bills to provide extra benefits for the under-fives--maybe yes, maybe no. We are looking to the future. The new Conservative party is prepared to go forward on proposals such as those contained in the new clause. We recognise that the under-fives are a group of children who need special help. We are targeting the under-fives because we believe that they are most entitled to the benefit.

Miss Johnson: Can the hon. Gentleman explain to me and my hon. Friends why child benefit was frozen for a period and was not increased over the term of the previous Government as it has been by this Government, who have put record increases into child benefit? Will the hon. Gentleman confirm that the previous Government cut the value of the married couples allowance?

Mr. Ottaway: Yes, I confirm that the previous Government cut the value of the married couples allowance.

Our argument is that the children's tax credit has not been designed as well as it could have been. It should be a simpler and a fairer structure. As it is currently designed, the tax credit is a duplication. As the Minister knows, the 10 per cent. band covers the first £1,500 of taxable income. The CTC merely duplicates the relief that would be available at 10 per cent., which is not available to those who are entitled to CTC. Indeed, when the working families tax credit is taken into account, the children's tax credit is a triplication. The credit does not give parents with younger children the level of support that they need and deserve. A discriminating, inadequate, poorly thought out measure incompetently introduced is not the way to support the nation's children.

The next Conservative Government will increase the children's tax credit for parents with children under the age of five by £200 per annum by 2003-04. We will devote £300 million of our £8 billion capacity for tax cuts to reducing the income tax payable by parents with a child under the age of five. That, coupled with our pledges to restore the married couples allowance, to simplify the system, and to arrest the advance of means-testing with all its complexity, means that only the Conservative party recognises the problems of the family and is prepared to do something about them.


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