Tax Credits

During a debate on the Tax Credits system, Shailesh Vara raises concerns that increasing bureaucracy and responsibility on the recipients is counter productive.

Mr. Vara: The Minister is keen to emphasise the positive aspects of the system. Will he concede, bearing in mind some of the recipients of tax credit are the poorest in the land and some of the most vulnerable, that he and the system are doing such people no favours by increasing bureaucracy and the responsibility on them to make claims without there being a similar impact on the administrators?

Mr. Timms: There is a big impact on precisely the people to whom the hon. Gentleman refers, and that is for the good. For example, the tax credit system has reduced substantially the tax burden on low to middle-income families, precisely those to which he refers. That tax take of 9.8 per cent. on a single earner couple on £21,000, with two children—the manufacturing average wage—is now, according to OECD studies, the lowest rate of any country in the G7. There has been a huge gain for middle and low-income families. The single earner family with two children can now earn just under two thirds of the average wage before they start to pay any net tax. Thanks to tax credits, the number of families with children paying no net tax will have risen by more than 500,000 to more than 3 million this year. Those improvements should attract wide support from across the House."