Finance Bill

That does not detract from the real concern expressed by many Members throughout the House about the loss of the 10p band. Let me draw the hon. Lady’s attention to what some of them have said. At the time of the Budget debate, the hon. Member for Birmingham, Selly Oak (Lynne Jones) admitted:"““I think we have to some extent neglected poorer people who have no children. I think that’s a cause for concern. It is something that needs to be put right in the long term because there are people who are single who are struggling on low incomes.””" Even the Chancellor’s close ally, the hon. Member for Coventry, North-West (Mr. Robinson), said on the final day of the debate:"““I have a bone to pick with the Chancellor and the Treasury Front Bench about the removal of the 10 per cent. basic rate. I cannot believe that that is the last word from my right hon. and hon. Friends on the subject. It is hurting many people whom the Government never set out in any of their policies—I accept that that is a consequence and not an intention of the Budget—to hurt. Indeed, when the 10p rate was introduced it was precisely to alleviate those problems that, in part, we are now creating.”” —[Official Report, 27 March 2007; Vol. 458, c. 1365.]" He went on to say that he hoped there would be a review of the decision to scrap the 10p rate. Essentially, the Chancellor is relying on tax credits to soften the blow inflicted by the loss of the 10p band. In deciding whether it should be retained, we should examine the tax credit system. The impact of the abolition of the 10p band is even tougher on the poor and the low-paid when we take account of the fact that only 61 per cent. of people entitled to working tax credit claim it. Among people without children, the figure drops to 19 per cent. The Treasury itself has budgeted on the assumption that only 25 per cent. of the working tax credit due to childless households will actually be claimed—and who can blame people for being wary of becoming embroiled in tax credits? Although we support tax credits in principle and believe that they can and should play a continuing role in alleviating poverty, the tax credit system is broken and in need of drastic reform. Referring to tax credits in connection with the abolition of the 10p band is simply not a complete answer. Their effectiveness in mitigating the impact of the loss of the 10p band is undermined by the current chaos in the tax credit system. The fundamental problem is its complexity. As the National Audit Office has said, that complexity underlies the problems with fraud and overpayment. The more complex the system, the more likely it is that mistakes will be made. People claiming tax credits must fill up a 12-page form and wade through a 60-page explanatory note. Robin Williamson, of the Low Incomes Tax Reform Group, recently commented:"““A specialist in differential equations from Oxford tried to calculate someone’s entitlement””" —tax credit entitlement, that is."““He got it wrong.””"