My Lords, I will come shortly to the Motion before the House today, but before I do, I should briefly address why the Motion is standing my name. In the past few days, we have seen unprecedented focus on the passage of secondary legislation through this House. The further the debate has evolved, the more it has taken on a new dimension—a debate concerning our responsibilities as a House and how we want to discharge them. While I will now turn to the substance of the instrument before us, I will later come on to the context for the decisions before us today.
The regulations before the House cannot be viewed in isolation. They were part of the Chancellor’s Budget in July and form part of our wider economic strategy and vision for the future of our country. In the last Parliament, we made significant progress: through a
combination of savings and growth, the deficit halved as a share of GDP, investment in our schools and the NHS increased and more than 2 million jobs were created. But our deficit is still too high and our debt, as a share of GDP, is at the highest level since the late 1960s.
In the months leading up to the general election and in our manifesto, my party made it clear that reducing the deficit would involve difficult decisions, including finding savings of £12 billion from the welfare budget. The regulations that we debate today deliver no less than £4.4 billion of those savings next year alone. But these reforms are about more than just savings; they are about delivering a new settlement for working Britain—more people in work, with better wages, keeping more of the money that they earn. The quickest and surest way for people to feel secure and able to succeed is a good job that pays well.
This Government have created 1,000 jobs every single day since 2010—1,000 more people each day with the security of a job and a wage. We have raised the personal allowance so that people keep more of what they earn. By next April, more than 27 million basic rate taxpayers will be paying less tax, with a typical taxpayer benefiting by £825 per year. We will go on raising the personal allowance until it reaches £12,500, so that those on the national minimum wage will pay no income tax at all. We will introduce a national living wage, raising the minimum pay for a full-time worker by £900 from next April and by nearly £5,000 by 2020, benefiting 6 million people with the upward pressure that it will apply on wages. I am glad to say that more than 200 firms, including some of our biggest employers, have announced that they intend to pay staff at or above the national living wage before it comes into effect.
We are supporting working families with their childcare needs, too, as we have just heard. We have already brought in 15 hours of care for the most disadvantaged two year-olds and we are doubling free childcare for working families for three and four year-olds— worth around £5,000 per child per year. But if we are to deliver that settlement in a way that is sustainable, reform to our system of tax credits must play its part. We have a situation where too many families are on low pay, and so, to make ends meet, the state has had to top up those wages with tax credits.
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Noble Lords should be aware that spending on tax credits has increased from £4 billion to £30 billion this year, trebling in real terms, while in-work poverty has risen by 20%. That cannot be the right long-term solution for the country. Change was necessary, and we began to do just that in the last Parliament. As a coalition Government, we started to bring the system back under control, reducing the number of families with children eligible for tax credits from nine out of 10 to six out of 10. If we are to meet our commitment to a new deal for working people, we must continue that process of reform.
Tax credits will remain an important part of our support for those on the lowest incomes. Five out of 10 families with children will still be eligible to receive them and we will still be spending the same amount on
tax credits in real terms as the last Labour Government did in 2007-08. But the SI before us today will change their operation in several respects. First, it will reduce the threshold at which working tax credits begin to be withdrawn from £6,420 to £3,850. As we do so, we will protect those on the very lowest incomes, while continuing to bring the overall Bill down.