Guardian's Allowance Up-rating Order 2012

My Lords, I am pleased to introduce the draft Tax Credits Up-rating Regulations 2012, the draft Guardian's Allowance Up-rating Order 2012 and the draft Guardian's Allowance Up-rating (Northern Ireland) Order 2012. In my view these regulations and orders are all compatible with the European Convention on Human Rights. The regulations and orders before the Committee put into effect a number of reforms to tax credits announced in Budget 2010 and the Autumn Statement last November. The changes I will now outline will ensure that we tackle the deficit in a fair way and that tax credits are targeted at those who need them most. Tax credits are made up of a number of different elements for people in different circumstances. Some of these elements will continue to be increased by the CPI at 5.2 per cent, including elements for disabled workers and severely disabled workers, for children, disabled children and severely disabled children. However, the couple and lone parent elements of working tax credit will be frozen and the basic element and 30 working- hour element will remain frozen. The family element of child tax credit is currently payable to families with an income of up to £40,000. From April 2012, this threshold will be removed and therefore the family element will be withdrawn immediately after the child element. A disregard of £2,500 for falls in income will be introduced, meaning that any in-year falls of less than £2,500 will be disregarded when recalculating the award. The 50+ element of working tax credit will also be removed. This is time limited to one year and will not affect anyone who is currently claiming. Couples with children will need to work at least 24 hours combined, with one partner working at least 16 hours per week, to qualify for working tax credit. Previously, depending on a family's circumstances, new claims and changes of circumstance could be backdated by 93 days. From April 2012, this will be reduced to one month. The changes the Government have made will ensure that we tackle the deficit in a fair way and ensure that tax credits are targeted at those who need them most. Reforms to tax credits included within these regulations and orders mean that support for higher income households will be reduced by increasing the rate at which tax credits are withdrawn while reducing the threshold at which tax credits are paid. Under the previous system around nine out of 10 families with children were eligible for tax credits. This reduced to closer to seven out of 10 families in April 2011 and will be reduced further to six out of 10 from April 2012. Spending on tax credits has increased from £18 billion in 2003-04 to an estimated £30 billion in 2010-11. The system of tax credits under the previous Government was not only unsustainable in fiscal terms, it was also unrealistic in terms of meeting its stated policy objectives. Let me be clear that this Government are committed to making work pay. The best way to help working people is by taking them out of tax altogether. In April 2012 we will make a £630 increase in the income tax personal allowance, taking it up to £8,105. This is in addition to the £1,000 increase in April 2011. Together, these increases will benefit 25 million individuals and take 1.1 million low-income individuals out of tax from April 2012. Universal credit will unify the current complex system of means-tested out-of-work benefits, tax credits and support for housing in one single payment. The award will be withdrawn at a single rate, with the aim of offering a smooth transition into work and encouraging progression in work. For parents on working tax credit, the Government continue to provide support for 70 per cent of childcare costs, up to a weekly limit of £175 for families with one child and £300 for two or more children. This support will be extended under universal credit to those working fewer than 16 hours, allowing 80,000 additional families to receive help with childcare costs. This will give second earners and lone parents, typically women, a stronger incentive to work. This Government are committed to restoring the country to sustainable growth and prosperity. We know that it is not an easy path to tread and we have not shirked our responsibility to take the tough decisions to return the UK to economic stability. It is in that context that I commend these regulations and orders to the Committee.