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Ms Harman: My hon. Friend makes a very important point. We must recognise that there must be more flexible benefit patterns for people whose health condition might fluctuate, and more flexible working patterns must be available from employers. We mean business about this--we are serious. We are not happy that 1 million people are simply excluded from the jobs they might want to do because they have health problems or a disability. We must be able to respond to their capacities and abilities and not simply preside over a system which continues to pay them but writes them off.

The next part of our strategy is to make sure that work pays. This Budget helps us take a further major step forward. The introduction of the new working families tax credit--I pay tribute to the work of the Select Committee on Social Security on the issue--together with the national minimum wage, will not only make sure work pays, but will bring greater rewards for work by helping lower and middle-income families with children to keep more of what they earn.

The system will guarantee a minimum income of at least £180 a week for all families where someone works full time. It will guarantee that no working family pays any income tax at all on earnings below £220 a week. It will put a stop to the penal rates of marginal tax which have meant that some low-paid employees have had to pay back more than a pound for every extra pound earned.

Mr. Quentin Davies (Grantham and Stamford): Is the working families tax credit available to the self- employed? If not, why not? Is that not an irrational and invidious discrimination?

Ms Harman: The working families tax credit is available for people in employment, and the hon. Gentleman is right to place on the agenda further proposals to help people prosper through work, whether they are employed or self-employed. It is a major step forward, but further developments will have to be considered.

Mr. Archy Kirkwood (Roxburgh and Berwickshire): I am happy to acknowledge that the Government have responded positively to most of the ideas of the Select Committee in terms of the working families tax credit. However, the biggest barrier to work identified by the Government's research is the difficulty with housing

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benefit. Responsibility for housing benefit is split withthe Department of the Environment, Transport and the Regions, but it would help if the Secretary of State could say a word about the Government's plans for dealing with it in the future.

Ms Harman: We are concerned about the way in which housing benefit is operating, as we do not believe it is contributing to housing policy in the way it should. One of its problems is that it does not fit with our commitment to ensure that every part of the benefits system contains no disincentives to work--and, indeed, provides incentives. Together with the Department of the Environment, Transport and the Regions, we are reviewing the interaction of housing policy and housing benefit, and we will bring forward proposals for consultation shortly. We are well aware of the evidence to the Select Committee--and the Committee's report--which suggests that this matter needs further action.

The new disabled persons tax credit will bring greater rewards from work for people whose earnings are limited by long-term sickness or disability. Their new tax credit will be more generous than the disability working allowance that it replaces, with a lower taper and higher earnings thresholds. We are modernising the system to take account of the aspirations of disabled people in the workplace.

As part of modernising the system to take account of women's role in the workplace and their responsibilities in the home, the Budget takes a major step forward towards a national child care strategy for Britain--the key elements of which are quality, accessibility and affordability. For the first time, the Budget makes high-quality child care affordable for all families. We are providing low-income families with the cash they need to meet the costs of registered child care through the new child care tax credit. Parents will receive up to £70 a week towards the cost of their child care for one child, and up to £105 a week for two or more.

All families below an upper earnings cut-off will receive at least 70 per cent. of their child care costs, and changes to benefit rules will ensure that the lowest earners get even more. It will not just be the lowest earners who benefit--although they will benefit the most. A lone parent with two children under 11 may still be eligible for some child care tax credit even if her income reaches £30,000 a year, and a typical lone parent with one child and an income of up to £15,000 a year is still likely to be paid a full 70 per cent. of her child care costs.

Those changes, together with the announced£300 million investment in out-of-school child care, mark substantial progress in our national child care strategy for Britain. A Green Paper setting out that strategy in full will be published after Easter. I am truly proud of the progress that my right hon. Friends the Chancellor and the Secretary of State for Education and Employment and I have been able to make in delivering that manifesto promise in such a short time. We shall support parents by offering them choice backed up with opportunities, and opportunities backed up with real investment.

That is important for children, for their parents and for the economy. It is important for children because good child care can give them a head start, offering them educational and social opportunities before they start school, regardless of whether their mother works. It is

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important for parents because it is what they want--the waiting lists for nurseries, after-school clubs and child minders are endless--as child care helps them to support their families by working, so that they can bring up their children on income from work, not benefits, and thereby break the cycle of joblessness and social exclusion. Child care is important because Britain's economy depends on women's work--as does the welfare of their families.

What happens in the workplace is also crucial if we are to ensure that people have opportunities to work--change in the workplace must be part of welfare to work. That means ensuring greater access for disabled people and tackling discrimination through our disability rights commission. For lone mothers--indeed, all mothers--it means that we must ensure that employment is family friendly, so that women can balance their responsibilities at home and at work.

Our changes to the tax and benefit systems--supported by the changes to the national insurance system that were announced by my right hon. Friend the Chancellor on Tuesday--will increase the rewards from work for millions of working people. We shall abolish the entry fee for both employers' and employees' national insurance, cut the cost of employing lower-paid workers by raising to £81 a week the earnings level at which employers start to pay national insurance contributions for their employees, and replace the distorting step rises in national insurance rates with a new unified rate of 12.2 per cent.

Together, all those changes are crucial in ensuring that the practice of the social security and tax systems meets the real needs of men, women and children today. The principles remain true to those of Beveridge--first, that work is the best route out of poverty for people who are able to work and, secondly, that individuals have a responsibility to help to provide for themselves when they can do so.

Beveridge's third principle--that society has a responsibility to help people in genuine need who are unable to look after themselves--also remains central. By helping people to provide for themselves when they can, and by minimising and rooting out fraud and abuse, we can better help those in genuine need. We are putting that principle into practice too, which is why we acted to help all pensioners to keep warm during the winter, and provided extra help for the poorest pensioners.

Mr. Simon Burns (West Chelmsford): As the right hon. Lady will remember, 40,821 duff cheques were sent out. Is she aware of the problem that is now becoming apparent--that pensioner married couples who are not on income support are receiving two cheques for £20? What will her Department do to rectify that loss to the public purse?

Ms Harman: The hon. Gentleman points out an error of some 40,000 payments in a programme that involved the better part of 10 million payments. The exercise was unprecedented, as the previous Government's approach to winter fuel was to tax it--not merely at 8 per cent., but at 17.5 per cent. We expect to make better progress next year--when we shall again make winter fuel payments--than we were able to do this year. I have acknowledged that there have been problems, but we shall iron them out. What is important is that, for the first time, we gave £20 to

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all pensioner households and £50 to the poorest pensioner households, in which the pensioners were on income support.

Mr. Burns: Will the right hon. Lady now deal with the second point of my question? I asked her about the new problem whereby pensioners who are married couples and who are not in receipt of income support are being sent two cheques and twice the amount of money, and not the single cheque of £20? What will her Department do to correct that problem? Many pensioners are not sure whether they should cash the cheques or return one, and they are not receiving clear advice when they ring up the Benefits Agency.

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