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Dawn Primarolo: I am grateful to my right hon. Friend for giving way. This is an important point, which should be made clear to the House. In circumstances in which an employer did not pay or interrupted the payment of the tax credit, action would be taken. I explained to my right hon. Friend that a code of practice is currently being developed with the employers, and that there will be penalties against employers if they try such things.

More important, if the parent--the young woman in the scenario that my right hon. Friend described--tells the Inland Revenue what is happening, the Inland Revenue will move to ensure that she continues to receive her money, and will deal with the employer separately.

Mr. Field: I am extremely grateful to my hon. Friend for putting on the record what she kindly said to me this morning. All hon. Members will want the measure to operate as she describes, and when we have details of it, hon. Members will use their best intentions to make that machinery as effective as possible

I merely register the fact that I have been here too long not to know that we can express wishes in the Chamber, implement reforms and then find that they do not work out quite as we wanted them to. When they were in government, the Conservatives would make changes in housing benefit, everything would seem to be hunky-dory, and then they would come up against their constituents and all hell would break loose. I know that my hon. Friend is aware of the issues, especially given her past interests. She would, however, be aware of them in any event. We must watch the position very carefully.

There is concern about fraud. The hon. Member for Brentwood and Ongar kindly quoted what I had already said about that aspect of working families tax credit. I wish neither to withdraw nor to repeat my observations, but I am happy to agree that the hon. Gentleman reported me correctly.

Again, this is a question of power--power in the workplace. We sometimes encounter a bit of that when we come up for reselection, but generally we are in a privileged position. We are not, thank goodness, in the position of some of our constituents in the real world, who must sometimes deal with not very pleasant employers. It is clear from the work undertaken by fraud officers in the DSS on family credit that some employers want to strike a bargain with their employees, encouraging them to submit false returns in regard to their wages so that they can claim the maximum, which the employers then top up with cash in hand.

My hon. Friend mentioned steps that the Inland Revenue would take to counter the problem. I welcome those steps, but I should add that it is one thing to discuss such matters in a detached, almost clinical way in the Chamber, and another to know how the real world works, and to appreciate the pressure that some employers will put on decent people to connive at fraud. Certain people, of course, do not require any pressure.

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This measure is based on experience in America, where fraud is generally accepted to account for about 15 per cent. of the American equivalent of working families tax credit. If the same happens here, we will face a fraud bill of £750 million. In Committee, we shall need to consider carefully how much more effectively the Treasury will protect taxpayers' money than the DSS--sadly--has in the past.

I have serious reservations, but the Bill is part of the Government's overall strategy to move from what has been, for too many people, a welfare culture providing few chances, to a culture that offers real opportunities in the place of work. It would be entirely wrong for us to see the Bill in isolation from the introduction of a national minimum wage, and from the tax changes that the Chancellor has made and wishes to make in the future. It would also be wrong for us to see it in isolation from the Government's important welfare-to-work initiative, which they will develop further. I am happy to give qualified approval to the Bill's Second Reading.

5.9 pm

Mr. Steve Webb (Northavon): It is a pleasure to follow the characteristically measured and constructive criticism expressed by the right hon. Member for Birkenhead (Mr. Field).

Let me explain at the outset the distinction between the Liberal Democrat and Conservative approaches. Both parties will vote against the Second Reading, but for rather different reasons. The Conservatives' reasoned amendment says that one of the reasons why the official Opposition will vote against the Bill is the fact that it will increase the social security budget.

We welcome the additional £1.5 billion incorporated in the Bill, but that money could have been better spent. I was therefore disappointed when the Paymaster General chose to misrepresent our position, saying that we were opposed to supporting the low paid. On the contrary, we would spend that money more efficiently and in a more targeted way, and give extra help to the low paid.

All the desirable features of the tax credits scheme could have been introduced through reforms to family credit under the existing benefits system. The Bill's unique, distinctive feature--indeed, almost the only thing in it--is that tax credits will be paid through the pay packet. That is also its fundamental flaw. There are four or five substantive reasons why payment through the pay packet is a mistake, most of all--and first of all--the effect on women.

On the radio this morning, the Paymaster General tried to present the measure as pro-women--I would argue that it could be anti-women. This morning, the Paymaster General briefed the press about the recipients of family credit; she knew that we would make a powerful case this afternoon and got her spin in first. She said that half the people on family credit are lone parents, so the purse-to-wallet issue is irrelevant. We agree. She also said that, of the remainder, up to 25 per cent. are couples in which the woman is the principal breadwinner, so if the tax credit goes through the pay packet the purse-to-wallet argument is irrelevant. We agree.

I am concerned about the 300,000 couples receiving family credit where the man is the principal breadwinner. I asked the Library to work out how much family credit is paid to the women in those households. The figure is

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£900 million. The Government can have it one of two ways: either the money will predominantly be paid through the pay packet or it will not. If not, all this guff about the beneficial effects of paying it through the pay packet goes out of the window, because for lone parents it does not matter and the self-employed and women breadwinners are irrelevant. In respect of couples where the man is the principal breadwinner the response is, "It will go to the woman anyway."

If the money is paid through the pay packet--as the Government want, and as they have set up a huge bureaucracy to achieve--women will have to negotiate with their partners to get back the £900 million that they currently receive.

Ms Keeble: Perhaps because there are not many women on the Liberal Democrat Benches, the hon. Gentleman has not been involved in the kind of discussion that Labour Members have had. Does he not accept--[Interruption.] This is a perfectly fair point. Does he not accept that the child care tax credit--which will pay for child care, either on invoices or receipts, and will go straight to the person giving the care--will make it possible for women, for the first time, to go out to work knowing that they can have quality, flexible child care? That will be greatly beneficial for women and is what makes the measure positive for women.

Mr. Webb: The hon. Lady points out the beneficial effects of subsidising child care. I would argue that there is a more effective way of achieving that, rather than having a child care tax credit that reaches beyond those on £30,000 a year. I accept what the hon. Member for Gravesham (Mr. Pond) said about £38,000 being an extreme figure, that five kids meant £150 a week and all the rest of it. Even so, stretching the figure to £30,000 a year is hardly targeting the low paid. That is not a sensible way to spend public money.

We should use the same money--not extra money--on cash subsidies for families with younger children and allow parents to choose whether they want to pay someone to look after their children or whether they want to do it themselves. The Government are obsessed with paying people to look after other people's children; they do not give people a choice.

Mr. Pond: On the particular example of how well targeted the working families tax credit is, the hon. Gentleman will be aware of the work of the Institute for Fiscal Studies, which tells us, of course, that the greatest benefit will be obtained in those deciles in the lower part of income distribution. Surely that suggests that the measure is rather well targeted, certainly in comparison with other ways of spending the money.

Mr. Webb: As the hon. Gentleman will be aware, I am vaguely familiar with the work of the IFS. The point that I made to the Paymaster General was that, if the poorest 350,000 or so recipients of family credit continue their present working hours--I accept that, in an ideal world, we want them to work more--they will not get a penny out of the measure: the poorest family credit recipients will not get the money. The people who will get the money are those further up the income scale. I accept that

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huge amounts will not go to people on £30,000 a year, but the benefit will be paid further up the income ladder than I would like.

If we follow the approach that I have described, where the additional cash goes to families with young children, including those on the minimum amount of family credit, that would focus help on the poorest family credit recipients, which I thought was the point.

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