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Ms Keeble: Those are important points, but does the hon. Gentleman not accept that one of the reasons why we need to get women to go to work is that the economy needs some of their skills? As we know, there are certain sectors where we desperately need women: for example, nursing. Child care is a real barrier; it is wildly expensive. For all sorts of reasons, therefore, it is important to ensure that women have the option of going back to work, and flexible child care should be available if they work shifts, so that they can work and be sure that their children are being properly looked after.
Mr. Webb: The hon. Lady raises an important problem: the loss of women's human capital while they are out of the labour market and the loss of their valuable skills, which we do not want to lose. She says that it is important that they have flexible child care. If we follow my route of giving them cash through extra money for the under-fives, they can spend it on flexible child care which does not have to be registered, whereas the Bill allows only for registered child care, which is often not available for people such as nurses who work shifts.
The evidence on the incentive effects of the scheme--making people who are out of work move into work--is almost invisible. The hon. Member for Gravesham mentioned the Institute for Fiscal Studies. We understand from the "Today" programme that it has calculated that the incentive effect might lead to 40,000 extra families working.
I have no idea whether that is the right figure; nor do the Government. Here is a £5 billion scheme--the existing£3.5 billion and another £1.5 billion on top--and the incentive effects are simply not known; the Government do not have a clue.
We support that £1.5 billion because it helps poor people in a static situation. If it has a beneficial incentive effect, that is all well and good, but that is not the key point. The measure will benefit people who find it hard to get by but there is no evidence that it will have a big incentive effect.
Ms Margaret Moran (Luton, South):
Will the hon. Gentleman not accept the view of the Child Poverty Action Group that the measure offers a well-targeted approach to dealing with those working families in poverty? It says:
Mr. Webb:
The hon. Lady might like to look at what the Chancellor of the Exchequer did in his first Budget.
The Chancellor has finally caught up with the point that we already knew: the child care disregard was indeed an ineffective way in which to support families and children; it did not work. The question is: is it better to have a child care tax credit that reaches people on £20,000, £25,000, £30,000 or more, and probably does not do much for people on very low wages because they cannot afford to pay for registered child care; or would it be better to pay the money in cash, through child credits on the tax credit, to families with younger children?
The Government must trust people. They must let them have the cash and decide what to do with it, rather than insist that they spend it in a particular way. Then those people can decide who brings up their children.
The effects on women are clear cut. The response of the Minister so far has been, "Not to worry. If there is a problem about whether the woman will see the money, there is a choice," but the right hon. Member for Birkenhead has raised the important issue of relationships in which there is no equality--where there is an imbalance of power. One example is violence in families. If we were debating a different issue, Labour Members would be telling us time and again that violence in families is a huge problem and that tens of thousands or hundreds of thousands of women may suffer abuse or unequal power within a relationship. If there is a choice as to who gets the money, who will get it in those families? Will it go to the mother or to the father? We all know the answer. In those families, the money will go to the father.
Dawn Primarolo:
Perhaps the hon. Gentleman would like to explain to the House the current arrangements for family credit. Although he touches on an important point about violent relationships, the family credit system does not deal with it either because the woman can be forced to sign the money away and, as he knows, it can be cashed by either partner.
Mr. Webb:
Inevitably, there cannot be a perfect system that takes into account difficult family relationships, but the present presumption is that the money will go to the mother. That is better than a system that provides a balanced choice. My hunch is that the new system will be loaded to try to encourage payment through the pay packet. If it is not, what is the point of the Bill? The Bill has only one significant provision--payment through the pay packet.
Last night I was surfing the net--my nickname is "Worldwide"--and at 10 o'clock I came across the Inland Revenue website. I discovered a memo from the Inland Revenue on the working families tax credit and disabled persons tax credit. I have seen Labour Members waving that document around. It comprises pages of riveting detail about the complexities of the new scheme. It does not just say that the money is to be paid to the carer, but raises a variety of issues.
Let me give the House one example of the absurdity of the regime that we are about to introduce. Let us suppose that someone is on strike. It is a shame that the
hon. Member for Bolsover (Mr. Skinner) is not here because we could be to referring to a striking mineworker who receives the tax credit through his pay packet. When he goes on strike, he no longer receives pay from his employer, so what happens to the tax credit? To get the tax credit, he has to get a form from his employer saying how much tax credit has been paid. He then sends the form to the Inland Revenue which pays him the money directly until the strike is over, when he sends the Revenue another form to enable the tax credit to be paid through his employer. How many people in such circumstances would be able to get a form from their employer? As there are not many mineworkers in my constituency, I am more concerned about the children who will be affected. Any interruption in the payment of tax credit--which would not occur under family credit--will create problems for the children concerned.
Dawn Primarolo:
The hon. Gentleman touches on an important issue relating to certainty of delivery of the tax credit. He uses the example of a trade dispute. I hope that he has noticed that the code of practice and the procedures that are notified by the Inland Revenue state that the Inland Revenue must be informed. If an employer refuses to co-operate, the employee can tell the Inland Revenue and it will pursue the matter. As the hon. Gentleman knows, the Inland Revenue already has powers to demand and obtain information which it uses in respect of PAYE and national insurance contributions.
Mr. Webb:
Does the Minister accept that any period without cash could cause problems for the children concerned? How long does she think it will be before it is clear that an employer is not co-operating? Let us suppose that a striking employee is paid once a month and approaches the payroll office towards the end of the month. The payroll people agree to provide a certificate but say, "We're a bit busy at the moment. Maybe at the end of next week." Time goes by and the child goes without.
Dawn Primarolo:
The hon. Gentleman will also know that the provisions state that an employer who fails to deliver to the employee as specified by the Inland Revenue would be in default and the Revenue would deal with the matter. The hon. Gentleman is trying to suggest that people will go without money, yet there are provisions to ensure that that does not happen.
Mr. Webb:
The hon. Gentleman may wish to intervene.
Mr. Duncan Smith:
I am grateful. The real point--which the Minister has totally missed--is that she assumes that all the people whom the hon. Member for Northavon (Mr. Webb) is describing are capable, clear thinking and not likely to be under any pressure from a difficult employer, particularly at a difficult time. That is quite the wrong assumption. The worst-off--the people who are under most pressure--will not be able to make those assumptions, and they will be scared.
Mr. Webb:
There may be redress after the event, and it may be that--some weeks down the line--it gets sorted
In terms of the effect on women, the Minister cannot have it both ways. Either the carers will claim it--in which case we do not need the whole edifice of bureaucracy--or the credit will be paid through the pay packet, in which case women will be deprived of £900 million, which they will have to try to ask for.
The second big problem is the effect on business. I have tabled written questions to find out whether the tax credit will be a burden on small firms. I have asked at what point does somebody's earnings become such that the tax credit to which he is entitled becomes greater than the income tax and national insurance that his employer has to pay to the Government.
A two-child family with one earner can be earning £200 a week--£10,000 a year--and have a net entitlement. In other words, a small employer who employs one person, who has two kids, on £10,000 a year will have to pay net money to the employee, and the Government will have to sub money through the firm. Now, £10,000 is not a particularly low figure, and I have tried to ascertain how many people are in that situation. That is a complex question--it depends on the number of children someone has, the earnings of the spouse and so forth.
I have found out how many people are working for smaller firms--firms with less than 25 employees; most of the firms will have very few employees--and earning less than £10,000 as a family. There are 200,000 couples with children in that position, and another 200,000 lone parents. If all of those people were the sole employees of firms, small businesses would have to pay them money and the Government would have to pay the small businesses money.
The Minister will say, "Not to worry. All the firm has to do is to say to the Government that it thinks that it will have to pay some net money next month, and that it would like the cash up front." However, the firm may have to give at least three weeks' notice, unless it pays on a weekly basis. What if the Inland Revenue is a touch bureaucratic? It is quite busy at this time of year. Might not it have other things on its mind?
Clearly, there will be cash ramifications for small firms. The small businesses of this land are not jumping up and down with joy at the prospect of administering the scheme. However, the Government do not know how many firms are in that position. I have asked them--the answer is not available. How can the Government introduce such a scheme without knowing what effect it will have?
The scheme will not just affect firms. What about people with complex circumstances? What about people who change their job? The Inland Revenue document says that if someone works for two employers, the person who pays that individual the most pays that person the tax credit--fine. If someone starts a second job, the tax credit is paid to that person while the system is being worked out. It is then paid to the employers, once the system is
up and running. If someone leaves one of the firms--which may be quite common for people with multiple employment--that person tells the Inland Revenue, and gets a form from the employer which gives the amount of tax credit. He sends that to Revenue, which pays him directly while the matter is sorted out. It tells the second employer that the employee has moved, and then that person starts getting the tax credit from that second employer. What is the point of all that bureaucracy? Why not just pay family credit? Why not just get on with it? What is this change achieving?
A worse example than changing jobs is changing family circumstances and relationship breakdowns. The tax people are not used to dealing with cohabiting couples--tax allowances are given to married couples. However, the benefits system is used to recognising cohabiting couples. Suppose a relationship--between a cohabiting or married couple--breaks down. What happens to the tax credit? Suppose the man is getting the credit through the pay packet. Does the woman who has moved out contact the Revenue and say, "I have moved out with my child"? Again, the woman could be leaving because of a violent relationship. If the Revenue contacts the firm to say that it should stop paying the tax credit, what is the first question that the small firm will ask? It will be, "Why are we not paying you this tax credit any more?" The answer might be, "Well, the wife's left me."
The new system is much more intrusive than paying family credit to the carer, because in that case, if the wife leaves, the money goes with her and the children do not have to go without money for a week or two weeks. Under the new system, the wife has to apply to the Inland Revenue, at a very difficult time in her life; the Revenue has to send a letter to the employer; the employer has to tell the employee and perhaps ask embarrassing questions; and the employee may appeal to the Inland Revenue and say that his wife has not left him and is merely visiting her sister. That is all irrelevant, so why not stick with family credit?
"Only 5 per cent. of Family Credit Claimants benefit from the current childcare disregard. The new childcare tax credit will help more families. It is more generous and is payable for children up to age 14".
It is targeted more closely on the poorest families, so it will benefit those families to a greater extent than family credit could ever do, with cash benefit in the way that the hon. Gentleman implies.
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