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6.45 pm

The amendment will also partially--but not fully--solve the problem raised in Committee with which the Government failed to deal. If there is a dispute between a couple, who should receive the benefit? In Committee, the Financial Secretary said that the presumption was that, in the case of a dispute, the money would go to the spouse or the partner with care. The Government also said that the benefit could be claimed with just one signature on the form and that payment would go to the signatory. So whoever grabs the form first will be the winner--and that will not necessarily be the spouse or partner with care.

It would be helpful if the Minister at last clarified the position. If there is a dispute between a couple, who should receive the working families tax credit? If the working spouse completes and signs the form and the non-earning partner does not sign, will the payment go to the working spouse or to the partner at home who takes care of the children?

Dawn Primarolo: I can assist the hon. Gentleman now. When there is a dispute and the form is not completed, the Inland Revenue will establish contact and ask why. That does not happen at present with family credit: if the form is not completed, no payment is made. The Inland Revenue would have to be satisfied that it was not a claim of the type the hon. Gentleman describes--one partner who does not have a caring responsibility is trying to secure payment of the tax credit. A situation in which someone--the man, I presume the hon. Gentleman means--grabs the form, fills it in and receives the tax credit without the mother's knowledge would not arise.

Mr. Gibb: That may be the case during the transition from family credit to working families tax credit, but what about new claimants for working families tax credit? How will the Inland Revenue contact someone who has not returned a form? How will it know that there is a claim to be made? I do not understand how it will work.

Dawn Primarolo: The hon. Gentleman saw the forms in Committee. He will remember that they must be filled in by both parents--except in the case of a single parent--and the details must be included on the form. If the details do not appear, an inquiry will be triggered under the new and the transitional rules.

Mr. Gibb: We shall see how the hon. Lady's explanation works in practice. We were told in Committee that the claim could be processed with just one signature and that payment would go to the person who signed the form--that is, whoever filled in the applicant box. The form states that the payment will be made to the person who completes the left-hand, not the right-hand, column on the form.

Dawn Primarolo: I am grateful to the hon. Gentleman for giving way again, because this is an important point.

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One signature will be accepted only in extremely exceptional circumstances, such as in the case of a violent relationship. For example, if the man refused to complete the form--that is, sign it--but his partner was able to supply the details of his earnings, that information could be cross-referenced in the Inland Revenue to confirm that the details were correct. The partner would be the only one to sign the form, but in those circumstances, the claim would be categorised as low risk. We would rule that the claim was correct and the benefit would be paid to the partner. That is what would occur if there was only one signature on the form but two parents in the family.

Mr. Gibb: I am grateful to the hon. Lady for clarifying the situation.

The amendment will help the new benefit to be administered in a way that is responsive to the concerns of low income families. It will deal with the Bill's fundamental flaw: increased stigma. The hon. Lady did not address that issue in her comments. Increased stigma is a real concern, and I urge the House to support the amendment in an effort to remove the stigma that many low income families and lone parents, who are struggling to make ends meet and to bring up families while working, will face if the Bill reaches the statute book unamended.

Mr. Webb: Grouped with amendment No. 7, which the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) has just moved--I agreed with many of his comments--is amendment No. 6. As far as I can tell, it would have identical effects, but mysteriously, it relates to a few lines later. Both amendments are concerned with election to receive tax credits directly from the Inland Revenue.

The present proposal is that the Government will force lone parents to receive their benefit in a particular way--through the pay packet. Governments should force measures on people, possibly against their will--a lone parent might prefer to receive the money another way--only with very good reason, and we have been given no compelling evidence that lone parents should be forced to receive the money through the pay packet.

Paragraph 21 of the draft regulatory impact assessment states:

"The Government believes that employer payment of the tax credits is of crucial importance in helping to reinforce--and demonstrate--the link between receipt of the tax credits and the rewards of work." One might paraphrase that as saying that the Government believe that lone parents are so stupid that they cannot grasp the fact that they receive family credit when they work, but not when they do not; and they must receive the credit through the pay packet so that they understand that it is something to do with them working. That is absurd, patronising and insulting.

There is no reason to demonstrate to lone parents the merits of work because, I assume, they are capable of adding up two numbers and, in any case, both payments--salary and tax credit--might come through giro credits, so that would demonstrate that both were coming from work. What, then, would be another argument for the proposal?

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The hon. Member for Bognor Regis and Littlehampton has mentioned that there is apparently a need to reduce stigma. Yet as we have heard, the take-up rate on expenditure for lone parents was 91 per cent. in 1995-96. One can scarcely imagine a system with 100 per cent. take-up because there will always be people who have just fallen into the relevant circumstances for eligibility, but have not yet made a claim, so 91 per cent. is as near 100 per cent. as we are ever likely to get. That implies that there is virtually no stigma for lone parents who are the subject of the amendments. Almost all of them claim family credit, so why must they be forced to take the working families tax credit through the pay packet?

Another way of considering the issue is to ask whether there is any problem in forcing the payment through the pay packet. There are three main problems. The first is the administrative burden on business. That is the subject of the next group of amendments, so I shall not dwell on it. If half of all family credit recipients are lone parents, half of all tax credit recipients will be credited through the pay packet, and that is a large number of people whose employers will have to administer the scheme. If the amendments are made, and many lone parents opt for direct payment, there will be a greatly reduced burden on business.

Dr. Nick Palmer (Broxtowe): Does the hon. Gentleman agree that if the employer has to set up any procedure at all for coping with payment, he will do most of the work anyway?

Mr. Webb: I am not sure that I understand the hon. Gentleman's question. Under the proposed regime, someone who employs a lone parent will be obliged by the Government to implement the scheme and deliver the credit. There will be a fixed charge for doing that for the first person and a variable charge for additional or subsequent employees. I certainly accept that there will be a fixed start-up cost, which is why there is no reason for employers to have to bear that cost in the first place, but there will also be a variable cost, as the regulatory impact assessment points out.

The second problem is that the palaver created by people who change jobs will be extraordinary. A lone parent who moves from welfare into work--he or she is the apple of the Government's eye--will start a job and notify the Inland Revenue, or their employer will do so. Initially, the money will be paid by the Inland Revenue to the employee, to give the employer time to make arrangements. The employer will then begin to pay the credit directly through the pay packet.

If the lone parent then changes jobs, the original employer must tell the Inland Revenue that the employee has stopped working for him. The Inland Revenue will tell the employer to stop paying the credit and begin to pay the lone parent directly until the new job starts. If the lone parent has been claiming for almost six months, the payment might go direct to the claimant or through the new employer--I am not sure which.

All that is unnecessary. At the moment, lone parents receive family credit monthly through an order book or direct into their bank account. That is not a problem. If they change jobs, the credit continues. Given that we are dealing with a section of the labour market where job turnover is common, why are the Government introducing all that complexity?

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The final problem is the loss of privacy. There are two important aspects to that. If anything will stigmatise people, it is loss of privacy. The hon. Member for Bognor Regis and Littlehampton quoted the CBI's comment about employers' present lack of awareness about family credit. As the hon. Gentleman is no doubt aware, that is not only a CBI point but a Government point.

The Department of Social Security commissioned research into the effects of employer attitudes to family credit. DSS research report No. 32, "Employers and Family Credit", says:

"Only about two thirds of employers who employ Family Credit recipients know that they do so". The employers of one third--hundreds of thousands--of family credit recipients do not know that they receive that benefit. When the Government force employers to deliver the credit through the pay packet, every employer will know. That may be damaging to the employee because employers might take such people on a short-term contract, but if they pose a serious administrative burden because of all the extra paperwork, they might think twice about renewing the contract. That would clearly be detrimental to the people whom the Government supposedly want to help.

There is a loss of privacy also because the employer will know how much credit the employee is receiving. Given that about one third of recipients will get the maximum credit, the number and age of their children will be fairly obvious. It is also apparent that when someone's circumstances change, the employer will know because he will be told to vary the amount of family credit and will know that the salary has not changed. It must follow that the domestic circumstances of the lone parent must have changed; for example, someone has moved into the home.

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