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'Sub-paragraphs (i) and (ii) of paragraph (a)'.
No. 12, in page 16, leave out lines 29 and 30.--[Dawn Primarolo.]
Mr. Deputy Speaker (Mr. Michael Lord):
I must remind the House that Madam Speaker has selected the reasoned amendment in the name of the leader of the Liberal Democrat party.
Amendment made: No. 13, in page 26, line 12, leave out '165(1)(a) and (b)' and insert '165(1)(a)(i) and (ii)'.--[Dawn Primarolo.]
Order for Third Reading read.
8.26 pm
Dawn Primarolo: I beg to move, That the Bill be now read the Third time.
I am pleased to open this debate on the Bill. I rise with some trepidation, in that my hon. Friend the Financial Secretary to the Treasury and the hon. Member for Brentwood and Ongar (Mr. Pickles) have managed to refer in their speeches to films, television programmes and to Shakespeare. I wait with bated breath to see what the hon. Gentleman will come up with in this debate.
We have had very interesting--and I think, on the whole, constructive--debates, both on Second Reading and in Committee. It was a wide-ranging discussion, covering a variety of issues of concern and interest to hon. Members. No doubt many of those points will be revisited during this debate.
Since those debates, the Chancellor has delivered his Budget statement, which builds on the foundations that the Bill puts in place. My right hon. Friend announced an increase in the value of the basic tax credit of £2.50 per week, and an increase in child tax credit of £4.70 from October, and another £1.10 from April 2000; a new fast-track gateway to the disabled persons tax credit from October 2000 to help people who become long-term sick or disabled while working to retain their jobs; and a new income support run-on for lone parents moving into work. Payments for lone parents will continue for the first two weeks at the out-of-work rate to help people bridge the difficult period when they first go back to work.
Mr. Tim Collins (Westmorland and Lonsdale):
In the calculation of the figures that she has just quoted about the difference between being in work and out of work, has the hon. Lady assumed whether people have to drive to work?
Dawn Primarolo:
There is no calculation for people receiving benefits anywhere in the tax system in respect of travel to work--however short or far the distance. I am sure that the hon. Gentleman is conversant with how the tax system deals with him as a Member of Parliament, and he will know that that cost is not tax-deductible.
From October 1999, the working families tax credit will provide a minimum income guarantee for families with a full-time earner of £200 per week--up from £190 per week--which is over £10,000 per year. It will mean that no family with children will pay net income tax until their earnings exceed £235 a week, or more than £12,000 a year. On average, the working families tax credit will give families an extra £24 a week, or £1,248 a year, as compared with family credit.
It may be helpful to all present if I describe formally what the Bill does. In doing so, I will be able to explain how the various concerns have been met. There are three major planks to the Bill: the conversion of family credit and disability working allowance to tax credits; the administration of the tax credits by the Inland Revenue; and the payment of the tax credits through the pay packet. Those three planks establish the fundamental policy and objectives of the introduction of the tax credits. As tax credits, within the tax system, administered by the Inland Revenue and paid through the pay packet, they will clearly demonstrate the rewards of work.
As I have already explained in earlier debates, the tax credits build on and replace two existing benefits: family credit and disability working allowance. To achieve that in the most efficient way, the Bill builds on existing social security legislation. It does that by providing that the main features of family credit and disability working allowance will apply to working families tax credit and disabled persons tax credit. The functions and responsibilities affecting the benefits being replaced will be transferred to the Inland Revenue and the Treasury.
Much of the detail of the existing system is in secondary legislation, which has been a point of contention for Opposition Members.
Mr. Pickles:
This may be a convenient point at which to ask a relatively technical and non-controversial question. The Paymaster General says that the credits have the principal characteristics of the benefits to be replaced. There is concern among disabled groups that no guarantee has yet been given that certain benefits--in particular, prescriptions, dentistry and eye tests--that were previously triggered by disability working allowance will be transferred to the disabled persons tax credit. Will they be passported across?
Dawn Primarolo:
Discussions are still taking place about prescriptions, and the matter will need to be followed up. We are aware of the concerns that have been expressed.
There were some regulation-making powers associated with family credit, and we have followed that up in the working families tax credit. The Inland Revenue has published all the major regulations in draft, including those setting out the broad structure of the working families tax credit and how it is made up, with the important addition of the new child care tax credit.
The Inland Revenue has also published the regulations giving the details of payment through the wage packet. The full details of the scheme are available and can be clearly seen. I fully appreciate that some Opposition Members have fundamental disagreements with the principles in the regulations, but the details are there. Indeed, many organisations representing business and payroll managers, and individuals have already provided input and comment to the Inland Revenue as we developed the scheme, and consultation continues. The Inland Revenue also intends shortly to publish revised drafts of the regulations for comment, to give any interested parties who have not yet commented the opportunity to do so.
I have already highlighted the improvements announced by my right hon. Friend the Chancellor last week. Let me remind the House of those improvements
already announced for working families tax credit. The new child care tax credit will give extra help with child care costs. Earlier today, we added new clause 5 to extend the range of child care for which help can be given, which will increase the affordability of child care and help to promote good-quality child care for eight to 14-year-olds, in line with our national child care strategy.
There will be a full disregard of maintenance payments in the calculation of income for working families tax credit. That is a significant contribution to tackling child poverty, as maintenance payments will be able to be used directly for the children. I know that the hon. Member for Northavon (Mr. Webb) welcomed that in Committee.
As we all know, the tax credits will be part of the tax system administered by the Revenue. The staff currently employed by the Benefits Agency dealing with family credit and disability working allowance will transfer to the Inland Revenue, building on their experience and expertise. The hon. Member for Gainsborough (Mr. Leigh), who visited the family credit unit in Preston, commented earlier today on the excellent standards and diligence of the staff. They are the people who will continue to administer the credit.
The Bill provides for those members of staff to become fully integrated into the Inland Revenue, and in particular to be subject to the same strict confidentiality rules that apply in the rest of the organisation. That is an important provision to protect the information.
From April 2000, the tax credits will normally be paid through the pay packet. That is a fundamental part of the tax credits system. I understand that Opposition Members reject that principle, but it is fundamental to the Government's strategy. The Bill contains the regulation- making powers to establish that part of the scheme.
We had numerous discussions in Committee on this part of the scheme, some of which were repeated on Report, and it became very clear that the Opposition did not fully understand it. I would like to take this opportunity to try to allay some of their fears and perhaps--dare I say it?--put right some of their misunderstandings.
Couples will be able to choose which of them receives the tax credit. I have tried to put that delicately so that I will not be accused of anything. It is important to remember that, in the majority of cases, purse to wallet transfers are not even an issue, because of the profile of those who claim family credit and who will form the majority of those who claim the working families tax credit. Some 50 per cent. of current family credit claimants are lone parents in any case, and of the other 50 per cent., 23 per cent. have a female main earner. It is clear that the money will continue to go to them and, in other cases, couples will be able to choose.
Employers will not have to assess working families tax credit awards. Time and again, Opposition Members have talked of the burden on businesses and the need for them to calculate the payments, but I hope that it is now accepted that the Inland Revenue will do that and inform employers how much to pay, when to start payment and when to stop.
Employers will be given only the information they need in order to pay the tax credit to the right person. The Inland Revenue will step in to pay the tax credit when a job comes to an end or there is a breakdown inthe arrangement. The first priority--as hon. Members
would expect--is to get the tax credit to the employee on time. The Bill provides powers to ensure that that happens.
During our debates, hon. Members have expressed some concern about fraud and its history in the payment of family credit. We are determined--as the House would expect--to fight fraud in the payment of the working families tax credit and to ensure that it does not develop. That is why we have included in the Bill several provisions that make up a package to deter fraud and encourage compliance. Those substantial measures include information powers to allow the Revenue to obtain the information it needs to verify claims. That power is not available for the payment of family credit, but it will apply to the new credit. Also included are powers to recover overpayments through the tax system directly and penalties to deter non-compliance and fraud. That package will help to secure the system, and will make it clear that applications for tax credits, and the operation of payments through the pay packet, must be carried out honestly, to ensure that the right amount of tax credit goes to the right people. The concerns expressed in reports by the Social Security Committee have been of great assistance to us and we have built on the experience of the family credit unit.
The working families tax credit is targeted at families with children, and on low to moderate earnings, for whom the unemployment and poverty traps are especially severe. We owe it to them to provide a system that genuinely helps them and they can trust. I am sure that given the concern expressed by Opposition Members about fraud, they will support those measures. The Inland Revenue will consult on a code of practice that will describe how it intends to use those powers, so that there are no mistakes by employers.
It is worth also reminding the House that all the penalties in the Bill can be appealed against to an independent tribunal. Appeals about tax credit claims will be heard by new unified appeal tribunals set up under the Social Security Act 1998. That is because those tribunals will have the experience to deal with the type of cases that will come to them. Applicants are likely to be more familiar with that process.
Appeals against a penalty charged in connection with an employer's obligations will be heard by the tax appeal commissioners. That is because employers' obligations in relation to tax credits are very similar to their obligations to operate the pay-as-you-earn scheme and appeals on those penalties are already heard by the tax appeal commissioners. In the long term, as the new tax credits evolve, we intend to pass jurisdiction on appeals on decisions on entitlement or award of tax credits to the tax commissioners so that they will hear all appeals on tax credits.
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