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9.45 pm

Mr. Gibb: The Bill is an act of wanton vandalism that even the Klingons would be proud of, if I have to continue the wretched television analogy. The Government have replaced family credit, which is a highly successful benefit with a high take-up rate of 72 per cent., rising to 85 per cent. by expenditure and 91 per cent. for lone parents--a relatively simple benefit, as my hon. Friend the Member for Vale of York (Miss McIntosh) has said, which is paid promptly and usually to the mother--with the more complex working families tax credit. The disability working allowance is being replaced by the disabled persons tax credit.

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The Government call it a tax credit, but it is nothing of the kind. It is simply a benefit paid through the payroll. Huge burdens will be imposed on businesses, which, from next April, will have to administer the benefit, as my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) has just said. It will cost business£103 million a year to run. It will increase the stigma for those claiming it, who will find that their work colleagues suddenly become aware of the fact that they are claiming a state benefit--a fact which most proud people wish to keep confidential. We believe that such matters should be confidential. Designing a system that is likely to undermine that principle is heartless, uncaring and, I believe, an example of new Labour dogma stamping on the feelings of people who are struggling hard to make ends meet.

The benefit is hugely costly. The Government's figures show that it will cost £1.5 billion a year. The Bank of England calculates that it will generate no more than 40,000 jobs, at a cost of £35,000 per job. The Institute for Fiscal Studies has calculated that, rather than the Government estimate of £200 million, the child care element will cost £4 billion as people are given a cash incentive by the Government to move their children from informal child care arrangements to formal, paid child care.

In Committee and on Report, no statements were forthcoming from Ministers to reassure hon. Members and those outside the House that the forecast higher public expenditure would not be necessary. Today, the Government have added a new clause to the Bill providing for yet another type of paid child care for those aged eight to 14, making it more likely still that informal arrangements will be replaced by paid arrangements.

The scope for fraud is colossal. That was the principal concern of the right hon. Member for Birkenhead (Mr. Field), who has said that the whole venture was fraught with great dangers and offered huge bonuses for dishonesty. He would have been a welcome member of the Standing Committee, had the tight grip of the Government Whips Office allowed him to be. Labour members of the Social Security Committee would also have been welcome, but none was appointed. Perhaps they were too busy drafting and redrafting their reports.

The Bill spawns reams of regulations with which business will have to deal. Without the regulations and the glossy document from the Revenue, one would not even be able to work out the structure of the benefit from reading the Bill.

The Government seem determined that as many people as possible should have the benefit paid through the pay packet, despite the associated problems of stigma. That is why they failed to support any of our amendments that would have given people a choice of how to receivethe payment. As an inevitable consequence of that determination, there will be a huge shift of benefit payments from purse to wallet. As the Minister knows, there are currently 300,000 couples in which the man is the principal breadwinner, receiving a total of £900 million in family credit. Most of that money will shift from purse to wallet. That is an important concern.

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As the Joseph Rowntree Trust has concluded, money paid to the spouse with care is more likely to be spent on children.

It is odd that a Government elected on a pledge to reduce social security spending should introduce a Bill that will add £1.5 billion to social security spending on the Government's figures--£5.5 billion on the IFS figures. Hiding those numbers in an obscure line in the Red Book does not change the fact that it is a spending increase.

It is odd that a Government who pledged to reduce dependency should propose a Bill that will enable 400,000 more families, who were previously regarded as too wealthy to qualify, to claim benefits. The hon. Member for Liverpool, Riverside (Mrs. Ellman) trumpets that figure, but it is odd that a Government who pledged to reduce benefit dependency and social security spending should extend the availability of benefit up the income scale to families on £38,000.

At the lower end of the income scale, there is real concern that benefits that used to flow automatically to families who qualified for family credit--such as free prescription charges, eye tests, dental work and social fund grants--may not continue to do so when those families qualify for working families tax credit and disabled persons tax credit. Astonishingly, the Paymaster General still cannot give an answer on that. To extend benefit up the income scale, the Government are cutting benefits at the bottom of that scale.

The Government talk about wanting to improve productivity. If they read the McKinsey report on UK productivity--instead of commissioning more reports--they would realise that the biggest cause of the difference between our productivity rate and that of the United States is that, in the US, small businesses are exempt from the majority of the most burdensome regulation. Yet this Government keep piling it on. The regulatory impact assessment calculates that the Bill will cost business £103 million each and every year--and that will be an underestimate of the real cost.

The Bill will do nothing to achieve any of the objectives set by the Government. It will increase the stigma of claiming in-work benefits, rather than reduce it. It will--on the basis of the experience in Canada--increase the likelihood of fraud, not reduce it. It will increase dependency, not reduce it. It will increase social security spending, not reduce it. It will result in less money being spent on children, not more money. It will increase the burdens on business and thus hinder employment opportunities, not create them.

Through the Bill, the Government will replace a successful in-work benefit, family credit, with one that they insist, for dogmatic, ill-thought-through and misguided reasons, should be paid through the payroll. That will cause discomfort and embarrassment for many thousands of lone parents and working couples on low incomes, struggling to bring up a family in difficult circumstances. It is a bad and uncaring Bill, which I urge the House to oppose.

9.52 pm

Mrs. Roche: This has been an enjoyable and lively debate. Such was the good feeling in Committee that even during the speeches of the hon. Member for Bognor Regis

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and Littlehampton (Mr. Gibb), I never thought, "Beam me up, Scotty." I thank Members from both sides of the House for their contributions tonight.

The working families tax credit and the disabled persons tax credit are key elements of the Government's strategy to make work pay and to help people move from welfare to work. The present system is failing hundreds of thousand of families. Moving into a job from unemployment can often leave people little better off, and people cannot improve their income by working more because of absurd high marginal tax rates.

The system fails to recognise properly the in-work costs of child care. Under the Conservative Government, there was a growing division between working and non- working families. The Government think that one of the best ways of tackling poverty is to help people into jobs, and that is why we are reforming the tax and benefits system. By making work pay and by helping people move from welfare to work, we are starting to tackle the legacy of failure that we were left by the Conservative party, as was pointed out, in an excellent speech, by myhon. Friend the Member for Liverpool, Riverside (Mrs. Ellman).

As a tax credit--rather than as family credit paid by the Inland Revenue--the measure will demonstrate clearly, through the pay packet, the rewards of work. It will remove the stigma associated with claiming benefit.

We do not simply talk about welfare reform as the previous Government did: we are actually delivering. From what he said, the hon. Member for Brentwood and Ongar (Mr. Pickles) and I might have been in two different places when my right hon. Friend the Chancellor delivered the Budget last week. More than 20 million households will gain. On average, families with children will be £740 a year better off; and 700,000 children will be lifted out of poverty.

Mr. Geoffrey Clifton-Brown (Cotswold) rose--

Mrs. Roche: I will not give way as I have very limited time, but I am delighted to welcome the hon. Gentleman to the Chamber. It is very kind of him to join us.

The hon. Members for Brentwood and Ongar, for Westmorland and Lonsdale (Mr. Collins) and for Northavon (Mr. Webb) spoke about the transfer from purse to wallet. That will not happen. Couples will be able to choose which partner receives the credit. It is important to remember that, in the majority of cases, purse to wallet transfers are not even an issue.

Fraud has rightly been mentioned. It is the reason for our introducing new powers for the Inland Revenue to get the information that it needs to verify claims and to recover overpayments through the tax system, as well as directly, and new penalties to deter non-compliance and fraud.

My hon. Friend the Member for Riverside rightly drew attention to the Liberal Democrat U-turn on tax credits. That ought not to come as a surprise to anyone, because in Committee the hon. Member for Northavon, very honestly, said:

It should also come as no surprise that the Tories are supporting the Liberal Democrats tonight, in a Lib-Tory pact.

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The hon. Member for Vale of York (Miss McIntosh) spoke about regulation. We will take absolutely no lessons from the Conservative party. Before the general election, they removed 3,000 regulations from business; but they introduced 10,000 new ones.

The hon. Member for Bognor Regis and Littlehampton spoke, rightly, about the American example, but he failed to say that in the United States there is a minimum wage, which is good not only for the employer but for employees and everyone else, as it increases productivity and gives everyone a stake.

The Bill is a major reform of the tax and benefit system. It will deliver real benefits to those families who most need help, with a minimum income guarantee and proper child care support. [Interruption.] I notice that Liberal Democrats are sneering, just as the hon. Member for Northavon sneered at the tax credit for those with a disability. We are determined to deliver for people with a disability.

The Bill is an excellent piece of legislation and I commend it to the House.

Question put, That the amendment be made:--

The House divided: Ayes 164, Noes 295.

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