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("( ) The Board shall ensure that any single parent can decide to receive payment of any tax credit direct from the Board rather than from the employer.")

Dawn Primarolo: I beg to move, That this House disagrees with the Lords in the said amendment.

The amendment would give one group of applicants--lone parents--a choice not available to other applicants. It would allow them to choose whether to be paid a tax credit by their employer through the pay packet, or to receive it direct from the Revenue.

I make it plain at the start that, whatever the reason for the amendment, accepting it would mean a major policy change. It is not a matter of tinkering at the margins. The Government have said repeatedly that paying tax credits through the wage packet is one of the key elements of our policy on tax credits. It is designed to drive home the message that work pays, and to reinforce the crucial link between tax credits and work.

Single parents are not just a small peripheral part of the 1.4 million households expected to get the working families tax credit. They make up half of the family credit case load now, and we expect that to be roughly the same for the working families tax credit. Lone parents are precisely the families who should be able to benefit from the help that the working families tax credit can give, so that they can go back to work if they want to do so.

Our policy is to provide families with extra help and to do it through the wage packet if they are employed. Tax credits send the clearest message to those families that what they get is not a handout but an extra reward for work. That has been discussed at length in both Houses during consideration of the Bill. It allows families who would otherwise be better off on benefit the opportunity to re-enter the labour market and properly see the rewards of working. Against that background, I am not at all sure why single parents should be singled out for this special extra choice of payment method.

One argument is that, in practice, couples have a choice because they can choose which of them receives the tax credit; but the choice is not how it is paid, but who should

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receive it. That choice exists in order to avoid involuntary transfer from the woman's purse to the man's wallet, and it has been widely welcomed by those who had concerns about that in the early stages of the design of the working families tax credit. If both parents work, the choice is not whether the parents receive it through the wage packet, but which parent receives it. If there is only one parent, there is only one person to whom the tax credit can be paid.

Therefore, the argument does not run. Lone parents are not being denied something that couples have been given. I hope that it is now crystal clear that couples have a choice about which one of them is to receive the credit because there are two in the family, and that, by definition, cannot apply to a lone parent.

Other arguments in support of the amendment are that it would protect lone parents from having to disclose their circumstances in some way to an employer, or that it would allow them to compete on an equal footing with other parents when looking for work.

Any fears about breaching confidentiality are unfounded. Single parents may need to ask an employer to certify likely wages, as happens now with family credit, once they have a job. That operates in the same way for couples. Single parents are treated no differently from anyone else. The form simply gathers information; it contains no clues about the employee's circumstances. Employers will just be told the amount to pay and will in no way be involved in computing the amount, as was recognised in the previous debate, when going through the steps they will be required to take in order to pay the tax credit.

Mr. Webb rose--

Dawn Primarolo: In the previous debate, the hon. Gentleman repeatedly intervened, anticipating my speech. If he will allow me, I shall make my speech and, if necessary, I shall be more than happy to return to particular points.

There were concerns that an employee's circumstances could be inferred from the amount notified to the employer. I can assure hon. Members that, because of the number of separate elements, such as the effect of the taper and the child care tax credit, it will be almost impossible to relate the amount of tax credit directly to the elements upon which the award is based, and say that, because someone is receiving X in tax credits, they must have Y children or two other jobs. No doubt payment through the wage packet will mean that employers are aware of employees' eligibility for one of the two tax credits--the working families tax credit or the disabled persons tax credit, which is also part of this--but that is all.

Another concern expressed in this House and in the other place was that employers would be able to discriminate against groups of employees who might cause them administrative hassle by claiming tax credits. The Opposition spokesman was a little confused in the previous debate, on the one hand arguing that discrimination would occur, and on the other saying that the anti-discrimination clauses should not be in the Bill.

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It is useful to remember--

Mr. Webb rose--

Dawn Primarolo: I was not referring to the hon. Gentleman, but I am happy to give way on that point if he insists.

Mr. Deputy Speaker: Order. We will of course remember that we must not go over the arguments about the previous amendment, which has been disposed of.

Dawn Primarolo: The hon. Gentleman has decided not to intervene, but I look forward to hearing his comments.

It is useful to remember that employers are unlikely to know about a person when they take him on and will be unable to make an accurate judgment of whether he is likely to qualify for a tax credit. However, once the credit has been claimed and awarded, and if the employer administers the payment through the wage packet, it will of course become clear that the employee is receiving that credit. We included the relevant provisions in clause 7 because of the possibility of discrimination at that point, but I stress that we are absolutely confident that the overwhelming majority of employers are law abiding, that they will not discriminate in such a way against their employees and that they will recognise the benefits of the tax credit to their work force.

Giving single parents alone a choice of payment method would give employers who wanted to avoid their responsibilities under the tax credits legislation a new incentive to find out about lone parents so that they could persuade or pressure them into asking to receive the tax credit directly, perhaps on renewal. That option would identify lone parents.

If hon. Members are concerned that lone parents should not be identified, and certainly should not be identified as recipients of the tax credit payment, they should not support the amendment. There is no serious mileage in the argument that lone parents are somehow being discriminated against or being denied a right that is provided for other parents. Although the amendment may be an attempt to help lone parents, I do not think that it will do anything of the sort. I ask the House to reject the amendment.

Mr. Willetts: I apologise to the House for turning up rather late for proceedings on the Bill, which is about as far through its parliamentary process as one could imagine. I thank and congratulate my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles), who so powerfully led for us in Committee. I also thank several of my hon. Friends who are in the Chamber and who served on the Committee, making telling criticisms of this profoundly misguided measure.

Perhaps I may reflect for a moment on the history that has brought us to this point. A keen young policy wonk thought that the way forward was to copy the American earned income tax credit. He got the ear of Ministers and the legislation was introduced. It passed through its stages in the House of Commons, but then it hit opposition in the House of Lords on two points: burdens on business, and whether the payment should be made through the benefits system--or directly to the claimant--or through the pay packet.

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That is the point at which the history of the efforts made by a previous Government in 1986, to whom I was proud to be an adviser, and the recent history of this Bill, took rather divergent paths. The Government of Margaret Thatcher--who had had objections put to them in the House of Lords on behalf of businesses worried about the burdens on them, and on the so-called wallet-purse argument and whether groups such as single parents should be paid direct--concluded that the right thing to do was to listen to those objections.

5.15 pm

All we are asking the Government to do--having gone through exactly the same process at exactly the same stage--is listen to the same arguments in the same way as the last Government did. What we hear, however, is what has rightly been described as pure ideology: the empty assertion that it is somehow better for working families tax credit to be paid through the pay packet, with absolutely no evidence to back it up.

In fact, it is worse than that. Not only have the Government no evidence to back up their assertion; every criticism that they made in opposition of what was then family credit applies in spades to the scheme that they are now introducing. In opposition, those who are now Ministers used to talk about something called benefit abuse. They claimed that employers were exploiting family credit, and using their knowledge of which people would receive it to hold down wages. I wonder whether the Paymaster General has compared notes with her colleagues in the Department of Trade and Industry, who still use that argument in defence of the minimum wage. They say that one of the reasons why the minimum wage is needed is the need to deal with the behaviour that they claim to have identified on the part of employers.

Now the Government are suddenly introducing a measure that is much more open to that line of criticism than family credit was. There is much more employer involvement in their proposal than there was in family credit. The boot is now firmly on the other foot. Suddenly Ministers are telling us not to worry, and saying that there is no reason for any concern about employers' knowing what is going on.

Leading for the Opposition when the Bill that we introduced years ago was in Committee, the current Leader of the House said:


We know that the charge made against family credit was entirely invalid. We know that because an independent body, the Institute for Employment Studies, conducted objective research into what employers knew about people who were receiving family credit. Research

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study No. 32 from the Department of Social Security states:


    "Employers did not have adequate knowledge of Family Credit or sufficient information about potential recruits to adopt such practices"--

that is, exploiting the benefit to hold down wages. The research established that


    "only 9 per cent. of employers agreed that the availability of Family Credit affected the wages they pay."

The risk that the Opposition went on and on about when attacking family credit is now the basis for one of the charges that we make against working families tax credit. We regard it as a serious mistake. It takes the policy of helping people who are receiving low earnings in entirely the wrong direction. It is cumbersome, it is badly targeted, and it increases marginal rates for many families. It imposes a new burden on employers, and it poses the risk about which the Government, when in opposition, claimed to be worried in relation to family credit--the risk of benefit abuse by employers.

In supporting the Lords amendment and opposing the Government's attempt to reverse it, we are concentrating on one small aspect of the system. We want single parents receiving this benefit to have the option of receiving it directly, rather than through the pay packet.

The Paymaster General advanced a series of arguments in defence of the Government's position. She advanced them briefly just now, and she advanced them in Committee. One of the arguments is that there is a problem of stigma. We are told that it is important for people to be forced to receive the benefit through the pay packet, because otherwise it will be stigmatised and they will be reluctant to claim it.

If family credit suffers so badly from stigma, why is it that approximately 90 per cent. of single parents who are entitled to it are claiming it? If we are to be told that there is that problem of stigma, what evidence from the real world is the Minister able to offer that it exists as a problem? On the contrary: the evidence is that, if 90 per cent. of single parents are collecting family credit, there is no problem of stigma.


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