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Dawn Primarolo: I congratulate the hon. Gentleman on his promotion to the Opposition Front Bench, and appreciate that he is formidable in his speeches. However, does he accept that families who are desperate for an income will take the money regardless of whether they are stigmatised by so doing, and that stigma will not therefore affect take-up? He is talking about two separate issues: the need to receive the money; and an attitude to how it is paid.

Mr. Willetts: I understand the point that the Minister is making, and had planned to deal with it later in my speech. Nevertheless, my response to the argument is that the best way of judging whether there is stigma--in the sense in which the Minister refers to it--is to give people the choice. If they are concerned in the way in which she describes, they will opt to be paid through the pay packet, as there would be absolutely nothing to stop them from doing so. Alternatively, they could be paid direct.

My hon. Friend the Member for Gainsborough (Mr. Leigh) is in the Chamber. I hope that he will not mind if I say that, on this occasion, the great advantage of our proposal is that it is a permissive measure: all it

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would do is give people the option. It is the Government who are trying to force people to take one route rather than the other.

All we are saying is that we do not know what concerns people more. They may prefer to receive money through the pay packet, in which case they could choose that route; or they may prefer to receive the money direct, in which case they could choose that route. The onus is on the Minister to explain why she wants to compel them to take the money one way rather than the other.

Dawn Primarolo: As the hon. Gentleman said, we are reaching the end of our consideration of the Bill. Does he accept that the purpose of the tax credit is to provide a work incentive and to reinforce the rewards of work, and that, throughout our consideration of the Bill, that has been our central argument in support of the Bill?

Mr. Willetts: The argument that we have to boost in-work incentives does not mean that we have to compel people to receive the payment in a specific way. We could perfectly well create work incentives without simultaneously imposing on people the requirement that they must be paid the benefit in one way rather than another.

If the Government care so much about work incentives, it is a pity that they are increasing marginal rates by so much for so many families--as that could well have the perverse effect of reducing incentives to work among precisely the group whom Ministers are claiming they want to help: middle-income families.

The Opposition believe that the minimum the Government should do is give people the choice. If the Minister believes in what she is saying, she should have no problem with Lords amendment No. 2. If the Government were to accept it, they might find that, miraculously, everyone is perfectly happy to be paid through the Government's preferred route of the pay packet. However, if by any chance some single parents are not happy with that route, why not give them the option of being paid direct? That is all the amendment proposes allowing.

I should perhaps briefly comment on another point made by the Minister--that, in the amendment, we are making a special proposal for single parents, and that there are no proposals on how the benefit should be paid to couples that would provide any type of precedent. I felt that, on that, her argument was disingenuous. When a married couple decide whether payment should be made to the working partner or to the non-working partner, they are essentially also deciding whether the payment should be made through the pay packet or direct, as that will be one of the consequences of their decision.

Dawn Primarolo: The hon. Gentleman misunderstood the point that I was making. Lone parents--who are the only parent in the family and, by definition, the only working parent--should be compared with a family with two working parents. If both parents are working, either can receive the money through the wage packet. The only choice is which of them receives it. That choice is not necessary for lone parents. I am happy to send the

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hon. Gentleman the references from the Rowntree research, which has been quoted on the record before, that identify the problem of stigma.

Mr. Willetts: For married couples with only one partner working, the choice of who receives the payment of the working families tax credit will effectively be a choice between the payment going through the pay packet or directly to the non-working partner. Although some two-earner couples will qualify as the working families tax credit is extended, most people receiving family credit or the working families tax credit are one-earner couples or single parents. There will not be many two-earner couples.

All we are asking for single parents is an option that is available to the other large category of recipients of the working families tax credit: the choice of whether it should be paid through the pay packet or not. The Paymaster General says that it is simply a decision between the working or the non-working partner, but in practice it is a decision on how the payment should be made. We are simply asking for single parents to have the same provision as--thanks to the effective parliamentary scrutiny of the Bill--already exists for couples where one partner is not working.

The Paymaster General has not explained why her preferred method of payment has to be compulsory. She has not explained why she wants to force people down one route rather than giving them the choice of two different routes. I am afraid that the explanation is simple. There are some pig-headed people in the Treasury who believe that they should impose what they think is the earned income tax credit model on Britain regardless of the practical evidence of the success of family credit and widespread concerns about the implications of the working families tax credit.

There are concerns about the marginal rate, burdens on businesses and the issue of wallet versus purse. It is deeply disappointing that the Government have not listened in the way we did when we introduced our measures. The Paymaster General will come to regret her refusal to consider our valid, pragmatic and sensible proposals to improve the current muddled policy.

Miss Kirkbride: It gives me great pleasure to follow my hon. Friend the Member for Havant (Mr. Willetts). I add my congratulations on his promotion to shadow Secretary of State for Social Security. He will offer great wisdom on the issues, following other honourable and wise contributions in the past.

I sat for many hours in Committee and throughout the Bill's proceedings in the House. The Government still have not explained why they believe that the working families tax credit will be an incentive to work. When the Select Committee on Social Security considered the issues, we took evidence from Martin Taylor, the architect of the Government's proposal and then chairman of Barclays bank. We closely cross-examined him on whether there would be added incentives to work if we transferred from the very successful family credit system that tops up low wages to a working families tax credit. He offered nothing more than his prejudices that there would be. The Government have offered no evidence on why a tax credit rather than a benefit will be an incentive to take a job. That of course is predicated on the idea that

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single parents should be paid family credit by the Post Office instead of being forced to claim working families tax credit, which is paid through the wage packet.

5.30 pm

There is a flaw in the argument which has not been addressed by the Minister or her colleagues. We are facing a fundamental reform of our tax and benefits system that is based on the prejudices of those who are introducing it, not on the serious empirical evidence that it will have a major impact on the low-paid sector.

As my hon. Friend the Member for Havant said, there is stigma on both sides. A huge number of people claim family credit. If the object of introducing a benefit is that people should take it up as it will improve their lives, family credit is extremely successful, as it has the highest take-up rate in the entire benefits system. I take issue with the Minister when she says that that does not mean that there is no stigma attached to it. The take-up rate would suggest otherwise.

My hon. Friend made a valid point when he was challenged on the matter. He said that introducing choice to the system would establish once and for all whether there was a stigma attached to family credit. The only pure experiment would be to give single parents the choice, as married couples may have a different incentive to take a benefit rather than a tax credit--involving wallet-versus-purse issues. We should give single parents the choice between family credit and working families tax credit and find out whether there is a stigma attached to family credit.

The reverse may also be true. Those claiming working families tax credit could suffer the stigma of being on benefit. At present, other employees in the workplace are unaware that someone is claiming family credit. In many instances, employers are similarly unaware, although some may need to be informed of a claim. If people are to be exposed in the workplace as being on benefit because of the method of payment of the working families tax credit, that would increase the possibility of stigma rather than detract from it.

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