PROCEEDINGS OF THE COMMITTEE RELATING
TO THE REPORT
WEDNESDAY 3 JUNE 1998
Members present:
Mr Archy Kirkwood, in the Chair
Ms Karen Buck | Mr Nick Gibb
|
Mr Paul Goggins | Ms Patricia Hewitt
|
Miss Julie Kirkbride |
Mr Edward Leigh |
Mr Chris Pond | Mr Frank Roy
|
Ms Gisela Stuart | Mr Malcolm Wicks
|
The Committee deliberated.
* * * * *
Resolved, That the Committee
should include consideration of the Disabled Person's Tax Credit
in its continuing inquiry into tax and benefits.
* * * * *
[Adjourned till Wednesday 16 June at half-past Ten
o'clock.
WEDNESDAY 17 JUNE 1998
Members present:
Ms Karen Buck | Mr Edward Leigh
|
Mr Nick Gibb | Mr Chris Pond
|
Mr Paul Goggins | Mr Frank Roy
|
Ms Patricia Hewitt |
Ms Gisela Stuart |
Miss Julie Kirkbride |
Mr Malcolm Wicks |
In the absence of the Chairman, Mr Malcolm Wicks
was called to the Chair.
The Committee deliberated.
* * * * *
Mr Martin Taylor, Chief Executive of Barclays plc,
examined.
[Adjourned till Tuesday 23 June at half-past Ten
o'clock.
TUESDAY 23 JUNE 1998
Members present:
Mr Archy Kirkwood, in the Chair
Mr Paul Goggins | Mr Chris Pond
|
Ms Patricia Hewitt |
Mr Frank Roy |
Miss Julie Kirkbride |
Mr Malcolm Wicks |
Mr Edward Leigh |
The Committee deliberated.
Mr Bill Knox, Employment Affairs Chairman, Federation
of Small Businesses, and Mr Richard Baron, Deputy Head of Policy
Unit, Institute of Directors, examined.
[Adjourned till to-morrow at half-past Ten o'clock.
TUESDAY 7 JULY 1998
Members present:
Mr Archy Kirkwood, in the Chair
Ms Karen Buck | Mr Frank Roy
|
Miss Julie Kirkbride |
Mr Malcolm Wicks |
Mr Edward Leigh |
The Committee deliberated.
Ms Pauline Thompson MBE, Director, Ms Marilyn
Howard, Disablement Income Group, and Mr Brian McGinnis, Special
Adviser Mencap Campaigns Department, Disability Benefits Consortium,
examined.
[Adjourned till Wednesday 8 July at half-past Ten
o'clock.
WEDNESDAY 28 OCTOBER 1998
Members present:
Mr Archy Kirkwood, in the Chair
The Committee deliberated.
Ordered, That the evidence taken before the Committee
this day from HM Treasury and the Inland Revenue be communicated
to the Treasury Committee, in accordance with paragraph 4(d) of
Standing Order No. 152 (Select committees related to government
departments).
Mr Gabs Makhlouf, Head of Work Incentives and Poverty
Analysis, HM Treasury, and Mr Tony Orhnial, Assistant Director,
Mr George Rowing, Policy Adviser, and Ms Sue Walsh, Project Manager,
Personal Tax Division, Inland Revenue, examined.
[Adjourned till a time and date to be fixed
by the Chairman.
WEDNESDAY 25 NOVEMBER 1998
Members present:
Mr Archy Kirkwood, in the Chair
Ms Karen Buck | Miss Julie Kirkbride
|
Mr Vernon Coaker | Mr Edward Leigh
|
Mr Andrew Dismore |
Kali Mountford |
Mr Howard Flight | Mr Chris Pond
|
Mrs Joan Humble |
|
The Committee deliberated.
Draft Report (Tax and Benefits: Implementation of
Tax Credits), proposed by the Chairman, brought up and read.
Ordered, That the draft
Report be read a second time, paragraph by paragraph.
Paragraph 1 read, amended and agreed to.
Paragraph 2 read and agreed to.
Paragraph 3 read, amended and agreed to.
A paragraph(Mr Edward Leigh)brought
up and read, as follows:
"There are four reasons why we are concerned
about WFTC and we believe that before implementation the Government
must answer these points satisfactorily:
(1) Cost. Some estimates have put keeping Family
Credit as saving £1.5 billion a year (according to the Red
Book). There is little doubt that implementing WFTC will increase
social security spending. Government must provide the House of
Commons with firm evidence of the number of jobs created to justify
such an increase in spending.
(2) We are concerned about dependency. Whereas Family
Credit is well targeted on low income earners, WFTC could include
higher rate tax-payers earning up to £38,000 a year, according
to the Treasury. Dawn Primarolo, Financial Secretary to the Treasury
has said that 'The highest possible level of family income which
will be supplemented by the WFTC depends on number and age of
the children in the family. For example if the family had five
children under 11, rather than 2, it would still receive some
WFTC with family income of around £38,000' [HC Deb 21 July
1998 vol 316 col 502w].
(3) Family Credit supports families, whereas WFTC
does not encourage the traditional one-earner family structure.
(4) We believe that whereas Family Credit is fairly
easily administered by the Department of Social Security, WFTC
will be another attack on business."
Question put, That the paragraph be read a second
time.
The Committee divided.
Ayes, 3 | Noes, 6
|
Mr Howard Flight | Ms Karen Buck
|
Miss Julie Kirkbride |
Mr Vernon Coaker |
Mr Edward Leigh | Mr Andrew Dismore
|
| Mrs Joan Humble
|
| Kali Mountford
|
| Mr Chris Pond
|
Another paragraph(Mr Edward Leigh)brought
up and read, as follows:
"We are very concerned that this proposal will
place the two couple household, one of whom works and one of whom
looks after small children (the classic Beveridge family) in a
disadvantaged position in relation to single parent households,
or two parent households in which both adults are working. Secondly,
the arrangements as currently envisaged may create an incentive
for mothers currently looking after their children at home (and
who will therefore receive no WFTC childcare credit) to register
as child minders and to swap children with another household which
has adopted the same response to the new incentive structure.
Until we stop the benefit structure encouraging this kind of response
this will be an entirely legal as well as rational course of action.
WFTC will also enhance current incentives for fraud in the system.
We fear that this will aggravate an existing situation under which
couples are tempted to conceal their relationship so as to qualify
for the best benefit payments they can get. By the same token
there could conceivably be an incentive for couples who wish to
maximize their benefits and who do not wish to make false declarations
to split up. We realise that in practice this would rarely happen
but why in principle should the tax system provide any such incentive?
We believe that there are already too many pressures within the
benefit system which push couples towards relationship breakup
and WFTC will add to them. Since it is always easier to conceal
a relationship if there is no formal marriage, and since contracting
marriage therefore reduces one's flexibility to apply for welfare
benefits in the future, this measure will further reinforce the
trend against traditional marriage among those categories of the
population which potentially fall within its scope. We are concerned
that the WFTC creates anomalies by a system which is assessed
of pooled household income, but fails to pool tax allowances.
For example a lone parent on £15,000 with one child takes
home £70.25 of WFTC, whereas a single earner couple on the
same income with one child can take home only £0.25 of WFTC
a week. There is a danger that the WFTC could discriminate against
single earner married couples."
Question put, That the paragraph be read a second
time.
The Committee divided.
Ayes, 3 | Noes, 6
|
Mr Howard Flight | Ms Karen Buck
|
Miss Julie Kirkbride |
Mr Vernon Coaker |
Mr Edward Leigh | Mr Andrew Dismore
|
| Mrs Joan Humble
|
| Kali Mountford
|
| Mr Chris Pond
|
Paragraphs 4 to 8 read and agreed to.
Paragraph 9 read, amended and agreed to.
Paragraphs 10 to 12 read as follows:
"The Procedure Committee suggested that a procedure
similar to the deregulation procedure could be used for such instruments.
Deregulation Orders are first submitted to both Houses in the
form of Minister's proposals, which are then scrutinised in detail,
both as to their drafting and effect, by Committees of both Houses.
Relevant interest groups and people who may be affected, give
oral and written evidence. In this House the Committee judges
the proposals against a set of criteria which include the adequacy
of public consultation.
The Minister may make the Order only after the conclusion
of the Parliamentary process, and must take full account of any
amendments recommended by the Committee in each House. The draft
Order is then formally laid for consideration as an affirmative
instrument.
We regret that no progress has been made on this
recommendation, which seems to us to offer a means of substantially
improving Parliamentary scrutiny of this type of secondary legislation.
We recommend that the Modernisation Committee should, as a matter
of urgency, bring forward proposals for improving the scrutiny
of delegated legislation. We propose to bring this formally to
the attention of the Leader of the House as Chairman of that Committee."
Paragraphs disagreed to.
Paragraphs 13 to 15 (now paragraphs 10 to 12) read
and agreed to.
Paragraph16 (now paragraph 13) read, amended and
agreed to.
Paragraph 17 read as follows:
"The Government set considerable store by the
decision to pay WFTC and DPTC through the wage packet: 'Its clear
link with employment should demonstrate the rewards of work over
welfare and help ensure that people move off welfare into work'."
Amendment proposed, in line 3, at the end to add
the words "Unless payment of the new tax credits through
the wage packet is successful from the start, the new system runs
the risk of being discredited at an early stage. The concerns
of employers, coupled with the difficult questions which still
have to be resolved, lead us to propose that the second phase
of implementation be put back by twelve months. We recommend that
payment of WFTC and DPTC via employers be postponed until April
2001."(The Chairman.)
Amendment proposed to proposed Amendment, in line
4, to leave out from the word 'that' to the end of the paragraph
and add the words 'the Inland Revenue address with some urgency
the practical difficulties of implementation within this timetable.'(Mr
Chris Pond.)
Question put, That the Amendment to the proposed
Amendment be made.
The Committee divided.
Ayes, 6 | Noes, 3
|
Ms Karen Buck | Mr Howard Flight
|
Mr Vernon Coaker | Miss Julie Kirkbride
|
Mr Andrew Dismore |
Mr Edward Leigh |
Mrs Joan Humble |
|
Kali Mountford |
|
Mr Chris Pond |
|
Proposed Amendment, as amended,
made.
Paragraph, as amended, agreed to (now paragraph 14).
Paragraph 18 disagreed to.
Paragraphs 19 to 22 (now paragraphs 15 to 18) read
and agreed to.
Paragraph 23 (now paragraph 19) read, amended and
agreed to.
Paragraph 24 (now paragraph 20) read as follows:
"The Institute of Directors described to the
Committee the administrative burden which the above arrangements
might still involve, including entering the amount of WFTC on
the payroll system; aligning the award with the pay periods; readjusting
a payment at the end of the period of an award; and dealing with
other employers concerning employees who have commenced employment
elsewhere or been taken on part-way through the period of an award.
On the latter issue, the Inland Revenue told the Committee that
they were still considering how to deal with employees who changed
jobs, and did not have a public answer to the problems raised
by employers. In short, said the Institute of Directors, WFTC
would be 'a huge amount of hassle'(Q. 74)."
Amendment proposed, in line 7, to leave out from
the word 'employers' to the end of the paragraph. (Mr
Chris Pond.)
Question put, That the Amendment be made.
The Committee divided.
Ayes, 6 | Noes, 3
|
Ms Karen Buck | Mr Howard Flight
|
Mr Vernon Coaker | Miss Julie Kirkbride
|
Mr Andrew Dismore |
Mr Edward Leigh |
Mrs Joan Humble |
|
Kali Mountford |
|
Mr Chris Pond |
|
Paragraph, as amended, agreed
to.
Paragraph 25 (now paragraph 21) read and agreed to.
Paragraph 26 (now paragraph 22) read, amended and
agreed to.
Paragraph 27 (now paragraph 23) read and agreed to.
Paragraph 28 (now paragraph 24) read, amended and
agreed to.
Paragraph 29 (now paragraph 25) read and agreed to.
Paragraphs 30 and 31 (now paragraphs 26 and 27) read,
amended and agreed to.
Paragraph 32 read as follows:
"The Committee considers that either option
is administratively cumbersome and potentially exposes the employee
to greater error and delay. Only a small percentage of recipients
of WFTC and DPTC are likely to have multiple jobs, and we consider
that they should have a guarantee of regular and complete payments.
We recommend that where an employee has more than one job, the
Inland Revenue should pay any tax credit due direct to the recipient."
Paragraph disagreed to.
Paragraph 33 (now paragraph 28) read and agreed to.
Paragraphs 34 to 36 read and postponed.
Postponed paragraph 34 (now paragraph 29) again read,
amended and agreed to.
Paragraph 35 disagreed to.
Postponed paragraphs 35 and 36 (now paragraphs 30
and 31) again read, amended and agreed to.
Paragraph 38 ( now paragraph 32) read and agreed
to.
Another paragraph(Miss Julie Kirkbride)brought
up and read, as follows:
"We are concerned that the implementation of
WFTC could be bad for business. Tim Melville-Ross Director General
of the IoD said 'The result of any new burden combined with the
impact of the minimum wage could be to discourage companies from
taking on low skilled or semi-skilled employees.' The implementation
of the WFTC could therefore act as a disincentive to take on marginal
employees at the same time as when the Government is spending
huge sums of tax-payers money on the New Deal. We remain further
concerned that the some employers may seek to manipulate the WFTC
in order to act as a downward pressure on wages. A greater knowledge
of the benefits system and more in-depth knowledge of the personal
circumstances of the employee might lead some employers to offer
lower wages which they know will be topped up by WFTC."
Question put, That the paragraph be read a second
time.
The Committee divided.
Ayes, 3 | Noes, 6
|
Mr Howard Flight | Ms Karen Buck
|
Miss Julie Kirkbride |
Mr Vernon Coaker |
Mr Edward Leigh | Mr Andrew Dismore
|
| Mrs Joan Humble
|
| Kali Mountford
|
| Mr Chris Pond
|
Paragraphs 39 to 41 (now
paragraphs 33 to 35) read and agreed to.
Paragraph 42 (now paragraph 36) read, amended and
agreed to.
Paragraphs 43 and 44 (now paragraphs 37 and 38) read
and agreed to.
Paragraphs 45 and 46 read and postponed.
Paragraphs 47 and 48 (now paragraphs 39 and 40) read
and agreed to.
Paragraph 49 (now paragraph 41) read, amended and
agreed to.
Postponed paragraph 45 (now paragraph 42) again read
and agreed to.
Postponed paragraph 46 (now paragraph 43) again read,
amended and agreed to.
A paragraph (Ms Karen Buck)brought
up, read the first and second time and inserted (now paragraph
44).
Paragraph 50 (now paragraph 45) read and agreed to.
Paragraph 51 (now paragraph 46) read, amended and
agreed to.
Paragraphs 52 and 53 (now paragraphs 47 and 48) read
and agreed to.
Paragraphs 54 and 55 (now paragraphs 49 and 50) read,
amended and agreed to.
Paragraph 56 (now paragraph 51) read as follows:
"The acceptance by the Government that it has
the responsibility for ensuring take-up opens the way for imaginative
take-up campaigns aimed at harnessing data already held by Central
and Local Government to identify potential beneficiaries of WFTC.
We recommend that the Government should consider the use of data
matching between Government Departments and between Central and
Local Government to identify families who appear to be eligible
for WFTC and to encourage them to claim."
Amendment proposed, in line 5 after the word "claim"
to add the words "We are concerned also about the possible
stigma against low income earners that WFTC could cause. As the
Institute for Fiscal Studies states 'As employers and potentially
work colleagues would observe the WFTC it might increase the stigma
associated with receiving transfer payments and so decrease the
take up' [IFS Green Budget]."(Miss Julie Kirkbride.)
Question, That the Amendment
be made, put and negatived.
Paragraph agreed to.
Paragraphs 57 and 58 (now paragraphs 52 and 53) read
and agreed to.
Paragraphs 59 and 60 (now paragraphs 54 and 55) read,
amended and agreed to.
Paragraph 61 (now paragraph 56) read and agreed to.
Paragraph 62 (now paragraph 57) read, amended and
agreed to.
Paragraph 63 (now paragraph 58) read as follows:
"It is crucial that the option of payment to
the non-wage earner in a couple (usually the mother) should be
actively presented in a positive way. There is otherwise a risk
that, in a couple with a single male breadwinner, the automatic
presumption will be that the in-work assistance should go to the
man earning the wage. The Inland Revenue advised the Committee
that it was working on the design of the claim form 'to see how
the choice might be presented'. It is important that the claim
form for WFTC is designed to encourage proper consideration of
payment of the tax credit to the partner at home. This could be
done by making payment to the partner at home the 'default' position,
barring an active choice by the couple to opt for payment through
the wage packet. We recommend that the claim form for WFTC should
indicate that payment will normally be to the partner at home
in recognition of their responsibility for meeting the everyday
needs of the children; but that, if both partners prefer, payment
can be made through the earner's pay packet by ticking a special
box."
Amendment proposed, in line 10, at the end, to add
the words "However we note that this undermines Martin Taylor's
evidence that ' the association of this payment with work rather
than with the Benefits Agency will change the way people think
about it'(Q.11)."(Miss Julie Kirkbride.)
Question, That the Amendment
be made, put and negatived.
Paragraphs 64 to 69 (now paragraphs 58 to 64) read
and agreed to.
Paragraph 70 (now paragraph 65) read, amended and
agreed to.
Paragraph 71 (now paragraph 66) read and agreed to.
Paragraph 72 (now paragraph 67) read as follows:
"One area not addressed in the Chancellor's
announcement is the issue of 'eligible' childcare. At present,
the childcare tax credit will follow the Family Credit rules in
being restricted to registered childminders, registered nurseries,
out of school clubs, care on school premises out of school hours
(all of which must be registered with the local authority) and
bodies exempt from registration. One group unable to gain access
to the childcare tax credit as a result are parents with childcare
needs who work unsocial hours. They need childcare in their own
homes, which by definition is not registered, and therefore not
covered by the present rules. Several disability organisations
drew attention to the particular difficulties parents of disabled
children can face in finding suitable facilities for the care
of their children. A child may need to be cared in the home which
has been specially adapted; or they might have formed a particular
bond with a carer who is not registered."
Another Amendment proposed, in line 4 after the word
"registration" to insert the words "Stay-at-home-mothers
make up half of all mothers with pre-school children, a third
of mothers with children aged 5 - 9, and a quarter of mothers
staying at home if their children are aged 10 - 15 [HC Deb 19
November 1998 vol 319 col 859w]. Parents who elect that one of
them shall stay at home and look after their own children will
be unable to gain access to the childcare tax credit. Married
couples with pre-school children should automatically be considered
to be eligible to claim the childcare tax allowance if one spouse
stays at home to look after the children."'(Mr
Howard Flight.)
Question put, That the Amendment
be made.
The Committee divided.
Ayes, 3 | Noes, \6
|
Mr Howard Flight | Ms Karen Buck
|
Miss Julie Kirkbride |
Mr Vernon Coaker |
Mr Edward Leigh | Mr Andrew Dismore
|
| Mrs Joan Humble
|
| Kali Mountford
|
| Mr Chris Pond
|
Paragraph, as amended, agreed
to.
Paragraphs 73 to 76 (now paragraphs 68 to 71) read,
amended and agreed to.
Paragraph 77 (now paragraph 72) read and agreed to.
Paragraph 78 (now paragraph 73) read, amended and
agreed to.
Paragraphs 79 to 81 (now paragraphs 74 to 76) read
and agreed to.
Paragraph 82 (now paragraph 77) read, amended and
agreed to.
Paragraph 83 read as follows:
"WFTC and DPTC are a key part of the Government's
strategy for improving work incentives by increasing the rewards
from working. Yet the Committee's scrutiny of how the proposed
new tax credits system will work in practice suggests that many
potential obstacles lie ahead. The success or otherwise of WFTC
and DPTC in achieving the Government's objectives will not be
apparent for some time. We consider that Parliament should be
given the opportunity to 'revisit' WFTC and DPTC in the future,
to decide whether the new system is effective in supporting people
into work. We recommend that a provision should be inserted into
the Bill introducing WFTC and DPTC that the powers conferred under
it should lapse on the fifth anniversary of its coming into force.
This 'sunset' provision is intended to ensure that Parliament
will be given a further opportunity by primary legislation to
extend or amend the WFTC and DPTC legislation."
Paragraph disagreed to.
Paragraphs 84 and 85 (now paragraphs 78 and 79) read
and agreed to.
Paragraph 86 read, amended, divided and agreed to
(now paragraphs 80 and 81).
Motion made, and Question put, That the Report be
the First Report of the Committee to the House.
The Committee divided.
Ayes, 6 | Noes, 3
|
Ms Karen Buck | Mr Howard Flight
|
Mr Vernon Coaker | Miss Julie Kirkbride
|
Mr Andrew Dismore |
Mr Edward Leigh |
Mrs Joan Humble |
|
Kali Mountford |
|
Mr Chris Pond |
|
Ordered, That the Chairman
do make the Report to the House.
Ordered, That the provisions
of Standing Order No. 134 (Select committees(reports)) be applied
to the Report.
Several Papers were ordered to be appended to the
Minutes of Evidence.
Ordered, That the Appendices
to the Minutes of Evidence taken before the Committee be reported
to the House.-(The Chairman.)
Several Memoranda were ordered to be reported to
the House.
|