| Committee Recommendations: Progress
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| Sessions 1998-99
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First Report: Tax and Benefits: Implementation of Tax Credits (HC 29) Published: 2 December 1998
Government Reply: Second Special Report (HC 176) Letter to the Chairman of the Committee from the Chancellor of the Exchequer) Published: 26 January 1999
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| Recommendation | Government Response
| Committee Response/Follow up | Further Government Action
| Notes |
| The Committee welcomes the Government's intention to improve the rewards of work for relatively low paid workers (paragraph 3)
| It was very gratifying to see the very warm welcome the Report gave to the Government's aims in introducing the new tax credit - to improve the rewards of work for families on lower incomes - and to the changes to National Insurance Contributions announced in y last budget
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| Treasury lead |
| We welcome the changes to NICs and agree with the Institute for Fiscal Studies that they are a "substantial step towards rationalisation of the National Insurance System" (paragraph 79)
| As above |
| | Treasury lead
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| We recommend that the main draft regulations on WFTC and DPTC should be published and made publicly available so that all interested parties have the opportunity to comment on the detail of the measures proposed (paragraph 7)
| The Government intends to publish all the Regulations associated with the Tax Credits Bill in draft before they are formally laid before Parliament. And it aims to expose the rules relating to the payment of tax credits in the wage packet and the Regulations relating to the computation of the tax credits - which will contain the details of the new childcare tax credit - in time to inform the more detailed debates on the Bill
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| Treasury lead |
| We regret that officials were not more forthcoming in discussing the range of options being considered in areas where no final decision had been made (paragraph 12)
| Many of the recommendations in the report concern the role of employers and cover areas where my officials were unable to give the Committee a comprehensive response because the details had yet to be settled
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| Treasury lead |
| We recommend that the Inland Revenue should work with employers' organisations to ensure that employers are fully aware of the practical implications for them as the details of the WFTC and DPTC are finalised (paragraph 13)
| The proposals detailed in the booklet [Inland Revenue WFTC and DPTC; Proposals for a new system of tax credit for people in work from October 1999"] were arrived at after a long period of consultation with representatives of employers, payroll associations and other relevant business organisations. These were carried out with a view to keeping any extra costs to employers to a minimum. And we feel that we have succeeded in that.
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| Treasury lead |
| The concerns of employers, coupled with the difficult questions which still have to be resolved, lead us to propose that the Inland Revenue should address with some urgency the practical difficulties of implementation within the currently proposed timetable (paragraph 14)
| Since the hearing in October, the Government have introduced the Tax Credits Bill. An the Inland Revenue have published - in the booklet "WFTC and DPTC; Proposals for a new system of tax credit for people in work from October 1999" copies of which Dawn Primarolo sent to the Committee - further details of the arrangements for paying tax credits through the payroll. I hope you will agree that, between them, the Bill and the booklet address the Committee's concerns.
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| Treasury lead |
| We recommend that during the first three months of WFTC only, provision should be made for new awards of Family Credit to last seven months (or 30 weeks) so that, in future, work can be distributed more evenly throughout the year (paragraph 18)
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| | Treasury lead
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| We recommend that employers should have a legal responsibility to inform the Inland Revenue when an employee in receipt of benefits leaves their employment (paragraph 19)
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| | Treasury lead
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| We recommend that the performance of the Inland Revenue in making prompt payments of advance WFTC or DPTC to employers should be measured against clear targets, and that details should be recorded of the numbers of employers who request such funds and the sums paid out by the Inland Revenue as a result (paragraph 26)
| The Inland Revenue booklet addresses the Committee's concerns about the arrangements for providing funding to employers who need it.
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| Treasury lead |
| We recommend that small employers who administer WFTC should be awarded reimbursement of their costs similar to that which currently applies in relation to Statutory Maternity Pay, whereby small employers are entitled to an additional payment of 7 percent of the payment of SMP (Paragraph 26)
| As above |
| | Treasury lead
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| We recommend that the new payroll service for new small businesses being developed by the Inland Revenue should incorporate systems which take account of WFTC and DPTC (paragraph 26)
| The proposals detailed in the booklet were arrived at after long period of consultation with representatives of employers, payroll associations and other relevant business organisations. These were carried out with a view to keeping any extra costs to employers to a minimum. And we feel that we have succeeded in that.
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| Treasury lead |
| We recommend that in cases of multiple employment, the Inland Revenue should decide with some urgency the method of payment which is to be pursued (paragraph 27)
| The Inland Revenue booklet addresses the Committee's concerns about employees with multiple employments, irregular work patterns or periods of leave or sickness
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| Treasury lead |
| We recommend that where a person can show a pattern of intermittent work in the previous six months they should have the option of choosing to receive payment of WFTC or DPTC direct from the Inland Revenue rather than through the wage packet. We further recommend that the entitlement to WFTC or DPTC should continue during periods of leave or sickness, as is the case with Family Credit (paragraph 55)
| As above |
| | Treasury lead
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| We recommend that the Inland Revenue should combine its enforcement functions in relation to the National Minimum Wage legislation with the obligation to pay WFTC and DPTC (paragraph 29)
| The national minimum wage will be policed by the Revenue on behalf of the DTI - and the Revenue will be considering, with DTI, the best means of ensuring compliance with the new regime
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| Treasury lead |
| We recommend that active steps should be taken by the Inland Revenue in the coming year to increase employers' awareness of their obligations to pay WFTC and DPTC and the benefits of compliance (paragraph 30)
| The Committee can rest assured that ..consultations…will continue. They will cover the more detailed implementation of the arrangements for employers, including the best ways of helping employers to become aware of and to understand the implications of the new scheme through publicity campaigns, education initiatives and so on
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| Treasury lead |
| We recommend that the Inland Revenue should be given power to levy 'compensation orders' on employers who consistently fail to co-operate in the payment of WFTC or DPTC (paragraph 31)
| The Inland Revenue booklet addresses the Committee's concerns about dealing with issues of fraud and non-compliance more generally
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| Treasury lead |
| We recommend that the statutory obligation which requires employers to provide an itemised payslip should be extended to require the specific inclusion of information relating to the gross income tax due and the total tax credit payable (paragraph 32)
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| | Treasury lead
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| We repeat the recommendation made in our previous Report that the Government should place a high priority on reform of Housing Benefit as part of its strategy of welfare to work and reform of social security. We further urge the Government to consider ways of assisting home-owners in low paid work (paragraph 41)
| The Government's Comprehensive Spending Review looked at housing policy and the support the welfare system gives people with their housing costs.
We concluded that we must help home owners to protect their homes in the event of unemployment and ill health. With lenders and the insurance industries, we have developed a new standard mortgage protection payment product. And we are looking to make it available nation wide this summer.
For tenants who need help with their housing costs a priority is to modernise the structure and delivery of Housing Benefit. With the Local Authority Housing Associations we are working to make Housing Benefit simpler and easier for claimants to understand; to improve its administration so that claimants receive their correct entitlement promptly; to make the benefit fairer, so that the most glaring anomalies, perverse incentives …………………..
| | The Government has been working closely with the Council of Mortgage Lenders (CML) and the Association of British Insurers (ABI) to improve the quality and value of Mortgage Protection Payment Insurance. New benchmarked products were introduced in July 1999 and all existing policies must meet or exceed this benchmark by 1t July 2001. This initiative has paved the way for higher quality, better value insurance operating alongside state benefits to provide a more effective level of protection for the home.
The Government published its Housing Green Paper, on 4tApril, which considered housing as a whole, including the role of HB. It contained a package of proposals that, if implemented, will overhaul the current HB system, ensuring that it is modern, secure and consistently delivered. The measures proposed would improve customer service, tackle fraud and error and reduce the barriers to work. The Green Paper also took the opportunity to explore possible fundamental changes to the system, whilst acknowledging that reform of the social housing sector will be necessary before these can go ahead. Consultation on the Green Paper ended on 31 July. The Government is currently studying the consultation responses and will make decisions on how to proceed in the light of them. Decisions will be announced in due course.
The Government has embarked on a major programme of service delivery modernisation and has made some specific HB improvements (e.g. Remote Access Terminals, electronic data transfer). Through the Benefit Fraud Inspectorate it is doing more to encourage good practice. Since April 2000 the LAs have been set a challenging agenda under Best Value to improve their HB services and we will intervene where BFI identifies persistent service failings.
An automatic two week run-on for lone parents, who have been getting Income Support or Jobseekers Allowance for at least six months was introduced from 4 October 1999. An award was linked to an automatic four week Extended Payment of Housing Benefit.
The process for claiming the Extended Payment of HB is to be made more automatic from April 2001, removing the need for a claim form to be completed.
An Income Support Mortgage Interest (ISMI) run on is to be introduced from April 2001, targeted at those returning to work or who go onto a Government training scheme in order to ease the transition back into work. The run on will last for a period of 4 weeks.
Also from April 2001 a simple, flat rate Job Grant payment will be introduced for claimants of IS, JSA, IB or SDA, who are over 25 and have been on benefit for at least a year and who are moving into full time work, which is expected to last for 5 weeks or more. Lone parents will not be eligible for the Job Grant but will instead retain eligibility for the two week lone parent run on. Job Grant payments will only be released once all eligibility criteria are met and are disregarded as capital in any subsequent claim for Housing Benefit.
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| We recommend that the 'passported' benefits which can be accessed at present through receipt of Family Credit or Disability Working Allowance should also be made available to recipients of WFTC and DPTC (paragraph 42)
| The Department of Health and the DETR are responsible for the 'low income scheme' and Home Energy Efficiency Scheme respectively and the Government will ensure that help continues to go to those who need it most
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| Treasury lead |
| We recommend that eligibility for free school meals should be extended to families who are awarded WFTF or DPTC, who have been in receipt of Income Support or JSA in the period immediately preceeding the award (paragraph 43)
| When Family Credit was introduced in 1988, provision was made to include a sum to replace the entitlement to free school meals provided by its predecessor benefit. This was also the case with DWA and both have been annually uprated. When WFTC and DPTC replace FC and DWA respectively, the amounts payable in respect of each child will continue to include that element
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| Treasury lead |
| We recommend that the current child support disregard for Family Credit should at least be maintained within WFTC and DPTC in real terms. We also recommend that consideration be given to disregarding Child Support payments up to the level of the anticipated average maintenance payment of £29 per week (paragraph 44)
| I was pleased that your Report welcomed the changes to the childcare tax credit which I announced in my Pre-Budget Report in November. Work is continuing on developing appropriate definition of "eligible childcare" that will complement our National Childcare Strategy. And your recommendations concerning parents working unsociable hours and children with special needs will help inform that thinking
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| Treasury lead |
| We welcome the Chancellor's announcement in his 1998 Pre-budget Report that the childcare credit will be extended to children up to the age of 14 in line with the National Childcare Strategy; and that, in the case of children with a disability, the age limit will be raised to 16 (paragraph 66)
| As above |
| | Treasury lead
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| We recommend that the definition of eligible childcare for WFTC and DPTC purposes should be broadened to include the childcare arrangements made by parents working unsocial hours and parents of children with special needs, provided these arrangements are verifiable (paragraph 68)
| As above |
| | Treasury lead
|
| We recommend that a duty be placed on the Inland Revenue to take all reasonable steps to ensure that people who are eligible to claim WFTC and DPTC (including the childcare tax credit) are made aware of their entitlement and encouraged to claim (paragraph 46)
| Encouraging all those eligible for the new tax credits to apply for them will be an important objective for the Inland Revenue and they will be undertaking a wide ranging publicity campaign,. Existing data will be used at every opportunity - within the constraints of the data protection rules - to help identify potential applicants and focus the advertising and information campaign on the appropriate people. The Revenue will commission tracking research to monitor the effectiveness of its publicity and information campaigns - and monitoring the take-up of the DPTC will be an important part of this
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| Treasury lead |
| 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 (paragraph 51)
| As above |
| | Treasury lead
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| We recommend that the Government should implement an active take-up strategy for DPTC, publishing annual targets for take-up and reporting annually to Parliament on progress in meeting those targets and the methods used to achieve them (paragraph 65)
| As above |
| | Treasury lead
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| We recommend that the Government should give greater priority to detailed back-to-back 'better-off' advice for individual families through the allocation of specific resources for this task and the provision of accessible points of contact in local areas where such advice is readily available (paragraph 50)
| Information and advice will continue to be available to potential applicants as part of the normal service supplied by the Benefits Agency and Employment Service. And the Revenue will continue to provide "better off calculations". The dedicated helpline currently giving the majority of the detailed advice on Family Credit and Disability Working Allowance will be transferred to the Inland Revenue
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| Treasury lead |
| We welcome the Government's decision to allow couples to choose which partner can receive the WFTC (Paragraph 57)
| The applicants from will allow couples a free choice to which of them receives the tax credit without presumption about whether it should go to the man or the woman. In general, correspondence will be with the person the couple chooses to receive the tax credit, but when tax credits begin to be paid through the wage packet in April 2000, couples will be notified jointly about the WFTC award
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| Treasury lead |
| 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 (paragraph 58)
| As above |
| | Treasury lead
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| We recommend that where WFTC is paid through the wage packet to a partner in a couple, notification of the award should also be sent by the Inland Revenue to the non-working partner (paragraph 59)
| As above |
| | Treasury lead
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| we recommend that the option of payment by order book at the post office should be made available by the inland revenue when making direct payments of WFTC (paragraph 60)
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| | Treasury lead
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| We recommend that the impact of the proposed measures within DPTC to encourage job retention by people who become disabled when in work should be carefully monitored to ensure that they are effective in reaching the target group (paragraph 63)
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| | Treasury lead
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| We regret the fact that work on the main Benefit Review of Family Credit was dropped by the Benefits Agency following the decision to transfer the benefit to the Inland Revenue, when the lessons to be learned from such a review would have been of particular importance in assisting the Inland Revenue to minimise the scope for fraud in the design of the new tax credit system. We recommend that the Inland Revenue should take over and complete the investigation started by the Benefits Agency (paragraph 71)
| The Committee recommends helping to combat fraud by taking forward the Benefit review of Family Credit and by continuing to pay Income Support and JSA while entitlement to tax credits is established. I can assure you that these approaches will b born in mind as the Revenue develops its strategy for improving compliance. This is already being informed - and very helpfully so - by the experience of the Family Credit and the Benefit Fraud Inspectorate
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| Treasury lead |
| We recommend that the Government should give consideration to extending payment of Income Support or JSA to people who have claimed WFTC or DPTC for up to 14 days after commencement of employment in order that claims for in-work financial support can be properly verified before payment is made (paragraph 74)
| These approaches will be borne in mind and the Revenue develops its strategy for improving compliance
| | An automatic two week "run on" for lone parents, who have been getting Income Support or income based JSA for at least 6 months, introduced from 4/10/99.
From 2001 a simple, flat-rate Job Grant payment will be introduced for claimants of IS, JSA, IB or SDA who are over 25, who have been on benefit for at least a year and who are moving into full-time work which is expected to last for 5 weeks or more. Lone Parents will not be eligible for the Job Grant but will instead retain eligibility for the two week Lone Parent Run-On, introduced in October 1999. Job Grant payments will only be released once all eligibility criteria are met.
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| We welcome the Government's decision that, in order to improve transparency, the Treasury will for future projections of public finances include an additional line in the table showing Total Receipts, indicating the cost of WFTC separately from other income tax credits (paragraph 77)
| The full costs of the WFTC and DPTC were set out as a separate line in table B9 of the November 1998 Pre-Budget Report (Current Receipts). This followed a commitment by the Government in its response to the Treasury Select Committee's 8th Report that future projections of the public finances would include an additional line the current receipts tables showing the cost of the WFTC and DPTC separately from other income tax credits.
The figures are also included in the presentation of the national accounts public finances aggregates within Annually Managed Expenditure, in the accounting adjustments line. A full breakdown of the accounting adjustments is presented annually in the Public Expenditure and Statistical Analyses which is published in March or April along with the main estimates and departmental reports.
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| Treasury lead |
| We recommend that separate lines of figures by given for WFCT and DPTC in any Tables in either the Pre-Budget report on Total Receipts (as percentages of GDP) or Public Sector Current Receipts (in £ billion) (paragraph 77)
| A s above |
| | Treasury lead
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| The relationship between payment of NICs and entitlement to contributory benefits is absolutely fundamental to the wider debate about social security reform and is a subject to which the Committee should return
| | The Social Security Committee is conducting an inquiry into the contributory principle
| | Treasury lead
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