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Mr. David Kidney (Stafford): This being carers' rights day, may I ask whether, in response to the consultation, carers' representatives have been in touch to find out whether the employment tax credit that benefits disabled workers could also benefit carers?
Dawn Primarolo: Yes, the Carers National Association has participated in the consultation process. Discussion continues between the Inland Revenue and associations representing carers to take forward their objectives, particularly to establish an agreed definition of carers and how that may become part of tax credit payments in the future. I know that the association has been fair and direct in its comments, but achieving such a definition will be difficult. It is important that the definition is correct and allows carers to benefit. The Government have made a commitment to take that forward.
There will be continuing dialogue with interested groups as the Bill goes through the House and supporting legislation is drawn up. Many points raised in the consultation responses will be picked up again during those discussions, the definition of carers being but one.
In the light of the views expressed in the consultation process, we have decided that child maintenance payments will not be treated as income for the purposes of the new tax credit. The disregard of child maintenance has been a successful feature of the working families tax credit and disabled person's tax credit, helping lone parents move into work. We are continuing that approach in the new tax credits—a decision that has been widely welcomed.
Building on reforms in the system must take account of the progress that has already been made. The National Association of Citizens Advice Bureaux has been constructive in its engagement in the process. It stated:
- "We recognise the substantial progress that has been made in the past four years with the introduction of a range of policies aimed at increasing the incomes of people both in and out of work."
We introduced the working families tax credit and the disabled person's tax credit, which provide more support to families than their predecessors—family credit and disability working allowance—ever did. The working families tax credit helps almost 1.3 million families, who receive an average of £35 a week more than under family credit. The disabled person's tax credit goes to more than 29,000 people—almost 60 per cent. more than the disability working allowance at its peak. In 2001, we introduced the children's tax credit, which is worth up to £10 a week for about 5 million families. From next April, it will be worth an additional £10 a week to families who have a new-born child in that year. However, we have also made sure that work pays.
Mr. David Willetts (Havant): The Paymaster General said that 1.3 million families were benefiting from the working families tax credit. It is important, of course, to assess the take-up of tax credits against the number of people who are eligible to receive them. How many people are eligible for the working families tax credit and how does its take-up compare with that of other benefits?
Dawn Primarolo: I have indicated the growth in working families tax credit and the number of extra families who are receiving it over and above its predecessor, family credit. The hon. Gentleman is right to raise the impact of the working families tax credit and whether it gets to the families who need it most and addresses the issue raised by my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott). That is precisely why the Government have ensured that we have independent assessment and research on those points. It ill behoves Opposition Members, who presided over record growth in child poverty and unemployment, to try to undermine the take-up of those benefits.
Mr. George Osborne (Tatton): I want to press the hon. Lady on the issue raised by my hon. Friend the Member
for Havant (Mr. Willetts), who asked about take-up of the working families tax credit. How many people are eligible for it and how many claim it?
Dawn Primarolo: Some 800,000 people were claiming family credit and 1.3 million now receive the working families tax credit—a higher number. Opposition Members need to focus on two points: first, the benefit to those 1.3 million families, and, secondly, whether all those who are entitled to receive the credit are receiving it and any barriers to doing so. Precisely the comments that Opposition Members have made about complexity and the problems of applying for this support are addressed in the Bill, to which they should turn their attention.
Mr. Mark Prisk (Hertford and Stortford): Will the hon. Lady give way?
Dawn Primarolo: No; I want to make some progress.
Dawn Primarolo: Which part of the word "No" is the hon. Gentleman struggling with? I should like to make a little progress, after which I shall give way. I have been very generous in doing so. Indeed, so few Conservative Members are present in the Chamber, I think that I have given way to just about every one of them.
The commitments to supporting families are mirrored by our efforts to ensure that work pays. We have improved work incentives and reduced in-work poverty through targeted tax cuts that allow families to keep more of what they earn. We introduced the working families tax credit, the disabled person's tax credit and the children's tax credit—targeted cuts for families that provide, alongside the national minimum wage, guaranteed levels of income for working families. We included the child care tax credit in the working families tax credit and disabled person's tax credit, removing the barriers to work and helping parents to enter and remain in the workplace. We introduced the 10p starting rate for income tax, which has halved the marginal rates of tax for almost 2 million people on low earnings. We also introduced the national minimum wage to ensure that people receive a fair day's pay for a fair day's work. The national minimum wage tackles the worst excesses of low pay and ensures greater fairness in the workplace. The Low Pay Commission has estimated that between 1.2 million and 1.4 million workers aged 22 or above have benefited from the increase of the national minimum wage to £4.10.
I turn now to the structure of the new tax credits and what they replace. Building on the foundations of universal child benefit, the child tax credit will draw together in a single payable tax credit the child elements of the working families tax credit, the disabled person's tax credit, income support and the income-based jobseeker's allowance, as well as the children's tax credit.
It establishes for the first time a single system of income-related support for families with children, whether they are in or out of work. It bridges the gap between welfare and work and removes the stigma from support for children.
The credit will include a family element available to all families with children that will be higher for families with a child under the age of one. We will also include additional elements to reflect the number of children or young people in the family. That tailors support according to the size of the family. Higher credits will be payable for children or young people with a disability.
The working tax credit replaces the adult elements of the working families tax credit and disabled persons tax credit, as well as the employment credit in the new deal 50-plus. It extends the principle of in-work support, paid through the wage packet to those without children. If based on current support systems, it would benefit an estimated extra 400,000 people without children on low incomes. That benefit will also cover workers with a disability. Disability groups have favoured that approach rather than retaining a separate tax credit such as the disabled person's tax credit.
With the minimum wage, those credits will tackle poverty and improve work incentives by making work pay. The working tax credit will consist of a basic element for all those who are eligible. Additional elements will target support according to household circumstances. For example, there will be an additional element for couples, lone parents and workers who have a disability.
The working tax credit will also include an element for the costs of child care. Unlike the other elements in the credit, it will be paid directly to the main carer alongside child tax credit. It will not be paid through the wage packet. That reflects views expressed in the consultation. The Government remain committed to helping parents to overcome barriers to work. We will therefore build on the success of the child care tax credit in the working families tax credit and the disabled person's tax credit by including a child care component in the working tax credit.
The child care tax credit already helps approximately 145,000 families with their child care costs. That is three times the number who benefited from the child care disregard in family credit. Lone parent employment is at its highest for 20 years. We have listened to the comments of parents and child care providers about the existing arrangements, and we will make improvements to the new system. We plan to pay the child care element only while child care costs are being incurred. That will meet the anxieties of providers about keeping places open for parents who do not use them. It provides flexibility for parents who can get extra help when they need it.
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