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Caroline Flint (Don Valley): My hon. Friend knows that there is no greater champion than me of the Government's actions on child care. However, during the Bill's passage, I ask the Department to try to tackle the problems that face families whose child care is provided in their homes. For example, child care must be provided in the home for a nurse on shift work or a parent with a disabled child. More than 50 per cent. of child care is in the informal sector.

Dawn Primarolo: I assure my hon. Friend that child care in the home is partly covered by the Bill. However, I know that she is a champion of child care principles, and I emphasise that when we pay for child care, we must ensure that it is safe and of high quality so that the child is protected. She also knows that the Department for Education and Skills regulates child care providers. It will

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be necessary, especially in the case of disabled children for whom it is more appropriate to provide care in the home, to ensure that there are no barriers to prevent the payment of the tax credit. This issue will also apply, as my hon. Friend rightly suggested, to shift workers, who usually find it more appropriate to provide child care in their own home, depending on their shift.

The payment of the working tax credit through the wage packet will be key in demonstrating the link to work. We also recognise the practical need to provide help with child care costs quickly to the main carer. We shall, therefore, pay the child care element of the working tax credit directly to the main carer alongside the child tax credit.

The Bill also deals with the transfer of child benefit payments to the Inland Revenue.

Mr. Webb: I appreciate that the Minister will not give us specific figures, but may I ask her a question on the principle of the streamlining of support for people both in and out of work? She will be aware that the children of someone in work get slightly more support—through the combination of child benefit and working families tax credit—than the children of someone who is out of work receive through personal allowances on income support. The difference is not large, but it exists. Will she confirm her intention to level up, rather than level down, that difference?

Dawn Primarolo: The hon. Gentleman seeks to draw me into a discussion on rates and tapers in a slightly different way and, as much as I like and respect his work, I cannot be tempted down that route at the Dispatch Box today. He makes an important point, however, that goes to the heart of the tax credit reforms, which will ensure that support given to families specifically for children should not be differentiated according to whether the parents are in or out of work. I am sure that the hon. Gentleman will follow closely when the Chancellor makes his announcements on the rates and tapers in the 2002 Budget, and if the hon. Gentleman serves on the Committee for the Bill, he will no doubt want to pursue the matter further when we discuss the clauses that provide for the regulations on child care.

The Bill provides for the transfer of child benefit to the Inland Revenue, as announced by the Prime Minister in June this year. Child benefit is a key part of the Government's strategy for eradicating child poverty, and it will remain an identifiable stream of income that is universally available. The child tax credit introduced by the Bill will build on the foundations of child benefit. It makes sense to streamline the administration of financial support for parents by transferring child benefit to the Inland Revenue.

Alongside the introduction of the child tax credit, that will enable the Government to deliver a joined-up service to parents, who will need to deal with only one Department to get the support to which they are entitled for their children. The majority of the 7 million families who receive child benefit will also receive help through the child tax credit, so it makes sense for both to be run by a single Department. That will help to reduce the hassle and red tape for those families.

Mr. Prisk: While welcoming the simplification of the various credits that the Minister has mentioned, may I ask

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her whether she believes that the Bill in any way negates the need for the Carter report, which she and her senior colleague published recently?

Dawn Primarolo: The simple answer to the hon. Gentleman's question is no, if he is referring to the Carter report that deals with the burdens on small and medium enterprises. The Government are currently seeking responses to the suggestions in the report.

As the hon. Gentleman is no doubt aware, small and medium enterprises have made the criticism—unjustly, in my view—that the working families tax credit and the disabled person's tax credit put an unreasonable burden on such companies. While reforming the system, we examined the development of tax credits in the context of reducing the burdens on small and medium enterprises. If he reads the regulatory impact assessment, he will see that the costs are reduced by about £11 million per year, but by bringing tax credits more in line with the tax system we have reduced the number of necessary contacts with the employer. For example, the assessment is annual, so there is no need to stop and start during the year, which happens with the six-monthly working families tax credit allocations, and much of the paperwork necessary because of the six-monthly renewal has disappeared.

I am sure that a few companies still cannot appreciate the benefits of having a stable work force and being able to provide child care, but they will realise that the burdens on them are considerably reduced. Although I do not necessarily agree with all the criticisms made originally, it would be churlish not to seek during the reform further to reduce the pressures and burdens on small and medium enterprises.

If the hon. Gentleman is lucky enough to sit on the Committee, which I hope he is, I shall be more than happy to engage in greater detail on the changes that we have made. Indeed, the Institute of Directors, which is not necessarily noted for its great enthusiasm for the tax credit agenda, has congratulated the Government on the measures and changes that we have introduced

Mr. Kidney: On burdens, the other side of the coin is the ability of Inland Revenue staff to carry out their new duties in addition to their existing ones. Is my hon. Friend happy that they will be able to discharge their duties well? As an indicator of the answer, may I say that I have been extremely impressed with the high-quality service provided by the Inland Revenue in my constituency during delivery of the working families tax credit system?

Dawn Primarolo: I was a little worried as my hon. Friend began in case he was about to point out an error—errors do happen in such a vast system—but I am happy that he has confirmed his experience of how the Inland Revenue conducts its relationships with employers, ensuring that they are properly informed of their obligations and working with those who claim their entitlement through the tax credits. It has worked extremely efficiently.

There are always problems in a vast system, and I cannot put my hand on my heart and say that there will be no errors in future, but the Inland Revenue has shown in the development of the working families tax credit and the disabled person's tax credit and in the Bill that it has the capacity to deliver sensitively, quickly and in a way that people who claim the tax credits understand.

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The other important point, which my hon. Friend's intervention leads me to, is the tax credits responding to changed family circumstances. We inherited much of the structure for the working families tax credit and the disabled person's tax credit from their predecessors, family credit and the disability working allowance, which included fixed awards. That means that families may have to wait up to six months for their award to be adjusted to their changing circumstances.

We have already made changes to the working families tax credit and the disabled person's tax credit to ensure that families can receive extra help immediately a new child is born, but the introduction of the new tax credits allows us to go much further in developing a responsive, targeted system.

Under the new system, tax credit awards will respond as a family's circumstances change, delivering the right support to families at the right time. For example, whenever the composition of a household changes or a family's child care costs change significantly, tax credit awards will be able to respond to that change straight away. No longer will there be any need for a family to wait six months.

In responses to the consultation, everyone recognised that there was a need to respond to changes in income, both up and down. The proposals in the Bill introduce a more flexible system that can respond to those changes in income, and that has been widely welcomed. All hon. Members will recognise that it is important to strike a balance between making the system responsive to income changes and keeping it straightforward for claimants. There must be certainty in the guaranteed amount of income over a fixed period that the family will receive. That has been vital in working families tax credit and disabled person's tax credit, and in family credit before that. We must provide that certainty, but we must also be able to respond to dramatic falls in income or changes in family circumstances. The Bill allows us to take a flexible approach to income changes.

We need to have further discussion of this issue, which I am sure will occur in Committee, so that we can refine the system in the light of experience once the tax credits have been functioning for some time, and enable it to be changed quickly.

Finally, the problems of compliance and fraud are ever present.

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