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Dawn Primarolo: Does the fact that the official Opposition feel unable to vote against the Bill mean that they will not table amendments in Committee?

Mr. Flight: That is a very strange comment from the Paymaster General, who has always enjoyed discussing the amendments that we table. I assure her that the Opposition will table a substantial number of amendments to tease out the problems presented by the Bill, and the Government are not allowing sufficient time in the allotted Committee sittings for those amendments properly to be discussed.

What the Chancellor has described as a seamless system of income-related support for families with children is in reality a complex extension of his means-testing agenda, which involves considerable dangers, and we are suspicious of the real political motives behind it.

4.59 pm

Mr. Frank Field (Birkenhead): Nobody outside the House should be unclear about the Government's commitment to tackle poverty and child poverty. The Bill means that, as a party, we forgo a 3p cut in the standard rate of tax. When the whole of the Government's tax credit proposals are unfolded, we forgo something like a 5p cut in the standard rate of tax. So when we go into the next election, we will be setting aside the chance of campaigning on a 17p standard rate of tax and defending our tax credit strategy. I hope that, when they face the electorate, Labour Members will not be under any misapprehension about how costly the anti-poverty programme is or how seriously the Government are attempting to tackle poverty. It is clear that there is a big divide in the House. It is easy to speak about our concern for people on low income and our wish to see them on higher income but, when it comes to action, we have to put taxpayers' money where our mouth is. The Government are doing that handsomely. Later, I shall consider whether it is wise to put so much taxpayers'

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money in one basket, but no one should be unaware of the seriousness of the Government's attempt to counter the growing poverty that many of our constituents first experienced under the regime that existed when the Opposition were in government.

I compliment the Paymaster General. When Labour Members are in government, I wish that we always heard Ministers who commanded both the respect of the House and their brief as she does. The Opposition deliberately bowled her a number of difficult balls that were not always relevant to the Bill, but she had no problem in hitting them to the boundary. It certainly raises morale on this side of the House to have Ministers with such qualities and expertise.

Of course, it is difficult for a Member of whatever party to speak against a Bill that tries to ensure that poorer people have more money. When I was in opposition, the Conservative Government introduced measures to initiate housing benefit. Who could be against a measure to help poor people pay their rent? I was one of the Members who spoke against the proposal. It was extremely attractive on the surface, but I thought that it would lead to extraordinary problems. I thought that when it came to fruition, it would push rents up so much that most working people would be unable to pay their rent without assistance; far from freeing people from poverty, we would increase significantly the extent of dependency in our society.

My warnings in those debates carried no weight with the House of Commons. Hon. Members thought that I was scaremongering. The Opposition were embarrassed by my warnings and the Government were set on introducing housing benefit. However, rents have been pushed up, an ever-increasing number of people are dependent on housing benefit and fraud is so extensive that it frightens those of us who have glimpsed it. The present Government, like the previous one, do not know how to get off the treadmill of rising welfare bills. As with housing benefit, so with the tax credit proposals. Although I have no doubt that the Paymaster General will have no difficulty in countering arguments that may be made in the years ahead, today she is dealing with the easiest part of the argument. Once the benefits or credits kick in, real life will start to impinge on our image of how they work.

I wish to discuss five bear traps that are already apparent. People around the country have written to me about them, and they will take up more of Parliament's time than they currently do.

The first problem posed by the Government's approach to tackling child poverty is that many employers who employ people on lowish wages cannot make their employees better off by raising their wages, and can only suggest to their employees that they claim the relevant tax credits, while the employers plough back profits that they would have paid in increased pay. I do not criticise employers or employees for working the system in that way. I blame the House if it passes such measures, because we give them no option other than to behave rationally as economic men and women. Already, employers are aware that if they increase pay, that pay increase will be clawed back by the tax credit proposals.

Mr. Ruffley: I have been listening carefully to the right hon. Gentleman, and I want to agree with his analysis,

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but can he explain how the proposed in-work benefits differ from family credit? Did not the problem that he identifies exist under the family credit regime?

Mr. Field: Of course it did. Both sides are tarnished. The only defence that the Opposition can come up with against my argument is, "Well, guv, we were shopped, but we were not nearly as generous with taxpayers' money, so fewer people were affected." That does not counter my argument.

The second point concerns the exchange between the Front-Bench spokesmen about how the payments would be made. The crucial point is that they are made through the pay office of firms. Although information in pay offices ought to be confidential, and people ought to be discreet in what they say, sometimes, if they see an injustice, they are less discreet than we are with information that might come our way.

People are already noticing what others are taking home in their pay packets, and what that is doing to pay hierarchies within firms. An employer writes to tell me that he is employing someone who has not worked before, and he is very pleased to have that person on the payroll, but after the tax credits are paid, her pay moves from £12,000 to the equivalent of £19,000 a year. There are many people in the firm who earn much less than that who are skilled, have acquired extra qualifications, and feel that that is a huge injustice. The issue will not go away, but become more current in our debates.

The third bear trap is that we will be encouraging our constituents to work the system, like employers. I shall give an example from one of the Revenue offices, where staff failed to get their bosses to act against fraud. They and the staff of other offices have therefore leaked information to me. I hope that the word goes out from our debate tonight that we will be as careful with taxpayers' money as we are with our own.

The example involves someone who is disabled and who pays her daughter £2.50 an hour to look after her. That is well below the minimum wage, as was pointed out by the officer, who was told by the senior officer to agree it. The push is to get claims registered; that is what is required. The officer comments that this example of "taking in washing" would be complete if the grandmother could qualify as a child carer, so that she could be paid to look after her granddaughter while her daughter is paid to look after her, all at the expense of the hard-working constituents whom I and other right hon. and hon. Members try to represent.

Again, that leads to the question of fraud. How keen will the Government be to act when officers raise the issue of fraud but senior officers say that they are anxious to boost claimant numbers to meet targets, rather than ensuring that people are claiming correctly? When inspectors checked up on employers who were likely to be committing fraud in relation to family credit, they often found that employees were paid appallingly low wages and discovered a pattern in which employers regularly withdrew large cash sums from the bank, but could give no account to investigating officers of where that money was going. Obviously, cash deals were being struck between employers and employees, who decided that they should work the system and maximise family credit, as it was then called, while taxpayers picked up the bill for the fraud that both parties were committing.

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For 13 weeks, I was Minister of State with responsibility for dealing with such fraud. In that time, I requested that we carry out a benefit review to consider the avenues for fraud in respect of the working families tax credit, but what happened is deeply disturbing. I asked for the review so that the Treasury would have the information when it came to design the working families tax credit so that the opportunities for fraud could be minimised as far as possible, but it was not undertaken and the papers that I signed in relation to that whole period have gone missing. I raise the issue merely as a sign that some people in Whitehall are less keen on countering fraud than hon. Members. When my hon. Friend the Paymaster General said that she gave the matter priority, it was news to our ears and to those of our constituents. I hope that she will equal the effort that she has put into launching the measure in taking the measures needed to counter fraud.

In the longer run, I do not believe that a free society can be run in such a way. We cannot let people buck the system to the extent that about 85 per cent. of working families with children are on means-tested assistance and assume that it will not affect their behaviour one iota.

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