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Mr. Ruffley: I agree with almost everything that the hon. Gentleman has just said, but does he know what would trigger an in-year assessment? The Bill does not tell us that.

Mr. Webb: I understand that events such as the birth of a child, marriage, relationship breakdown or changes in employment would do so, but I am concerned about less obvious changes, such as stopping doing overtime or taking a second job. One of the issues is how much the onus is on the claimant to be aware of the effect that such changes will have on their entitlement. Anything that requires folk to understand that complex system, with the possibility that they will be penalised if they fail to report changes that they might not realise are significant, is a possible problem.

I am concerned about take-up. The Paymaster General would not give us a figure for the number of families eligible for WFTC who do not claim it. If the take-up is about 75 per cent.—the sort of figure that is often quoted—it might be as many as 300,000 or 400,000 families. We know that of the 5 million entitled to the children's tax credit, 3.6 million receive it and perhaps another 1 million self-employed parents will get it through their tax returns. It may be that another 300,000 or 400,000 are missing out on that one.

In terms of employment credit for people who have never been in the benefits system before, apart from housing benefit—the childless low-paid—there is an issue of take-up. Studies of various pilot schemes have suggested that take-up is a real problem, but there is not a problem with the take-up of tax allowances; everybody gets the tax allowance. If we deliver support through tax allowances and not through the working credit, we will not have a take-up problem. I am convincing myself more as I go on that tax allowance rises would be better than the employment credit.

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The interaction with housing benefit has been mentioned. In terms of the pension credit, the Government have said that they will raise the housing benefit thresholds so that someone getting maximum pension credit will get exactly the same housing benefit as before; the thresholds will go up in line. There is a hint in the Bill that the Government are thinking of putting housing benefit thresholds up so that people who are brought into the tax credit system—the childless in particular—would not find that they were losing 85 per cent. through housing benefit tapers. We seek some reassurance on that. It would be perverse if people were given £20 with one hand and then had 80 per cent. of that taken away by another through the housing benefit system.

The money we are talking about must be paid into an account. For those with a bank account, that is not a problem. For those without, it is. The scheme is to begin in 2003. Previously, the Government said that the universal bank and the card system—the switch to automated credit transfer—would be phased in over 2003 to 2005. However, the Bill requires payment into accounts from April 2003. If the Government are falling behind schedule on the universal bank, that will cause great concern, as these payments need an account. I hope that the Government can reassure us that the universal bank will be in place by April 2003.

Clearly, this is a complex Bill, and the regulations will tell us a great deal. It would inform the Committee's deliberations to have sight even of draft regulations or indicative statements from the Government on the levels of thresholds and their thinking on other points. That would make a huge difference to our judgment of the Bill.

Because the Bill, in principle, moves in the right direction—particularly with regard to families with children—I and my colleagues welcome it. We have considerable misgivings about the working tax credit that we hope to address in Committee but, on balance, we are minded to support the Bill.

5.52 pm

Gareth Thomas (Clwyd, West): The fact that this debate so far has been couched in technical terms and complex language may lead an outside observer to believe that this is an esoteric matter. It is not. My right hon. Friend the Member for Birkenhead (Mr. Field) did the House a service by bringing this debate to life. He is more sceptical about the Bill's implications than I am, but he was right to say that while the Bill is complex, it affects the lives of many people, as is often the case with social security measures.

The Bill is a substantial step forward in the Government's campaign to end child poverty and to improve the lives of many people who continue to live on low incomes. The debate has brought to light the philosophical and political divide that exists, and my right hon. Friend the Member for Birkenhead was right to refer to that. The Government are proceeding down this course, rather than seeking tax cuts. They are putting their political credibility on the line and seeking to implement measures that are, on any view, seriously redistributive and will mean a real improvement in the lives of many people.

The Bill builds on the Government's work, and there are many tools in the toolkit; it is not just a question of relying upon tax credits. Reference has been made to the

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need to bring low-income people out of tax liability, but that is already happening. The 10p starting rate for tax has been extended, so that many people are not paying tax at all. The national minimum wage has made a big difference, as has the working families tax credit, the predecessor of the child tax credit and the working tax credit.

The figures from my constituency reflect the degree to which the Bill is of immense practical value. No fewer than 8,111 families in my constituency have benefited in a big way from increases in child benefit. No fewer than 1,840 low and middle-income families are, on average, £30 better off thanks to the working families tax credit. I am pleased that the Bill extends the scope of the tax credit regime to a greater number of people.

Some 1.25 million children already have been lifted out of poverty. I am sure that the Government are under no illusions and are aware that a considerable amount of further work needs to be done. We live in a society in which, due to the legacy of the previous Conservative Government, the divide between rich and poor has widened. I am convinced that the Bill is a big step in the right direction. It is right for us to move away from the culture of welfare dependency to a system in which we promote incentives to work, make work pay and further improve financial support for children.

My right hon. Friend the Member for Birkenhead mentioned elephant traps, but there other traps; the unemployment trap and the poverty trap. I am certain that the regime of tax credits will be one of the most effective ways of bringing an end to the culture of dependency and improving the lives of a considerable number of people.

As a former member of the Social Security Committee, I agree with its findings in the last report that it produced in the previous Parliament. The Committee concluded that tax credits will help to tackle child poverty, increase work incentives and produce a simpler and more coherent system of administration for the benefit of recipients.

The Committee was particularly exercised by the question of what work was being done to ascertain the absolute measure of poverty to which the regime of tapers, rates and thresholds will be addressed. One appreciates that the devil is in the detail, but could the Minister give an indication of the Government's thinking on that matter?

Will the Government respond positively to a briefing that I have received from NACAB, which has expressed concerns about two issues? The first is the number of hours worked. In terms of eligibility, how many hours would people have to work before they can qualify for the working tax credit? It is the view of NACAB—and I suspect many others—that the current figure is rather too high, particularly with regard to disabled groups.

On the vexed question of housing benefit, I wish to refer to paragraph 45 of the Social Security Committee report, concerning the perverse effects of differential tapers. It states:

The Committee went on to suggest that serious consideration should be given to a free-standing housing credit as part of the planned reforms. It concluded that it was pleased that the Government were looking at the

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interaction of child tax credits and housing benefit but felt that the aim should be to improve marginal deduction rates rather than simply not making them worse than they are at present. As I understand the Government's position, they were, until recently, looking seriously at that issue, because it cuts across the philosophy behind the Bill and the Government's approach, which is to make work pay.

The Bill is a substantial step forward. I am particularly pleased that the Government have accepted the need for child tax credit to be paid to the main carer and that the Bill will disregard child maintenance. I am also pleased that it strikes a balance between predictability and certainty, which is so important for many low-income families, while taking into account the need to respond to changed circumstances. I welcome the Bill, which offers an opportunity to have a more streamlined system of support and makes a reality of the principle that work should pay.

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