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Mr. Webb: I shall resist the temptation to go into detail, because these are detailed matters. I did not say that I do not know anyone who earns too little to pay tax. I said that I suspect that there are relatively few people who earn too little to pay tax and who would be entitled to the employment credit for which they have to work
On the issue of raising tax allowances and not helping the rich, that could also be done by starting the basic rate band lower down, so all the increase in the tax allowance would benefit the poorest taxpayers. There are various permutations. It is the principle that is important. It does not have to be done through an in-work benefit: it could be done through the tax system as I suggested.
Kali Mountford: I asked similar questions recently during a Select Committee meeting. I asked whether we should simply change the starting rate. I see the simplicity of the proposal and understand why the hon. Gentleman finds it attractive, but it does not solve the problem of ensuring that those who are not in a position to pay tax will gain some benefit.
Conservative Members, who are not here now, said that no stigma was involved in claiming benefits, and that they saw no difference between benefits and tax credits in that regard. I think there is a difference between receiving benefit through a pay packet and receiving it by means of an order book. I can only say that anyone who has ever had the misfortune to stand in a queue at a post office with an order book and who says no stigma is attached to that cannot have had the experience for long. In areas like my constituency, which is made up of many villages, everyone knows who is receiving benefit and who is not.
My right hon. Friend the Member for Birkenhead said that some pay clerks got to know how much was in wage packets, and that that led to jealousy in the work force. I think that much more stigma is attached to the use of an order book. For some it means a huge disadvantage, especially when it is used to claim in-work benefit. The prospect of collecting such benefit in that way is not attractive. We are moving towards a system in which more people will receive benefits or tax credits through bank accounts, but, as the hon. Member for Northavon pointed out, we do not yet have a universal bank.
I think that receiving benefit through the pay packet is a benefit in itself, in that the benefit of being in work can be easily recognised. A social structure is involved, which makes sense to mealthough other Labour Members have criticised the arrangement, for a party political reason that I abhor. They suggest that a benefit book makes it clear immediately that the Government have provided the money, whereas a tax credit makes the connection between the Government's generosity and the receipt of money less clear. I think it good for people to see the tax credit not as some act of generosity by the Government, but as something they have earned through their own efforts. That, I think, deals with the point raised by my right hon. Friend the Member for Birkenhead.
I did not set out to issue a critique of my right hon. Friend's work, because I admire him greatly. Today, however, flags have been flown bearing words writ large, as though they were true and unchallengeable. I felt strongly that I should take the flags down and have a closer look. Having done so, I do not think that they deserve to be flown.
Before I begin to sound like someone from a naval outfitsuch a person might, in fact, address the House by means of semaphore, but I have no gift for thatlet me say this: no matter how learned or respectable Members
My hon. Friend the Member for Regent's Park and Kensington, North cited the example of Australia, and asked whether a system involving a yearly check was fair and proper. I think she was right to ask that, and to ask whether it would lead to greater poverty and hardship. I ask her, however, to look at the Bill more closely, as I did when she made her suggestions. The Bill makes it clear that under this systemthough not under the Australian systempeople can present new evidence during the year. They can tell the Inland Revenue that their circumstances have changed substantially, and their tax credits can be altered as the year goes on.
To my great disappointment, Members continually spoke of anticipation of the following year's income. The Bill, however, does the reverse, in that it asks us to consider the previous year's work, hours and income. That is not an impossible request. Under the previous "lump" system, there was an absolute requirement for the slightest change relating to those on any kind of benefit to be presented on the day; otherwise benefits would not be paid for that fortnight, for that month or, in the case of family credit, for the six months involved.
In all cases, there will be winners and losers. One factor must always be balanced against another. From time to time, we incurred substantial losses through the system of family credit operating for six months in advance, because people's circumstances changed during that time. Sometimes we made substantial gains, however, so the factors would balance outalthough whether they balanced out fairly is another question.
Do not all these systems involve a specific problem for those whose incomes fluctuate wildly during the year? I am thinking of people doing casual work or working on commissionpeople who cannot, in all honesty, predict whether their income in a few months' time will be much higher or much lower than it is now. Does not the tax credit represent a more flexible approach than the old benefits system, with its brutal cut-off points? I think that is probably what my hon. Friend is saying.
Kali Mountford: My hon. Friend has characteristically answered his own question. He is a thoughtful person, and he is absolutely right. Whenever we look at legislation, we are balancing one factor against another. We must ask whether we are balancing some crude implement against flexibility, or whether we are balancing cost with
Siobhain McDonagh: Is it not particularly important to consider the continuing need for child care support during the period of benefit entitlement? A group of child minders from Pollards Hill in my constituency wrote to me saying that under the current system people were asking them to sign their forms for child care tax credit, and then, after a week or two, leaving them to some informal system. They felt that they would be penalised by the Inland Revenue, which would assume that they had received payment that they had not received. They were also concerned, as taxpayers, that people were walking away with benefits to which they were not entitled.
Kali Mountford: My hon. Friend is right. I have encountered similar situations. I would not expect the House to devise a foolproof systemall the systems we have devised in the past have been open to some form of fraud or abusebut I think it imperative for us to seek at least a minimisation of abuse.
My hon. Friend used the phrase "child minder". I am glad that someone in the House is using that phrase. Hon. Members have talked about the informal child care market, with relatives taking care of children. I have no objection to parents choosing their own parents to look after their children. That is the matter for them, but the child minding system is an extremely valued and valuable way of providing child care. My hon. Friend the Paymaster General made the point that child care should be regulated and be of a high standard. That fits with the point that was made by my hon. Friend the Member for Mitcham and Morden about standards and who should qualify. It should be about standards.
People forget that those who want to enter some informal arrangement can register as child minders. It is a great pity that in some of the debate it has been forgotten that the child minder system regulated by the local authority has a useful part to play.
Hywel Williams: On that point, does the hon. Lady accept that in some parts of the country, particularly in rural areas, there is an absolute lack of child minders? In my constituency recently, the only child minding available was in large townswhen I say large towns, I mean towns of about 3,000 people. In large tracts of the country, whatever sort of child minding one wanted was not available, despite the best efforts of the national child care strategy and the National Assembly for Wales.