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Mr. Webb: rose

Mr. Clappison: I think that we shall debate this issue at a later stage, but I shall give way to the hon. Gentleman.

Mr. Webb: Lest the hon. Gentleman go to bed confused, the proposal is to replace the employment credit with a tax allowance rise. The money that would be spent on the employment credit would be spent instead on a tax allowance rise.

Mr. Clappison: The hon. Gentleman does not yet know the figure for that, and I am suspicious of any Liberal Democrat proposal described as tax neutral under which everyone gains and no one loses, but we shall debate that later. He also made important points of detail, particularly on the way in which the Bill deals with people's circumstances, which change throughout the year. Again, I shall deal with that in a moment.

From the Government Benches, we heard from the hon. Members for Clwyd, West (Gareth Thomas), for Regent's Park and Kensington, North (Ms Buck), for Morley and Rothwell, for Mitcham and Morden (Siobhain McDonagh), for Colne Valley (Kali Mountford), for Corby (Phil Hope), for Wimbledon (Roger Casale) and for Redcar (Vera Baird). I do not want to upset the hon. Lady, but she asked about Conservative policies and I am afraid that one of her first and most important points referred to the Conservative policy at the general election that in-work payments should be made to carers. She spoke forcefully about that policy, which was in the 2001 Conservative manifesto.

Vera Baird rose

Mr. Clappison: I shall give way in a moment, although I do not want to upset the hon. Lady even more by saying that she may want to reflect on the fact that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) made similar points to hers about the treatment of capital disregard. I say that gently, given the spirit of her speech, and I shall certainly give way.

Vera Baird: The hon. Gentleman may make the interesting point that, somewhere in the fragmented mists of time, are Tory proposals that almost remembered such people, but they did not get very far, did they? Would they have got far under the current leadership and the current array on the Tory Front Bench? Would they have got anywhere at all? The answer is no.

Mr. Clappison: As to how far any proposal gets, I gently remind the hon. Lady of family credit, which she wrongly described as tax credit. In 1988, Norman Fowler, now Lord Fowler, as Conservative Secretary of State, introduced family credit, which lasted a number of years and helped many low-paid families. It was widely accepted as a well targeted system that worked in practice. It was not greatly complex, it was paid to carers and it helped many poorer people.

Dr. Palmer rose

Mr. Clappison: I shall give way in a moment, as the hon. Gentleman may want to hear this point. In contradistinction

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to that honourable record of a successful and practical Conservative measure, since the Government came to power ordinary working families have been subjected to a series of changes—the tax credit system—of extraordinary rapidity and complexity. They could be forgiven for feeling that they are on the receiving end of a series of social experiments conducted by social scientists recruited from the ivory towers to the army of special advisers.

Dr. Palmer rose

Mr. Clappison: On the point about ivory towers, I give way to the hon. Gentleman.

Dr. Palmer: I am fascinated by the hon. Gentleman's thesis that people resent getting additional benefits. As we are going down memory lane, I would like clarification. There was a time when the Conservative party opposed the working families tax credit. Is it committing itself to abolishing the new tax credit as well?

Mr. Clappison: If the hon. Gentleman can contain himself, I shall set out what we consider to be the important aspects of the proposal. We are concerned that dealing with the working families tax credit and all the other credits is like trying to hit a moving target. A feature of tax credits that is striking above all others is the amount of change that has taken place—constant change, and never mind if it is change for change's sake.

On tax credits, The Guardian, which the hon. Gentleman may be familiar with, said last week:

Let us consider the history of the working families tax credit, which the hon. Gentleman asked about. The Chancellor announced his intention to introduce it in his March 1998 Budget. It was to take effect in October 1999, and payment of tax credits by employers through the wage packet was to take effect from the beginning of the next financial year, on 6 April 2000, but before the first tax credit was paid by employers, the Chancellor announced in his March 2000 Budget that it was to be abolished and replaced by the employment credit for working households. The working families tax credit had a longer history than the employment tax credit, because that never even made it to the statute book let alone the pay packet. In his pre-Budget statement, the Chancellor announced that the employment tax credit was to become the working tax credit.

The Chancellor was a model of consistency on the working families tax credit compared with his handling of the child tax credit. In the 1998 Budget, he announced the introduction of the children's tax credit as an allowance for which relief was to be given at a rate of 10 per cent. That was to begin in April 2001. We note in passing that the married couples' allowance ended in April 2000, so that couples with children, including couples on moderate earnings, lost all such tax relief for a year, which was a cruel trick on ordinary working families.

The children's tax credit barely made it to April 2001, because in his March 2000 Budget statement, the Chancellor announced that the children's tax credit was to be replaced by the integrated child credit. The children's tax credit had the distinction of being abolished before it was even introduced. Instead of a tax allowance

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in the form of the children's tax credit, the integrated child credit was to be a tax credit integrated with the child premium in income support and the working families tax credit.

I hate to report to the House that, since then, the integrated child credit has disintegrated, and we are now left with just the child credit. I shall tell hon. Members a little tale from history. Under this Government, family credit, which had existed since 1988, has so far been replaced by the working families tax credit, the employment tax credit, the working tax credit, the children's tax credit, the integrated children's tax credit and the child tax credit. To look at it another way, we have had a new family tax credit roughly every nine months.

Kali Mountford: The hon. Gentleman is having some fun with the changes in tax credits. Does he accept that, in the Conservative Government's efforts to introduce simplicity in the system, they cut benefits one after the other or withdrew them altogether? Is that the simplicity that we should expect from his party's proposals?

Mr. Clappison: We are dealing with the Bill, and I do not agree with the hon. Lady. Even she would have to admit that, in view of the Chancellor's past form, it would be a brave man or woman who backed the tax credits in the Bill to last very long. The Chancellor has, beyond peradventure, created what The Guardian called "a hideously complex system." What is more, he has brought more and more individuals and families into means- testing, which he had turned his face against at the 1994 Labour party conference. Individuals and families who pay more and more tax to the Government are having to undergo means-testing to have their own money recycled back to them.

Phil Hope: Will the hon. Gentleman give way?

Mr. Clappison: No, I have given way a lot.

It is fair to say that the simplicity of this legislation is not entirely self-evident, and all hon. Members should accept that. The Bill will require careful scrutiny, not least because it is a framework Bill that leaves the details to be filled in later, as my hon. Friend the Member for Arundel and South Downs rightly made clear. Ministers must answer questions, and we are still waiting for an answer from the Paymaster General to the question of how many people are eligible for the working families tax credit. She dealt with that question very elegantly, but she did not answer it. I look forward to the Financial Secretary dealing with it, perhaps not as elegantly as the hon. Lady, but I shall be interested to see whether he gives us an answer to that simple question on the working families tax credit, which so many Labour Members have praised. Will he tell us how many people are eligible for it?

Phil Hope: Will the hon. Gentleman give way?

Mr. Clappison: No, I shall not give way, because time is short. The hon. Gentleman spoke for quite a long time. His speech was interesting, but I want to finish my speech, if he does not mind. I was being generous when I said that his speech was interesting.

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We must consider carefully the issue of fraud. Many people are worried about the potential for fraud, none more so than the right hon. Member for Birkenhead. The right hon. Gentleman spelt out the risk of fraud, including the risks of fraud involving employers and employees. It was worrying for hon. Members on both sides of the House to hear about his request, when he held office, for fraud to be taken into account in the design of the working families tax credit, and that the papers from his time in office had subsequently gone missing. I know that the Financial Secretary will want to deal with the right hon. Gentleman's important comments. He must answer some questions about them.

While we are on the subject of answering questions, let me say that I would be grateful for an answer to a written parliamentary question, for which I have been waiting since 15 October. The Paymaster General was at pains to tell us about the penalties in the Bill, and the framework it established for dealing with fraud. Will the Financial Secretary tell us, then, how many prosecutions for fraud there have been under working families tax credit, and how many have led to successful convictions? I refer to all who have received the award.

Is this a credit that does not attract fraud, and does not involve any fraudulent behaviour? Or is the right hon. Member for Birkenhead justified in being worried and suspicious about the potential for fraud owing to the way in which it was designed?

Fraud, however, is not the only potential source of waste. The sheer complexity of the system increases the risk of error. As has been pointed out by the Institute for Fiscal Studies and also by the hon. Member for Northavon, many people's family circumstances will change during a year. Because of the way in which the Bill will deal with them, there is a serious risk of mistakes.

We shall want to scrutinise carefully the burdens that the Bill will impose on business. The burdens imposed by the tax credits system are already well known, and must be added to all the other burdens created by the Government. The Government claim that tax credits increase people's propensity to enter the work force to take on low-paid jobs; yet the administrative and regulatory burdens the Government have brought about diminish the propensity of, in particular, small and medium businesses to create jobs for such people to occupy.

The greater the burdens thrust upon business, the less competitive United Kingdom businesses become. Jobs, especially manufacturing jobs, go overseas. Worryingly, last month both main measures of unemployment indicated an increase in unemployment in the UK. That must be of concern to Labour Members, in view of all they have said about unemployment today.

It was the Prime Minister, no less, who told the Labour party conference in 1996

It is a fact that the welfare bill in 1997 was £92 billion. Under these proposals, it is set to rise to £125 billion by 2003. It will then have risen by more than a third since the Government took office. What is more, the Government have given up trying to get it down.

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We have the Tax Credits Bill before us; in the Queen's Speech in June, however, we were also promised a welfare reform Bill, which has clearly been abandoned. We do not know exactly why—was it shot down during the battle between the Chancellor and the Prime Minister? But we do know that, in the meantime, the cost and complexity of the welfare system has spiralled out of control.

We will hold the Government to account for the way in which they have dealt with welfare, the way in which they are spending taxpayers' money, and their failure to make good the Prime Minister's promises—not for the first time—to bring welfare under control. We will hold them to account by giving the Bill the careful scrutiny that it clearly needs, which hard-working taxpayers would expect us to give it. We intend to give it extremely careful scrutiny; hard-working taxpayers who pay the Government more and more in tax, and get bewildering and complex schemes in return, deserve no less.

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