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Mr. Heath rose

Dawn Primarolo: The debate started at 2.50 pm and has been long. Many issues have been covered. I will be more than happy to give way to the hon. Gentleman when I have made some progress.

The new clause would allow the board to make payments by automated credit transfer, but only through the basic account accessible at the post office and then only if the claimant had chosen that method of payment.

There was much discussion of the Post Office. Here, we are concerned only with the payment made. I remind hon. Members that the powers in the Bill are permissive powers for the Inland Revenue to determine how claimants will be paid and what choices they will have. I will be happy to deal with that subject after I have given way to the hon. Member for Somerton and Frome (Mr. Heath), but first I must inform the hon. Member for Teignbridge that the classic problem for some Liberal Democrat Members seems to be accepting a principle, but not accepting the consequences of implementing it. I also remind him that the Liberal Democrats opposed the working families tax credit. While we are more than happy that they now think that the child tax credit is the way forward, they need to be careful as they venture into that territory.

Mr. Heath: I do not understand the basis for the start of the Paymaster General's speech on this subject. She is claiming that the new clause and amendments would leave out the parts of the Bill that deal with alternative methods of payment, which they clearly would not. Furthermore, she interprets the word "entitlement" to mean a requirement on the Board of the Inland Revenue.

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I know of no construction that enables the word "entitlement" to be termed an instruction to the board, allowing no other means of payment. Perhaps the hon. Lady will elucidate.

Dawn Primarolo: Indeed I will. The Bill gives authority to the board of the Inland Revenue to administer the new tax credits under its care and management functions. If the hon. Gentleman had been able to attend the Standing Committee—he was not a member—he would have heard some discussion of how those obligations interact with the Bill.

With the exception of transfer into bank accounts, there is no statement in the Bill to list the precise ways in which the credit can be paid. As I said in Committee, the preferred option would be a direct transfer to a bank account—both individual's bank accounts and through the universal bank at the post office. I said that we needed to ensure that that payment was made. I understand why the hon. Gentleman is frustrated, but as he well knows, when one drafts an amendment one needs to know what is already in the Bill and where it cross-references.

There is a second issue. The new clause would impose an obligation on employers to use the same payment methods as the board. I am sure that those who drafted it did not intend it to do that either. I understand the concern that the new clause is intended to deal with. Hon. Members are trying to ensure that claimants can collect their money from the post office, as they do now, and that they are not forced to use bank accounts if no suitable accounts are available. I explained in Committee that the amendments tabled there would not have delivered that end. I am now explaining that these amendments will not do so either.

Hon. Members talked a lot about burdens on the employer. The new clause would impose an obligation on employers to make all working tax credit payments payable by them by order book or through suitable post office accounts. The working tax credit is paid by the employer. The payment goes from the board to the employer and then from the employer to the employee. The new clause would have that effect despite the fact that the employer would normally pay the employee's wages either in cash or into a bank account and that is what the employee expects. I find it hard to believe that the intention was to impose such a restriction, although the hon. Gentleman has confirmed that that is the case. I can assure him that the new clause would have such an effect.

The main thrust of the new clause is to enable claimants to continue to receive payments by order book. That would limit the choice of payment methods already available to and used by benefits and tax credit claimants alike.

My key objection to the new clause is that it would prevent claimants from receiving their payments by any method other than order book or through an account at the post office, even if they chose another payment method. It must be remembered that tax credits are paid to a broad range of families, many of whom already have bank accounts, are accustomed to using them and would expect to be able to continue to do so. Many other families will want to receive payments in that way. The new clause would prevent them from doing so.

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I made it clear in Committee that a move away from familiar payment methods must be accompanied by suitable alternative methods of payment for the most vulnerable members of society. As I said, the regulations to determine payment methods will deal with exactly that point. I was asked by the hon. Member for Northavon (Mr. Webb) whether the Prime Minister's commitment that people would still be able to collect cash from a post office via the universal bank would be an option. I confirmed that it would. Not only is the new clause unnecessary because the assurances have been given but should it be carried it would narrow choice and increase the burdens on employers, which hon. Members say they wish to reduce.

Mr. Swire: Will the hon. Lady give way?

Dawn Primarolo: I am happy to give way to the hon. Gentleman but hon. Members have already said that they want to discuss at length other new clauses. I will give way but out of respect to the House I need to try to put on the record the answers to the questions that so many hon. Members have asked.

Mr. Swire: It is true that many of the recipients of credits and benefits already have a bank account, but according to the Institute for Fiscal Studies extending the principle of tax credits to couples and individuals without children will bring an extra 250,000 single mothers and 170,000 working couples into the regulations. The IFS believes that in total almost 6 million households will receive some form of support. The number of people entitled to the benefits will rise by a large amount. Does the hon. Lady not concede that many of those people will not have, and will never have had, a bank account?

Dawn Primarolo: I am not sure whether the hon. Gentleman was listening. I said that we needed to provide choice and to ensure that other payment methods were available for those who had no access to bank accounts. Indeed when we discussed fraud in Committee, every Committee member accepted that the best way to minimise fraud and to ensure that the money went to the family or individual who was entitled to it was to have a secure payment method. We need to balance a secure payment method with ensuring access. That is what the regulations will provide for.

As part of that—I said it in Committee—we are working closely with the Post Office and the Department for Work and Pensions to ensure that a suitable alternative will be available. The powers in the regulations are permissive ones designed to deliver that. The Bill provides the power to make the regulations on the manner of direct payment—that is all.

If new clause 2 were part of the Bill, it would restrict entitlement. The new clause and amendment No. 15 would reduce freedom of choice at the same time as putting more burdens on businesses by requiring them to have two methods of payment: they will have to issue an order book, or pay into the post office account. That is clearly daft. I hope that the hon. Member for Somerton and Frome will agree to withdraw the new clause as it is fatally flawed.

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4.15 pm

Amendment No. 13 attempts to impose a duty on employers to consult with employees to see whether they would prefer to receive their working tax credit directly from the board rather than through the payroll. It is supported by hon. Members who just a few minutes ago were complaining about burdens. Now they are saying that employers must consult their employees.

What is interesting about the amendment is that it does not say what employers would have to do once they had consulted. Presumably, they would have to start printing order books, if it is linked to new clause 2.

Amendments Nos. 14 and 16 are another attempt to raise the issue of burdens on employers, which we discussed at length in Committee and during debates on the Bill that preceded the Tax Credits Bill. Amendment No. 14 has the dual purpose of requiring the board to reimburse employers for the costs they incur in paying working tax credit to employees, and of exempting employers with 20 or fewer employees from paying the tax credit, whereas amendment No. 16 aims to exempt employers with fewer than 15 employees.

As I pointed out in Committee, the Government are not attracted to that idea at all. The tax system does not provide for a direct subsidy or compensation to employers to fulfil their obligations in relation to tax. However, as I said at length in Committee—I will spare the House the long list—in a number of areas the Government have introduced reforms to reduce burdens, to simplify the operation of PAYE and to assist small businesses in particular. All that has been accepted and welcomed but ironically the amendments put more burdens on employers.

Let us consider the proposal to reimburse employers. What do we reimburse them for? An employer may have 20 employees with only one receiving a tax credit. How do we calculate exactly how much compensation should be paid? What information would we have to ask the employer to give us, so that we could calculate the compensation?

One amendment seeks to exempt employers with 20 or fewer employees and another those with 15 or fewer employees. I think that about 85 per cent. of employers are in businesses with 15 or fewer employees and 95 per cent. are in businesses with 20 or fewer employees. What would happen if a business had 16 employees and the exemption was for businesses with 15? Would it be asked to fill in loads of forms and send in loads of returns? Would it be sent loads more forms back? That would increase the burdens on that business. It has been demonstrated that paying the working tax credit through the wage packet will be simple. It supports the transition into work and assists employees and employers.

The hon. Member for Mid–Worcestershire said that the road to hell is paved with good intentions. The Opposition may have been full of good intentions but their amendments are a disaster. They are a disaster for claimants because they would restrict their choice and remove our ability to respond in an emergency by, for example, paying a claimant by giro. They would be an utter disaster for employers, who would have to consult, decide what to do, print order books, make arrangements with the Post Office in case that is where the claimant wanted the money to go, and let us know whether they had 14, 15, 16, 20 or 21 employees, depending on which bit of the system they came under.

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These are totally disruptive amendments, and I am happy to send a much longer explanation to the hon. Member for Somerton and Frome of why his good intentions do not work. I urge my hon. Friends to oppose the new clause and amendments because they are simply daft.

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