Mr. Webb: It may reassure the House and you, Mr. Deputy Speaker, to learn that I shall not try to catch your eye on any further group of amendments, unless goaded. The amendments relate to overpayments and underpayments and other technical issues, and one practical issue arises.
It would be helpful if the Minister would say how the system, which will come into operation in April 2003, will work in the following example of a typical person. We were told in Committee that the tax credits are modelled on the tax system and that they will bring benefits and taxes closer together. The tax liability for 200304 is based on income in 200304. My understanding is that eventually entitlement to tax credits for 200304 will be based on outturn income in 200304, which will obviously be known for sure only at the end of 200304.
What is the position of someone who makes a fresh claim in March 2003? I have a constituent who has had a letter from the Inland Revenue to tell her to hold on to her P60 for 200102. I have written to the Minister on this issue. My constituent is very concerned, because her income has fallen since 200102. She is worried that she might make a claim in March 2003, hand in her P60 for 200102, and be told by the Revenue that she had a high income and will not get much tax credit. The relevant adjustments would not be made until the end of 200304, when her income could be determined definitively. For someone who makes a claim in March 2003, the assessment of income should be based on a best guess for income for 200203, not on outturn income for 200102, which will be two years out of date by then.
Dawn Primarolo: When the system starts up in April 2003, we will not have P60s available for 200203. Therefore we will start, effectively, at P-1, so we will use the base year of 200102. In the circumstances the hon. Gentleman describes, when someone's income has fallen in 200203, we might move to current-year income. We would consider the actual income at that time. I am grateful that the hon. Gentleman has written to me, because I wish to consider his point, but that is my
Mr. Webb: I am grateful to the Paymaster General for that constructive response, but unfortunately it raises several concerns. First, my constituent rang the WFTC helpline, but the staff did not have a clue about the system that will start in April. Many people will want to know how it will work, and I would be grateful for confirmation that the staff will start to give prospective advice on how the new system will work as soon as possible.
Secondly, when I have received the Paymaster General's reply, I will write to my constituent and advise her to point out to the Inland Revenue when she makes her claim that her income has fallen and that she wants to be judged not on the previous year's income but on the present year's. My constituent will know what to do, because she has talked to me, but many people will not. They will be asked for the previous year's P60, but if their income has dropped they will be underpaid for up to 18 months.
Thirdly, I do not understand why we will not always have that problem. In March 2004, we will not have P60s for 200304, so we will have to use P60s for 200203 for assessments for 200405, unless three months into every tax year, when the P60s are published, all assessments are revisited in one go.
Dawn Primarolo: I congratulate the hon. Gentleman's constituent on being ahead of the game in applying for something that the House has not yet decided will be available to be applied for. It is difficult for a helpline to advise on something that has not yet been agreed by the House. None the less, I apologise if his constituent has not received the advice that she should have received.
On the hon. Gentleman's second point, I agree that, once the House has agreed the new system, it is important that we start training programmes and put the helpline in place. I will certainly pay particular attention to that.
On the third point, the Bill allows for assessments to be made on a combination of previous year and current year. In Committee, we discussed the timing of the changeover of the rates so that it was in place with the issuing of the P60s. Although the claim is made from April, an increased payment might start a little later. That will even out the system. I realise that my intervention is too long, and I do not wish to try your patience, Mr. Deputy Speaker, so I will write to the hon. Gentleman on those points. If he agrees, I will send a copy to the hon. Member for Arundel and South Downs (Mr. Flight), because I am sure that he is interested in the same points.
Mr. Webb: The system will be introduced in nine months. My constituent has taken or is considering takingI forget the exact circumstancesanother job that will mean a drop in income. She is looking ahead and wondering whether she can take the job. She has rung up for advice on a system that Ministers have said will be available next April, so it is a little harsh to criticise her. It is not unreasonable to ring a helpline for advice on a system that Ministers have repeatedly mentioned and that will be in place next April.
I also wonder about the culture of the changes. We have been told that tax credits are supposed to be like income tax, but everybody's rates might change in June, whereas income tax rates apply for the year from Aprilalthough I appreciate that allowances have been changed mid-year in the past.
Dawn Primarolo: I certainly did not criticise the hon. Gentleman's constituent. In fact, I congratulated her on her forward thinking. In April 2002, the Inland Revenue published a document entitled "The Child and Working Tax Credits: The Modernisation of Britain's Tax and Benefit System, Number 10". Paragraph 4.5 on page 19 deals with how we would adjust the credit and the calculation. As we ran on past the beginning of the tax year, we would have information about what people had already had. We would then be able to make the calculation for the next year accordingly. However, I will write to the hon. Gentleman about that.
I agree with the hon. Gentleman that it is vital that the correct advice is in place for people who want to plan for their futures and to take advantage of what will be an excellent source of support for them and their families as they enter the labour market or change jobs.
Mr. Flight: I thank the hon. Gentleman for giving way. I simply remind him of the extensive debate on these matters in Committee. The central problem in moving to a system based on the current year rather than the previous year is how the Revenue can obtain the relevant information. That is not about income alone; it also involves the numbers of children involved, housing benefit details, and all sorts of other things. There is also the difficult problem of the number of hours worked.
The administrative process is not up to speed at present, and the hon. Member for Northavon (Mr. Webb) is right to point out that that problem will continue beyond start-up. The Revenue will have a nightmare working out entitlements at year-end against awards paid in the course of the year, and in its attempts to collect overpayments. That is one of the problems with the Bill.
Mr. Webb: Not all the items listed by the hon. Gentleman are especially complex. For example, the number of children involved should be fairly predictable, and housing benefit does not feed into this calculationrather, it is the other way around. However, the practical problem with the number of hours worked may be the big one.
My point about the amendments is that we are faced with 137 of them this evening. I sat through the Standing Committee debates and did not spot the problems that the amendments resolve. Will the Minister say something about how the problems came to light? The hon. Member for Arundel and South Downs implied that Lord Higgins spotted them, and brought them to the attention of the House. I am worried that the House allowed the Bill to go through without spotting the problems. By what mechanism were they brought to light, and are there any lessons about how that mechanism could be brought to bear earlier in the process? I am as embarrassed as anyone that we are having to discuss 137 amendments to a Bill that I waved through.