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Session 2001- 02
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Standing Committee Debates
Tax Credits Bill

Tax Credits Bill

Column Number: 39

Standing Committee A

Tuesday 15 January 2002

[Mr. Edward O'Hara in the Chair]

Tax Credits Bill

Clause 4

Claims: supplementary

Amendment proposed [this day]: No. 8, in page 3, line 10, after 'manner', insert

    'before an official of the Board who is satisfied that all facts necessary to establish the claim have been made out'.—[Mr. Flight.]

4.30 pm

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking amendment No. 13, in page 3, line 23, at end insert

    'provided that such person has appeared before an official of the Board, who is satisfied as to the identity of such person and of the claimant and that the such person acts genuinely for the claimant.'.

Mr. Howard Flight (Arundel and South Downs): I warmly welcome you to the Chair, Mr. O'Hara.

I made the point this morning that the system of requiring interviews for those taking the fast track in winding up estates—a considerable number of people—has worked well in helping those involved and in helping the Inland Revenue to keep an eye on matters. The Minister's main objection to our amendments, which would require a meeting with the relevant Revenue officer, was that too many people would be involved for it to be practicable. That may be a fair point, but both the working families and children's tax credits are complex. It is not easy to work out what people qualify for or the average number of hours worked. I anticipate that the majority of people will want interviews to help with their forms. In many ways our amendments are more important for that reason than for the avoidance of fraud.

Just before lunch, I received, as other hon. Members may have done, a note from the citizens advice bureaux expressing concern that it would be difficult to advise, for example, a lone parent wanting to move off benefit and into work. It is difficult to forecast income over a year. The tax credit inquiry centres run by the Inland Revenue to advise people on their applications may be inadequate.

Compulsion may be over the top, but if the Bill is to help people, particularly people entering work for the first time, with a sophisticated and complicated matter and prevent a high level of wrong claims—some 75 per cent. of claims for the children's tax credit were found to be wrong—substantial resources will be necessary so that Revenue officers can meet people to go through their circumstances and advise them. The matter is not simple and it is mistaken to think that inquiries through the internet and modern communications in such complicated territory will work satisfactorily. I hope that the Government accept that.

I beg to ask leave to withdraw the amendment.

Column Number: 40

Amendment, by leave, withdrawn.

Mr. Flight: I beg to move amendment No. 9, in page 3, line 11, at end insert

    'provided that no claim shall be made for any period more than 4 weeks after the date upon which the same is payable.'.

The Chairman: With this it will be convenient to take the following amendments: No. 10, in page 3, line 13, leave out 'earlier or'.

No. 11, in page 3, line 19, at end insert

    'provided that the prescribed time shall not be more than 4 weeks later than the date upon which the award becomes payable.'

Mr. Flight: These are partly probing amendments. Amendment No. 9 would limit the backdating of claims to four weeks. There is no apparent limit in the Bill, but there is major scope for errors, fraud, sloppy administration by the Inland Revenue, and waste of time and money in legal costs to recover money. Four weeks may be too short and a longer period may be reasonable, but a time limit is needed to avoid inefficiency, fraud and waste.

Amendment No. 10 is slightly different. As matters stand, the Revenue can treat claims as if they were made earlier than they were actually made. As drafted, the clause gives scope for bad management, and almost encourages the incompetent handling of claims. The amendment is designed to put pressure on those who administer tax credits, and on those who make claims, to do so in good time.

Mr. Steve Webb (Northavon): I, too, welcome you to the Committee, Mr. O'Hara. You were in the Chair the first time I served in Standing Committee, some four years ago, and I shall leave you to judge whether I—or the rest of the Committee, for that matter—have progressed at all since then.

I have some misgivings about the amendments, in that there appears to be some misunderstanding about what the powers are intended to allow the board to achieve. People may claim late, after the point at which they became entitled, for perfectly good reasons that have nothing to do with fraud or poor management. Provisions in the social security system variously allow backdating of one month, three months or, in some cases, 12 months. Because of the complexity of the tax credit scheme, an entitlement to claim may not be instantly apparent to the person concerned.

A face-to-face appointment with an adviser, or with a representative of a citizens advice bureau, may be booked some weeks after the event that triggers entitlement. Therefore, for someone to lose money because the process was not completed within four weeks seems unduly restrictive. A delay between making a claim and becoming entitled could occur through no fault of the claimant, and the more complicated the system, the more excusable such a delay should be. Amendment No. 10 would appear to rule out any backdating at all, and in my view that is too restrictive. We should concentrate on helping to ensure that entitled non-recipients get their money—even if they get it a bit late—rather than on taking money off them and penalising them for the complexity of the system. For those reasons, I am disinclined to support the amendments.

Column Number: 41

The Financial Secretary to the Treasury (Mr. Paul Boateng): I join other members of the Committee in welcoming you to the Chair, Mr. O'Hara. It is always a pleasure—in this case, an unexpected one—to serve under you, and I am delighted to make my first appearance in Committee under your chairmanship.

The hon. Member for Arundel and South Downs (Mr. Flight) kindly made it clear that the amendments, which deal with the mechanics of making claims, are probing amendments. That is extremely helpful and I am happy to respond accordingly. Amendment No. 9—I appreciate that it is imperfectly drafted because it is a probing amendment—would restrict the time allowed for claims to a maximum of four weeks. I hope that the difference between the Government and the Opposition on this point is one of degree, rather than substance.

We want to stress that the essential point about tax credits is that they are designed to target support at the time that people need it. We want to encourage people to take up their entitlement in good time, so that they can get the support that they need when they need it. Having said that, we need to allow claimants reasonable time to identify that they are entitled to claim, and to claim. As the hon. Member for Northavon (Mr. Webb) suggested, it is important that the claims process be flexible and recognise the practicalities of people's lives. We must recognise that the times when one first qualifies for a working tax credit or a child tax credit—when one starts a job, or one has a new arrival in the household—are often particularly busy and stressful. We will therefore allow a period of three months in which claims can be made, rather than the four weeks proposed in the amendment.

There is a balance to be struck, and we must offer flexibility and recognise the everyday practicalities of real life. A time limit of three months will enable the rules governing child tax credit claims to be aligned with those governing child benefit claims on the birth of a child. That will allow new parents to claim the child tax credit and child benefit in tandem—a further part of the integration process. However, because the time limit is set out in regulations, we can keep it under review in the light of experience. I hope that that clarifies matters for the hon. Member for Arundel and South Downs, and that he finds that acceptable.

On amendment No. 10, even with a time limit of three months, there will inevitably be cases where a timely claim proves invalid for one technical reason or another. We do not want the entitlement of claimants who have done their best to comply with the rules to be curtailed through no fault of their own. To avoid such claimants losing out on a technicality, it would be appropriate to treat a claim as if it had been made earlier than it actually was. It is for such circumstances that the phrase ''earlier or'', in subsection (1)(b), is intended to cater. To avoid claimants losing out unfairly, it is right to allow some flexibility in respect of the effective date of claim. The current rules for working families tax credit and disabled person's tax credit allow some room for manoeuvre, and we intend to take a similar approach in the regulations dealing with claims for the new tax credits.

Column Number: 42

Amendment No. 11 would restrict the power, conferred in clause 4(1)(d), to make regulations. The power allows regulations to provide that an award of tax credits be subject to the condition that requirements for entitlement be satisfied at a prescribed time. If the amendment were accepted, the prescribed time would be within four weeks of the date on which the award becomes payable. I reassure Opposition Members on this point. The Government do not intend that tax credits be awarded to those who do not in any sense meet the qualifying conditions.

We will consider the main clauses dealing with entitlement—clauses 8 to 12—in due course, but the basic principle is that the qualifying conditions for eligibility for tax credits must be met. People cannot qualify for tax credits until they meet those conditions, and they will cease to qualify once they no longer meet them. Clause 4 (1)(d) is not intended to undermine that principle, and it is certainly not intended to allow the Inland Revenue to make payments—not even those limited to four weeks—to people who do not meet the qualifying conditions. It is simply a machinery provision. We are concerned with the mechanics of making claims, not the rules of entitlement.

Paragraphs (b) and (c) of clause 4 (1) allow that, in certain circumstances, claims may be made in advance of a person's becoming entitled to tax credits. We are still considering the circumstances in which that provision may apply. A possible example is the person who knows that they are about to start a new job. In such a circumstance, it may be right that the regulation allow them to submit a claim for a working tax credit shortly before they commence work, so that the Inland Revenue can ensure that the credit is available as soon as they qualify for it. As I have said, we must ensure that we deliver the payment when it can do most good and when it is most obviously needed.

However, it will be necessary to make it clear, as we shall in regulations, that a person who submits an advance claim is entitled to receive working tax credit only if they actually take up the job. The award needs to be made conditional on the requirements for entitlement being met at the date on which the award is set to begin. If the requirements are not met on that date, the reward will never become payable. Paragraph (d) is designed to enable us to impose that conditionality whenever an advance award is made. The requirements for entitlement will need to be met on the date on which the award is due to begin, not four weeks later, or even two weeks later. I hope that with that clarification the hon. Member for Arundel and South Downs will feel able to withdraw the amendment.

4.45 pm


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