Tax Credits Bill

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Mr. Flight: I had hoped that the Minister would give some guidelines on the first part of my inquiry in the latter part of her response. I am talking about simple principles. First, if people are in receipt of charitable help that is definable, will that be treated as income? Secondly, will perks that relate to employment—whatever they may be—be treated in line with Revenue practice? Thirdly, are the Government willing to tidy up some of the hangovers from the past in relation to social security law in this area in line with Revenue practice?

Dawn Primarolo: The hon. Gentleman has touched on precisely the points that I cannot answer now, although they are pertinent and I hear what he says. Benefits in kind, for instance, are very varied. Do we need to sweep them all across for the purposes of tax credits or will there be variation? That is one question. The hon. Gentleman's point about charitable payments is also important. There are quite a lot of complaints about the tax system. Indeed, the hon. Gentleman makes quite a lot of them. I am considering what is necessary and what materially changes the value of the tax credit paid, which I appreciate goes back to rates and tapers. I am also trying to balance the equity argument with the simplicity versus complexity argument.

I do not recollect the point about charitable payments being made before now, but I am more than happy to consider it. I hope that the hon. Gentleman accepts my assurance that, exactly as he implored me, I want to keep the system as simple and fair as possible without allowing any unreasonable levels of income to escape consideration and cause a schism between tax credits and the tax system as a whole.

Mr. Flight: I thank the Minister for those comments. I want to return to one issue, because I think that she slightly misrepresented in terms of numbers the type of situation that I described. We are talking, of course, about a minority, but in settlements involving families—I am thinking particularly of London—maintenance agreements, by agreement with the court, of the order of £3,000 per month are not that rare. That is certainly not the average, but if the Minister considers remuneration levels in central London, she will understand my point. I am talking not about the tiny minority at the super-rich end of the scale, but about an affluent minority that is not tiny. My point applied in that context. I understand the argument that we should not clutter this up when we are trying to keep matters as uncluttered as possible. People other than myself are likely to find it objectionable if they know that people generously provided for in maintenance payments—of whatever sex, these days—were then able to secure £1,000 or more tax-free child tax credit.

The amendment is a probing one, which we shall not press to the vote. I am happy with part of the

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Minister's response, although not all of it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8


Mr. Webb: I beg to move amendment No. 66, in page 6, line 19, leave out from 'who' to end of line 21 and insert


    (a) has not attained such age (greater than sixteen) as is prescribed and satisfies prescribed conditions; or

    (b) is aged less than 20 and is engaged in a course of full-time non-advanced education and began that course before the age of 18.'.

Clause 8 deals with entitlement to child tax credit, and that raises the question: What is a child? The amendment is designed to probe further the grey area of children who are past the end of compulsory schooling, but may be in full-time education. I should like to flag up for the Minister, in anticipation of our later debate on entitlement to working families tax credit, that I shall then deal with children at the other end of the age scale—the position of pregnant mothers, new-borns, maternity leave and that set of issues. The issues may be related as it could be argued that pregnant women should be brought into the scope of child tax credit. We have not tabled a specific amendment to that effect, so I shall deal with it when we debate clause 10. I just wanted to forewarn the Minister.

The current children's tax credit applies only to 16 and below. One cannot receive it in respect of a 17-year-old, whereas the working families tax credit provisions broadly mirror those for child benefit in applying up to the age of 18. In bringing the two systems together, which road should we go down? The Bill states that the money can be obtained in respect of a child—youngsters in school presumably fall into that category—but then refers to ''qualifying young persons''. What does that term mean? Is a 17-year-old at school a clear case of a qualifying young person? What about an 18-year-old or someone who takes two years resitting GCSEs? Those are grey areas. One wonders how far the tax credit system should be doing the job of educational maintenance, or do the Government believe that that should be dealt with through a separate system?

The amendment is designed to probe who precisely is covered by the clause and, in particular, by the term ''qualifying young persons''. Are 17 and 18-year-olds, and perhaps even 19-year-olds coming to the end of A-levels included? Will the Minister clarify the Government's intentions?

Dawn Primarolo: The tax credit will run normally in the same way as working families tax credit and child benefit now—up to the year in which the child becomes 16, although slight variations in the rules obtain in Scotland, Wales and Northern Ireland. We are following the child benefit rules—with the exception that the child remains in full-time statutory education—and current WFTC rules.

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The hon. Gentleman is right to point out the interaction with the educational maintenance grants that are still being piloted. He mentioned the scenario of someone who was 18 years old or nearly 18 who had left school without completing their GSCEs, and asked whether we could include them in the scope of eligibility. That is confusing, and we do not believe that we could do that. We would need to determine that that was what they were doing previously. The qualifying trigger would be 16. The pilot is still running and we are awaiting the results. When we drafted the legislation we wanted to state that this was currently the appropriate way to deliver support to this group. However, it may be necessary to reconsider the issue when we see the results of the educational maintenance grants pilot.

The hon. Gentleman also made a point about a young person who leaves full-time education for a year or more and then returns. That young person appears to fit squarely within what is currently happening with the educational maintenance grants. There is also an issue about the purpose of the two payments. The Bill continues the practice, but it would be wrong of me not to flag up that we are not seeking to anticipate the outcome of the results of the educational maintenance grants pilot. If it turned out that Government policy was that that way was more favourable, it might be necessary to reconsider the extent to which the tax credit was paid once we passed the September in the year in which the qualifying child was 16. So long as the young person is in full-time education, as is the case with child benefit and WFTC, they will receive the tax credit up to their 19th birthday. That is nice and simple. Parents understand that provision in child benefit and have got used to it in WFTC. Until a policy change is made, that is how the tax credits will work. I hope that that answers the hon. Gentleman's questions.

Mr. Webb: Am I right that a couple who earn £25,000, which is beyond the scope of WFTC, and have a 17-year-old sixth-former are not entitled to the children's tax credit because the child is 17?

Dawn Primarolo: Yes.

Mr. Webb: But they will be brought within the scope of the new tax credit, as the Minister has just said that we will use the WFTC decision. Is that a category of gainers that I had not thought of?

Dawn Primarolo: The hon. Gentleman is getting ingenious. In theory, the couple may qualify for the new tax credit, whereas the children's tax credit, which is essentially tax relief, ends at 16 regardless. They could have a child in full-time education and, depending on where the rates and tapers are set, could be entitled to some or all of the tax credit. An example was given of student nurses. We do not define eligibility on the basis of someone being in or out of work; we are looking at family circumstances. The hon. Gentleman identifies one group whom he fears will lose out, but many others are potential gainers. We need to see how that will map out.

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That is a sensible way to draft the legislation, but whether we revisit it will be triggered by any decisions that are subsequently taken on educational maintenance grants. I cannot envisage a situation in which people will be entitled to both. The hon. Gentleman identified people who would not come under the new tax credit; they may be the specific people who will be covered by educational maintenance grants. However, I do not know how the evaluation is going; I know only that I must keep that in consideration.

I hope that the hon. Gentleman's probing amendment has delivered the clarification he wanted and that he will withdraw it. Otherwise, I will have to ask my hon. Friends to vote against it, which I would regret.

11.15 am

Mr. Webb: That has been helpful in clarifying my understanding of how the system works, and I have no problem with there being gainers. I take the point that the Government are considering support for this age group and how it interacts with policy about staying on at school and so on. My only plea would be for more joined-up government. The Minister clearly knows that studies are taking place; perhaps she could ask the relevant officials to keep her regularly informed on progress. We have established some useful information, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

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