Tax Credits Bill

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Mr. Hoban: I take this opportunity to raise an issue that I mentioned on Second Reading. Subsection (6)(a) deals with the hours that can be worked by single persons and those living together as a couple. A

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couple could aggregate their hours to meet the 16 and 30-hour limits that we have discussed, but a single person would have to work either 16 or 30 hours. That puts lone parents at a disadvantage. Couples could manage their time to achieve 30 hours between them. Lone parents would have to work harder to meet the same limit and qualify for additional premiums. I raise that as more of a question than a speech, and I am open to clarification from the Minister as to whether my interpretation is correct.

Dawn Primarolo: The interpretation is that a couple would be able to combine their hours to complete the 30-hour element as long as at least one partner worked 16 hours or more. The 16-hour limit is still there, but we are allowing couples to aggregate their hours, instead of requiring one parent to work 30 hours, if both parents are working.

In the case of lone parents, the 16-hour rule applies. We thought it fair that if both parents work, but neither works a 30-hour week, they should be allowed to get 30 hours in the same way as lone parents. That is an equalisation, not a disadvantage. It is a benefit to households in which couples work part time.

Mr. Hoban: I understood the Minister to say that a two-parent household can aggregate its hours to get 30 hours as long as one person works at least 16 hours and the other perhaps 14 hours. I am slightly concerned that it is easier for a two-parent household to reach that 30-hour threshold by working together than it would be for a single person, as a couple could manage child-care arrangements so that one person worked while the other looked after the children, and they swapped over to complete the 30 hours. A lone parent might need to find child care for the full 30 hours. It would be easier for a two-parent household to mix and match, and they would find it far easier to achieve the hours. The Minister, by trying to equalise provisions for couples, may have inadvertently made life more difficult for lone parents who must work 30 hours.

Dawn Primarolo: No, this concerns a change in rules from those that applied to the working families tax credit, under which one of a couple—but not lone parents—had to work 30 hours. There is no change to the position of lone parents. They already have the advantageous position. The change in position helps two-parent households, and equalises the provisions. The circumstances about which the hon. Gentleman is concerned would not occur. The benefit that is being introduced is an improvement on the 30-hour rule for two-parent households.

Mr. Clappison: I rise briefly to put a point to the Minister, who has been courteous in responding to so many interventions.

I seek clarification from the Minister, as her response to my hon. Friend's question about the disincentive to couples to partner up was unclear to me. She addressed the circumstances in which people become lone parents. I want her to address what happens when a couple take the decision to form a joint household, because that is the subject that my hon. Friend raised.

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The hon. Member for Northavon drew attention to the risks that are run in such circumstances as a result of the intermingling of the child tax credit and the working tax credit. I want the Minister to address the matter again, so that I can be clear about her position.

4.45 pm

Subsection (6)(c) establishes that, as part of the working tax credit, a lone parent will receive an additional element for being a lone parent who has care of a child. In addition to that, under subsection (6)(b), if that lone parent takes a decision to form a household with somebody else, they will receive an element to reflect that they are part of a couple. The lone parent will gain that extra element for being a couple, because they will face the extra costs involved, but is it not the case that the single parent will lose the element that they received under subsection (6)(c)? They will no longer be receiving the element that they would have received in respect of their child. They will still have to bear the costs of the child, but they will not be getting the element to help them to afford to do so.

All of those elements are independent of the child tax credit: they are part of the working tax credit, and I want the Minister to explain why there is no disincentive.

Dawn Primarolo: I shall try once more, but my back hurts, because I have had to keep rising to my feet.

The working tax credit needs to cover a single person who has no children and no disability; they will get the basic credit. The other area that needs to be covered is the question of who will get the extras—whatever they are. Lone parents, couples and individuals with disabilities will get extra, in recognition of their extra costs. For instance, a lone parent does not get a reduction on their rent, gas or electricity; there are certain costs that can be shared between people.

If a lone parent household were extended so that there were two parents—two adults in the household—the lone parent would lose the lone parent element but gain the couple element. As I suggested to the Committee, the variation is so tiny that it would not act as an incentive. If an individual were deciding whether to live with another person, they would not be greatly influenced by the marginal difference between lone and couple elements.

There are lone parent, couple and disability premiums that recognise extra costs. A person could not get them all: they could be a lone parent, or a couple, and have the disability premium, but they could not have lone parent, couple and disability premiums.

I am confident that the balance will not suddenly encourage families all over the country to decide that they should be lone parents, and if they thought about making that choice the position should certainly be explained. People would have to manipulate their households in a spectacular fashion to get more out of the system, and that will be revealed under later clauses on enforcement and the correctness of details and applications.

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I hope that that clarifies the matter and that the hon. Gentleman feels slightly more at ease with the proposal. I understand his point: a dramatic change in household structure needs to be notified, because a second income might dramatically affect the household income and trigger a reassessment in the current year. There are several ways through the problem. The household may end up with more because of the way in which the system works, and because of the inter-relation of child credit and working tax credit.

Question put and agreed to.

Clause 11 ordered to stand part of the Bill.

Clause 12

Child care element

Mr. Flight: I beg to move amendment No. 33, in page 8, line 26, at end insert—

    '(2A) The charges of a prescribed description under subsection (2) may include an amount to take account of the loss of earnings of a person or of the spouse or, in the case of an unmarried couple, of the partner of the person by whom a claim for working tax credit is made who does not take qualifying remunerative work in order to care for a child of a prescribed description for whom the person is responsible.

    (2B) The amount of tax credit payable under subsection (2A) shall not exceed the maximum amount payable to a person in qualifying remunerative work'.

Mr. Flight: The amendment is in related territory and proposes that the child care element should involve an allowance to take account of the loss of earnings of a partner or spouse who does not work but who looks after children. Such an element would not exceed the maximum payable to a person in qualifying remuneration.

The amendment tackles the issue that we discussed in the previous amendment and in amendment No. 31. There are circumstances in which one spouse may not be able to work for reasons of travel, choice, qualifications and so forth.

Dawn Primarolo: I cannot say why the amendment would not work, only that it would not produce what the hon. Gentleman hoped for. He went straight to the principle that he wanted to explore: whether there should be compensation for a partner who stays at home caring for the children and does not enter the labour market. It used to be called wages for housework; I do not know what it would be called now.

The Government appreciate and understand that some couples take the decision that one of them will forego paid employment to stay at home because they believe that that is best for their children, and we therefore make payment by other methods, in particular child benefit. It would completely undermine our intentions on work incentives to make compensation for those who stay at home. We oppose the transfer of allowances for the same reason. However, it is important to ensure that those couples receive some recognition. That could be done through the adult element and child benefit, which, I remind the hon. Gentleman, the Government have increased

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by 26 per cent, as well as other arrangements. The new tax credits build generously on the working families tax credit. The Government are not prepared to concede this principle. I ask my hon. Friends to oppose the amendment, as it is an inappropriate way of recognising the costs on families, and would require expenditure that we are not prepared to commit ourselves to at this stage.

Amendment negatived.

Ms Karen Buck (Regent's Park and Kensington, North): I beg to move amendment No. 87, in page 8, line 27, after 'provided', insert

    'whether in the child's home or elsewhere'.

The argument has been well rehearsed. I raised this issue when we discussed the working families tax credit on Second Reading. It extends entitlement to the child care component of the tax credit to the provision of child care in the person's own home. There are two clusters of beneficiaries. The first are children with special needs and disabilities. I am grateful to Mencap for its briefing on this. It is concerned about children who need specialist care that is not closely accessible, such as in a special nursery that is not nearby, or care that is provided by a specialist carer in the home. Parents of such children are not currently entitled to draw down the child care component of the credit.

Mencap gives a helpful example of

    ''a working mother, Sue Knight who has a 5-year-old son, with multiple disabilities and is tube fed. In the holidays, he needs someone from a registered agency to come into the house to look after him because he needs higher levels of support than child minders. The Inland Revenue rejected her childcare expenses as part of her Working Families Tax Credit claim. The letter from the Inland Revenue makes it clear that they would pay if her son could leave the house and go to a childminder or a club.''

That was not possible because of his disability and the intense support he required. That case illustrates perfectly the point. I will not add any more.

The second group of potential beneficiaries are those who work antisocial hours. As a parent of a young child I recognise that parents who work from 3 pm to 8 pm are reluctant to move their child from child care in the evening, even assuming that such child care is available. That is a strong disincentive to people taking work.

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