|Tax Credits Bill
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
Column Number: 127couple 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.
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.
|©Parliamentary copyright 2002||Prepared 17 January 2002|