Tax Credits Bill

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Dawn Primarolo: I am at a bit of a loss to know what to say on the amendment. I could suggest that the hon. Gentleman reread what I said when we debated clause 1. I understand his point about there being a link.

The amendment refers to the child tax credit. As I made clear at the beginning of the Committee and throughout subsequent debates, the child tax credit has no work conditions. Anyone who gets either income support or JSA, and who is therefore likely to be unemployed, will get the full child tax credit which replaces the child premiums that existed before in income support and JSA. To return to the position in which child premiums for those who were not in paid work were part of income support and JSA would break the back of the principle of child credit, which is that it is paid on the assessment of the needs of the children, regardless of whether the adults in the family are in or out of work.

It would make no sense to say that those in paid employment can have the child tax credit and those who are unemployed can receive income or JSA with the premiums restored. To have it administered by two different Departments completely removes the advantage of the continuous stream applied for at one point and administered by one Department. The payment is made directly to the main carer. I hope that the hon. Gentleman would see that it would be nonsense to keep income support and JSA in place. If the adult or adults in the family are in receipt of income support or JSA and there are children in the family, the child tax credit is given to them automatically at the maximum amount. As they move into paid employment and up the income stream, there will be a gradual withdrawal of the child tax credit as the tapers and the threshold operate.

Mr. Flight: Am I correct in understanding that the extra element of child tax credit that such people will receive will equate to what they would have received

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under income support and JSA, and that there is no element within the working tax credit in respect of children that relates to what they would have got?

Dawn Primarolo: If the hon. Gentleman looks at the increases in the child premiums in income support and JSA he will see that the Government have been aligning those premiums with the working families tax credit, and that they will now be in the child tax credits. Whether the family is in or out of work, the maximum payment for the child will be the same.

Mr. Flight: As I pointed out, the amendment was tabled in conjunction with a previous amendment. I am satisfied that there are no problems. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12.45 pm

Mr. Flight: I beg to move amendment No. 101, in page 16, line 21, at end insert—

    ''provided that the regulations shall not directly or indirectly require the recipient to hold a bank account''.

The Chairman: With this it will be convenient to take amendment No. 113, in page 16, line 21, at end insert—

    ''provided that the regulations shall provide that payment shall be through post offices where the claimant elects for payment by such method''.

Mr. Flight: The amendments will be known as the post office amendments. The issue is whether regulations will directly or indirectly require a citizen to hold a bank account. That is implicitly the case in the Bill, and paragraph 150 of the consultative document says that all direct payments of new tax credits will be made to a client's bank account. However, many of the most needy will not have bank accounts, and the Government have admitted that the universal bank arrangements may not be in place for April 2003. Therefore, the amendments provide for payments to be made to a post office account, if someone so elects.

There are two aspects to consider. First, it is unlikely that the universal bank facilities will be in place to deal with payments when the Bill comes into effect. Secondly, we should consider what is convenient to tax credit recipients. The amendment is partly a probing amendment and partly a matter of principle.

Mr. Clappison: I wish to set the amendment against the background of events surrounding the post office, to which the Bill represents an important development. When I say ''post office'', I mean the network of 17,000 sub-post offices throughout the country. Last year, I believe that we lost more than 500 of them; a question mark hangs over the future of many.

Many sub-postmasters and sub-postmistresses are thinking hard about whether they will be able to continue in business. They are looking for anything that might help them to survive. They face the prospect of automated credit transfers coming into effect in April 2003. The Government led them to believe that the universal bank would be up and running by then.

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That would have helped to offset the loss of revenue that they will suffer when ACT replaces the transactions that the Government paid them to administer, and the loss of custom from people coming through the sub-post offices. The amendments would provide some help to sub-post offices at a time when they need help.

Recent reports suggest that the universal bank will not be up and running by April 2003. It would be useful if the Minister commented on that. What are the Government's plans for the scale of the universal bank? How many account holders do the Government anticipate? That would be of great interest to sub-post offices. This week, a survey from Consignia, which has a commercial interest, stated that up to half of the sub-post offices in the country could close. Sub-postmasters and postmistresses are thinking long and hard about their future, and I am sure that they welcome the amendment's highlighting of their plight.

Richard Younger-Ross: I support the comments of the hon. Member for Hertsmere. It is important to include a clause that allows payment to a post office. In my constituency, there are people who have experienced changes in their employment. They have been paid fortnightly via their employer, which makes their cash flow very difficult and chips away at the narrow profit margin of small sub-post offices, such as the one in Moreton Hampstead. Accepting the amendment would help such post offices until the universal bank is in place. The principle of allowing payment to a post office is vital. At another stage, amendments may be put that would introduce an exclusion for small employers, requiring payments to be made by other methods. I support the amendment.

Dawn Primarolo: Let me answer directly the points on the payment of tax credits. I understand the concern of the hon. Member for Hertsmere regarding ACT, but I am not tempted to enter into a debate about the Government's plans for post offices.

The hon. Gentleman will be aware that those who are potentially eligible for new tax credits, especially those in poorer families, may not have access to a bank account. However, he will also be aware that direct payments by other methods, such as order books, do not always provide a reliable way of getting the money to those entitled to it. The Government are committed to modernising the payment mechanism to reduce the use of such methods.

The Government are also spearheading a drive to tackle financial exclusion and make easily available suitable types of bank accounts to those who have been unable or unwilling to use banks. To achieve that, work is being undertaken with the high-street banks and the Post Office to ensure that suitable, accessible accounts are made available. High-street banks are already offering new accounts and arrangements are being made to enable customers to access them through a post office. The crucial factor is not where the account is held, but where it can be accessed.

Work is being undertaken to create a new post office account for those who are unable to use the new types of bank account. That will ensure that claimants are

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able to access some sort of account, whether through a bank or post office, into which their tax credits can be securely paid. Claimants can still go to the post office or sub-post office to collect their money. Payment of automatic credit transfer will provide that new tax credit claimants' payments will be made more flexibly, and claimants will be able to access those funds via a wide range of outlets, including post offices, which are the most convenient points of access for many.

The hon. Gentleman tried to tempt me into a debate subject to rules of confidentiality, dealing with the discussions of another Department about the Post Office. I am not able to join that debate. Suffice it for me to say that, as the Prime Minister said in his statement, claimants will still be able to go to the post office to withdraw their money, whether that be from one of the new high-street bank accounts, or one of the post office accounts. That provides a good basis for secure delivery direct to the individuals. It minimises the risk of things going wrong or the book being stolen. It gets the money to the family concerned, and at the same time ensures flexibility over the point at which it could be withdrawn.

Given his concerns about fraud, I hope that the hon. Gentleman will accept that that is the right way to proceed, and that my undertaking about being able to draw money via the post office satisfies his wider concerns about the problems faced by post offices in rural areas.

Mr. Flight: I thank the Minister for her comments, but she has not addressed my concerns. First, what happens if the universal bank facility is not available within the timetable of the Bill? It is not satisfactory simply to say that it will be, because those responsible for it in Government are giving out distinct noises to the effect that the project is in dire trouble, and those on the other side of the coin tell exactly the same story. It clearly would be foolhardy to enact a piece of legislation that depends on the money being dispersed via a mechanism that, when the time comes, is not there. What alternative arrangements do the Government propose in the event that that happens?

Secondly, if the universal bank comes to life and works, it is intended that people should go to the post office and draw money out of their universal bank account. For many that may be the only practical way to draw money out. That does not entirely answer the point of principle. The Minister implied that it would be the only mechanism and that if people wanted to

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have child tax credit vouchers to cash at the post office like child benefit vouchers, they could not do so. It would only be the universal route.

The third point, which she wisely sought to sidestep, relates to the problems facing the post office. Self-evidently, the whole arrangement of universal bank accounts and drawing cash at the post office will not work if half the post offices have disappeared. That is an issue in some of the most deprived rural and inner city areas where there are no banks and where post offices are crucial. For the Bill to work in getting the child tax credit money to the citizens in need, there must be an alternative to the universal bank in case it is not running, and enough post offices to dispense the money if it is.

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