Draft Child Tax Credit Regulations 2002 and Others

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Dawn Primarolo: I should be grateful if the hon. Gentleman allowed me to consider his question more

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closely in the record. I am happy to respond to it, but I cannot take him any further forward on the principle. As I said, the intention is that the public purse should not pay twice or more for the same support and service. However, just in case I missed the finesse of the hon. Gentleman's point, I shall read it in the record and write to him.

My final points relate to implementation and moving to the new system. I shall deal with the question of a plain English guide to the regulations in the context of what is sent to claimants to explain their entitlement, because regulations are about setting in legislation clear obligations for entitlement. However, we do not expect claimants to read the regulations to find out their entitlement, and there are other ways of explaining that. It is not necessary for a claimant to read much of what is in the regulations, and I would not suggest for a minute that they should sit down and read them. Their adviser might do so subsequently if there was a point at law that they wished to check, but that is by the bye.

The hon. Member for Northavon raised a point about the move to the new system. We covered that in the debate on the Floor of the House, so I shall try to shorten the points that need to be made. Again, I cannot see a problem. I am happy for him to come to the Department, and I will take him through some of the issues that it is considering and in which he has an interest.

The point is that we know the people who claim working families tax credit, disabled person's tax credit and those who have the tax relief, but there are people not in those groups who will also be entitled to the credits. We are trying to inform those people that from April 2003 they will move on to the new tax credits. To be frank, we are also trying to prevent the problem that the hon. Gentleman described. We do not want a huge surge into the new system so that it cannot cope and the Inland Revenue cannot deliver the support to families in the desired time frame.

Some time in August—not on 1 August—we shall start to send out small application packs, including guidance and back-up information, to encourage people to start applying, because all the mechanisms will be in place. I am sure that this is not a state secret—it will not be once I say it, which is the great beauty of being a Minister. We have done model office tests and all the usual things, and we shall start with a small number—just a few thousand—and see how people respond, whether the information is clear enough and whether it needs amending. We shall gradually gear up, so that we can get as many people as possible into the system.

Again, there is no problem. The packs are being finalised. Hon. Members will be kept informed and members of the Committee will have the guidance to enable them to explain people's entitlement. I hope that the hon. Gentleman agrees that it has been written in a clear, direct and accessible style. We could not wait until April 2003 and expect to move 5 million or so families on to the new system. It will be phased in over time.

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Mr. Bercow: The intelligibility of the packs to potential claimants is crucial, and I am glad that the Minister spent a few moments describing the Government's intentions. However, she will accept that it is only one, albeit important, part of the equation. We must consider, too, the intelligibility of the legal obligation under which employers will be obliged to operate. Will the Minister say what steps are being taken to inform employers of their obligations? Will the Small Business Service have a role in that context?

Dawn Primarolo: I am grateful to the hon. Gentleman for raising that important matter. Throughout the development of the working families tax credit and the new tax credits we have worked closely with employers' organisations—both large and small employers, as the impact on them varies—to explain clearly the changes that have been made as we move to the new annual system. Wherever possible we have designed the system in response to what employers said, and only the working tax credit will be paid through the wage packet. The child tax credit will be paid direct to the main carer.

In designing a working tax credit that goes through the payroll we sought a system as close to the practice that employers already have, using their present obligations to notify earnings and the tax and national insurance that is paid. We are considering what information should be in the employers' pack and how to develop software and produce CDs that the employers will be able to use. That work is continuing within a long-standing consultative framework, and we hope that the employers' guide will be ready to go out in October or November 2002. We will do everything we can to make it a smooth transition, supporting the employers and using the Inland Revenue employers' bulletin and the business advice support teams. We have to consider whether we will need contact points in the Department. Employers will not have such huge demands on them as the Revenue when people come into the system, hence our need to start slightly earlier.

Mr. Bercow: For the avoidance of doubt, can the Minister confirm that if there is an obligation on employers, the Government will take great care to inform them and to liaise with the representative business organisations, which have an extremely important informative and educational role to play? I raise the matter because the Minister knows that a great many of the businesses that will be affected are micro-businesses, and some of them will not be members of the Institute of Directors, the Confederation of British Industry or even the Confederation of Small Businesses, the Forum of Private Business or the British chambers of commerce. It is important that businesses that do not have access to help from a representative body are assisted to the utmost that is reasonable.

Dawn Primarolo: I agree with the hon. Gentleman. The nature of those businesses means that they have great difficulty taking part in consultation exercises. We keep such matters under review, and we do whatever we can to ensure that such businesses

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understand their obligations and have the information they need to fulfil them.

That concludes this order and covers much of the information in the subsequent orders. I hope that we can now make progress.

Question put and agreed to.


    That the Committee has considered the draft Child Tax Credit Regulations 2002.

Draft Working Tax Credit

(Entitlement and Maximum Rate) Regulations 2002

6 pm

Dawn Primarolo: I beg to move,

    That the Committee has considered the draft Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002.

The regulations are made under powers provided in sections 10, 11 and 12 of the Tax Credits Act 2002. They set out the detailed eligibility rules for various elements of the working tax credit, including help with child care costs, and the maximum rate for each element. The key to eligibility for the working tax credit is to be engaged in ''qualifying remunerative work'' and regulation 4 sets out the conditions that must be met if a person is to be treated as being in such work. It also sets out the types of work that will not be classified as remunerative work; these follow the categories that are currently excluded from the working families tax credit and disabled person's tax credit, for example voluntary work and other activities for which payment does not count as income for tax credit purposes, such as training allowances and sports awards.

The regulations do not follow the current working families tax credit and disabled person's tax credit model of stating that hours of remunerative work must be calculated around a particular cycle or period around the date of the claim. That approach would not be suitable for the new tax credits system, which will be far more responsive to people's changing circumstances than the present system.

The regulations cover a detailed set of arrangements and, in outlining and introducing the credits, I will be happy to respond to questions from hon. Members.

6.2 pm

Mr. Bercow: I am grateful to the Minister for responding to our questions and concerns on the previous proposal and for her succinct introduction of this one. I have a number of questions to pose.

I start with the Government's latest estimate of the administrative compliance cost of the working tax credit. The Government made a judgment that the payment should be made through the wage packet; we have had that debate and it could well be continued. However, working on the basis that that is how the system will function, it is reasonable to reflect the concerns that several employers have expressed on the

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matter, and to seek information and reassurance as appropriate.

The Minister knows that a number of employers' organisations have raised concerns about continuing to require employers to pay working tax credit through the wage packet. In fairness, it is true that several business representatives supported, as useful and welcome simplifications, the proposal to simplify the system for paying tax credits with wages by moving to an annual system, based around the tax year. I think that the Government said that they would continue to work closely with employers' groups in developing the details of the system to ensure that it is as easy as possible to operate. When the Minister replies, will she say something about that ease of operation of the system and relate it to the savings that will accrue as a result of that greater ease and simplicity? That is my first prod—it is no more than that—on the subject of cost, to which it might be necessary for other hon. Members to refer during the debate.

The calculation of working hours is an important matter and the Government have had something to say about it in recent months. During consultation, they received relatively few views on what would be an appropriate test for deciding working hours. Those who contributed to the consultation and referred to that matter acknowledged the inherent difficulties in view of the much more diffuse and flexible working patterns of today. Respondents in the consultation that the Government have conducted so far recognised that it was a difficult area. The Government therefore said that they would continue discussions to find the most appropriate measure that did not impose unreasonable burdens on the claimant when deciding whether he or she qualified for in-work support. I would welcome some guidance from the Minister on the upshot of those continued discussions.

On cost, I pay homage to the Institute for Fiscal Studies, as I know many hon. Members do. It is an extremely reputable organisation with no party political footprint and it likes to be quoted only if the quoting is accurate. The Minister will be aware of its publication in October 2001 of an important document on tax credits, entitled ''Credit where it's due?'' In the document, which is relevant to the consideration of the statutory instrument, the IFS estimated the total cost of the working tax credit. It suggested that there could be a cost of around £350 million a year as a result of extending what it called the employment tax credit—the previous name—to those without children, which it said was much less expensive than the system for those with children. It also said that only 250,000 single people and about 175,000 couples would be eligible. Will the Paymaster General advise the Committee whether that cost assessment is broadly accurate, and whether there is anything in the regulations, which I have failed to see through ignorance or neglect, that could enlighten my right hon. Friends, my hon. Friends and me?

I move on—croaking like a frog, as I do—to caring responsibilities, on which the Government are rightly focused. They talked about how respondents supported a careful examination of how to revise the

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eligibility criteria for workers with a disability and how to provide support for those with other caring responsibilities. The Government suggested that some responses to their consultation provided possible definitions of carer that could be used to enable tax credits to provide extra help to those with caring responsibilities. Ministers said that they continued to consider that and would discuss it with interested groups and other Departments with responsibility for the way in which support was provided to those households. What was the upshot of those discussions and how has it been reflected in the regulations?

If I may animadvert on what could be described as the Northavon point, the hon. Member for Northavon focused too narrowly on the requirement for annual reconsideration and the usual uprating of the amounts of money to be awarded. I suggested that such a narrow, materialist focus did not entirely suit him. Will the annual report, among other things, advise hon. Members whether there is an argument for a changed or expanded category of carer or of range and nature of disability included in the eligibility criteria?

Another important issue is changes in income. The Government have claimed that the Tax Credits Bill provides for a flexible approach in responding to such changes. Ministers have eagerly assured us that they will

    ''discuss the details with interest groups as draft regulations are drawn up.''

However, I am naturally quizzical, as the Paymaster General knows. I fear that she might try to fob me off—that seems an unkind way to describe it—or to reassure me with a soothing bromide that the process of consultation and discussion is being described and that it would be too difficult for her to describe in detail during a brief reply this evening all the discussions and consultations, and the suggestions that were made.

I am interested to know—indeed, this is critical to the way in which people's lives will be affected—the extent to which the Government have allowed flexibility in the regulations to respond to changes in income and how that can be explained to our constituents in particular cases. I am not particularly preoccupied with the principle, although it is probably a necessary prelude to an intelligent discussion, but I am concerned about what things mean in practice. I might well have constituents who say, ''If my income changes for the worse over a particular period, what is the implication for me?'' I am not sure that they will be altogether encouraged by some of the elaborate statistical graphs with which we have been provided thus far.

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