Draft Child Tax Credit Regulations 2002 and Others

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Mr. Boswell: As I am now about to make my first substantive contribution to the debate, may I say how much I welcome being in Committee under your chairmanship, Mrs. Adams? I have no intention of abusing the time of the Committee or rehearsing matters that have already been debated fully. I apologised to the Committee because another engagement caused me to be late. I have already been warned about name-dropping, but the engagement was with a distinguished person who lives a little to the west of the House and has garden parties from time to time.

I had assumed, perhaps foolishly, that the original race card that was issued to us would be reflected in the order in which the measures would be debated. I was mortified when I arrived in Committee that the Child Tax Credit Regulations were being debated, so I shall read the remarks not only of my right hon. and hon. Friends, but those of the Paymaster General when she responded to that debate, as I did not hear all of it. Although there are general worries on which we would wish to reflect, I shall not rehearse such arguments.

I shall give one encomium to the Government. As my right hon. Friend the Member for Fylde said, the way in which disability has been handled under the regulations has some interesting and positive implications. The Paymaster General will know that I have a specialist interest in, and a Front-Bench responsibility for, disabled people. We all want to help those with a disability into work and to help those who have disabled children. We want to send the right signals and find an effective way of helping them. As my hon. Friend the Member for Buckingham said, the scheme in the regulations will cover a wide range of circumstances, which is helpful.

The implementation timetable is set out in the original regulations, which we debated, and in this regulation, which is about entitlement and maximum rate. This proposal is twice the length of the substantive regulation that preceded it. I am interested in the timetable in both proposals and would like the Minister to comment, first, on whether it is sufficient to ensure that all the applications made can be processed and payable on time, assuming that all goes well and allowing for the inevitable outliers or mistakes.

Secondly, can the Minister say what proportion of applications will be checked? Will there be some sort of risk assessment of whether the applications are, or might be, fraudulent? That is something that we all want to avoid, as it is objectionable. However, as my hon. Friend the Member for Buckingham said, fraud is not always completely avoidable in social security payments or, indeed, in tax matters.

I should like the Minister to say a word or two about the anticipated take-up, because the lower the take-up targets that the Government set, for example, in public sector agreements, the easier they are to achieve but the less good they might do.

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I shall touch briefly on two other matters. Hon. Members, including the hon. Member for Northavon, who have heard me on the subject of pension credits, will know that to me it is something of a King Charles's head. Questions of jurisdiction abound and I should like the Minister to say something, first, about whether the income that might drive the credit has to arise in the United Kingdom and, secondly, what is the position of a person who leaves the United Kingdom to work or for another reason when they are entitled to credit? How long is the qualifying period? May it be continued in certain circumstances and what is the cut-off period after which someone might lose their entitlement?

In respect of child care costs, I understand from the explanatory notes on the regulation, that an affirmative resolution procedure is required because these regulations prescribe the upper limit for child care charges to be taken into account under section 12(2) and under sections 11 and 12 of the first regulations.

Child care is a difficult matter and my right hon. Friend the Member for Fylde has already mentioned that many of us have concerns that payments made for child care, or allowances given by Government, may not have been sufficiently flexible to cover all the difficult circumstances involved. I recently became a grandfather and my daughter has returned to work in Government service. These matters are of extreme interest to her; it is very important for young families to be able to work their way through these circumstances.

Will the Minister comment, first, on whether the child care provisions set out in the proposal will be sufficiently comprehensive to account for most of the practical needs of families for child care? Secondly, are the child care costs sufficiently generous to reflect the actual circumstances? I understand the Government's wish not to prescribe for a lavish level of costs or for some collusive arrangement that is unfair and inappropriate, but it is important to have the Minister's assurance that the balance is broadly right. With those comments on what are much more technical regulations than the head regulations, already considered by the Committee, I conclude.

7.10 pm

Dawn Primarolo: This has been a fascinating debate, particularly because we were suddenly invaded by almost the entire Opposition Whips department, but they have now left.

We heard the hon. Member for Daventry plead with the Government about child care, yet he was a member of a Government who failed to invest in it. I wonder what is going on in the Committee. I shall deal with the hon. Gentleman's points and take his speech as a complete commitment to this Government's strategy of supporting child care and investing in nursery places. I presume that he now supports that. These measures relate to yesterday's announcements on public expenditure. I presume that he supports the Government in the payment of child care fees where members of our community pay for child care.

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The hon. Gentleman asks, with an all-inquiring mind, whether the Government are spending enough and providing for enough child care. I presume that, when he next speaks, he will have the courtesy to slip on to the end of his contribution how he would raise the resources to pay for the expensive scheme for which he appears to be arguing, over and above what the Government are offering.

The hon. Member for Buckingham asked questions on the second set of regulations. I shall deal first with the issue of employers and their costs and concerns. There are four particular areas of improvement in the new tax credit system, which result directly from discussion with employers. First, claimants will no longer routinely have to ask their employers to verify their earnings or their hours, because tax credit awards will usually be based initially on the annual income for the previous year. People will already have the information necessary to make a claim, such as their P60 or self-assessment form.

Secondly, if the employee receiving the working tax credit leaves, the employer will stop paying the credit. There is no need for the employer to complete a certificate of payments, as happens now with the WFTC. If the employee remains entitled to the working tax credit because they have another job, they, not the employer, will be responsible for telling the Revenue about the change of employer.

Thirdly, because the new tax credits will be awarded annually, there is no longer a need for six-monthly stops and starts, which have been a matter of some concern and complaint in the current system.

Fourthly, the application procedure for employers who need funding will be greatly simplified. I am talking about employers who have to have funds put in to pay the tax credit. If, when they balance off with the collection of national insurance and tax, there are insufficient funds, the Revenue will put in funds. Those simplifications will reduce the compliance cost for business by £11 million a year.

The hon. Gentleman graciously acknowledged that the CBI and other employer organisations have welcomed that. If he reads the regulatory impact assessment, he will see that it talks about costs, the number of employers involved in the working tax credit and other items. He raised the issue of continuing consultation, as he did in the previous debate, and I would not dispute for a moment that that is necessary. The hon. Gentleman also asked about consultation on the regulations for working tax credit. As I have said, that is centred around the definition of qualifying remunerative work, details of the disability element rules, how to ensure support for such groups as term-time and seasonal workers, and the degree of flexibility necessary to change child care costs. All that is now reflected in the regulations.

As the hon. Gentleman said, there was extensive discussion about the definition of working hours. Hence, these regulations introduce the concept of normal working hours. The definition allows some flexibility for those whose hours fluctuate—because of

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recent illness, for example, or in extreme cases such as that of share fishermen or similar occupations. In such cases, hours may be curtailed in the particular short clip that is examined to assess how hours have been undertaken.

The hon. Member for Buckingham also asked about progress on the definition of carers. Despite the best efforts of the Government, no universally accepted definition was found for the wider definition of carers necessary to take the work forward. It is an important area of work, however, so officials at the Inland Revenue are working with the relevant Government Departments and continue to be in discussion with carers' representatives, who recognise and accept that it is not possible to reach an acceptable definition at this stage. Clearly, we must take that work forward as best we can and consider the possible extension of credit should the case be made.

The hon. Gentleman mentioned the old red herring of the National Association of Citizens Advice Bureaux report alleging abuse by employers—he asked about the number of cases. Any employer who sacks employees because they get tax credits is acting illegally. The Bill provides for employees to have the right to go to employment tribunals with the support and force that that demonstrates. The same procedure has worked well under the Tax Credits Act 1999 and the 2001 Act, and is identical to the enforcement procedure for the national minimum wage.

We are not aware of any cases of alleged employee abuse reaching employment tribunals, or of the substance of any case involving discrimination. In fact, on seeing the NACAB report, the Government asked for the details of cases in order to pursue them. Unfortunately, the details were broad and insufficiently specific to make a formal investigation. Despite repeatedly requesting the information, we do not have it at this stage. Of course, we continue to advise employers of their obligations, and the vast majority are fulfilling them. We have the power to take action in proven cases of abuse.

On the question of privacy and consultation with representatives, of course there was consultation. However, I wish to make it clear to hon. Members that employers will not be told any of the details of the tax credit awards, but simply how much to pay, in much the same way as the 50 plus employment credit is paid through the employer. That credit appears on the pay slip and no problem of discrimination has arisen.

The hon. Member for Buckingham also asked me to summarise the consultation results. When we were discussing a previous regulation, he quoted extensively from a Treasury press release—which quoted me extensively. If he reads a little further on in that press release, he will find a summary of the consultation responses, so I do not need to summarise them now. The responses are placed in the Library, and I recommend him to read them all as part of his summer reading. If he does so, he will learn that what I have been saying is accurate—we consulted closely, and paid a great deal of attention to the issues.

The hon. Gentleman raised a series of points about fraud and compliance. If he studies the Bill, he will see

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that there is a carefully constructed compliance framework—which was discussed at length in Committee. It operates at different levels; it addresses penalties, the circumstances in which penalties should be levied, the approach to fraud, and the powers that the Inland Revenue has at its disposal. The Act extended those powers, introduced specific new offences of tax credit fraud, and extended the powers of the Inland Revenue when such cases are under investigation. I also recommend, as part of the hon. Gentleman's summer reading, the Hansard report of the deliberations on the Tax Credit Bill, and he should pay particular regard to the issue of compliance costs, because that will put his mind at rest about the Government's powers on that.

Payment through a bank account directly to the person who should be in receipt of tax credits will also, on the child tax credit side, ensure that fraud is reduced; and there are strong powers to tackle the very rare cases in which employers pressurise their employees to collude. As I recall, Conservative Committee members objected to the strength of those powers against employers, and moved amendments to decrease them—although I am willing to be corrected, if that is not what happened.

The hon. Gentleman also asked about passporting. That is not directly relevant to these regulations. Before the new tax credits start, the Inland Revenue has undertaken to produce material that clearly sets out entitlement to passported benefits and the carrying of them across. That was discussed at great length in Committee, in an attempt to ensure that people in receipt of passported benefits—which are of real value to them—do not lose them when they move to the new tax credit system, and that the tax credits do not allow some people to access passported benefits when their income is too high for them to be entitled to it in other circumstances.

The hon. Member for Northavon raised a number of issues about the guide for employers and the claimant packs. The Inland Revenue's publication for employers has already alerted them to the fact that the claim packs will be going out—subject to the passage of the relevant legislation, of course. That advises employers that, if they are approached, they should tell their employees to call the tax credit helpline. The Inland Revenue will deal with inquiries precisely because we do not want to exert further pressure on employers to supply information or make judgments, as the Act does not require that. The employers pack that will be sent out is part of the regular strategy that the Inland Revenue will use from day to day to communicate with employers, and it should contain the information.

The hon. Gentleman also asked about calculating the hours worked. That does not necessarily refer to contracted hours or even the average hours worked, but the hours normally worked. I told the hon. Member for Buckingham that that is part of the debate that we had with the lobby groups. There was mention of trying to balance the situation, but somebody will always be just on the wrong side of a boundary. Although that is unfortunate, such issues always arise when considering borders. We settled on

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using the hours normally worked. If a claimant regularly goes outside his contracted hours for such reasons as overtime, we would include the extra hours. Contracted hours might not give the full picture. The only way to provide flexibility is to examine the facts of a case. When a person starts work, we will want to switch on the working tax credit immediately. We have debated the difficult issue at length with discussion groups.

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