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The hon. Gentleman referred to my comment about the independence, or lack thereof, of
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18 and 19-year-olds. Given that a qualifying young person's child benefit will apparently be paid through a parent or guardian, does he agree that there is a potential breach of the Human Rights Act 1998, because 18 or 19-year-olds would have to tell their parents that they were in training or education at a further education college? They may not wish to do that, but if they do not, they may not be able to gain access to the money.
Mr. Laws: The hon. Gentleman makes an important point. Where there is already a breakdown in the relationship between the young person and the parent, a different category of benefit entitlement might apply anyway and they would not be covered by the child benefit provisions. However, there will be many marginal cases, and this should be one of the issues that we consider very carefully in Committee.
The final reason why this is an important Bill is that although it is short and seems modest, it involves quite a lot of public expenditure. The total cost, as the hon. Member for Wolverhampton, South-West said, is about £170 million a year, or £6 for every taxpaying household in the country. That is not a huge amount, but it is not a modest amount either, and we should certainly subject that sort of expenditure to a great deal of scrutiny.
I want to touch on four issues today. The first is the cost and benefit calculations that have to be made, and the extent to which they have been made in the regulatory impact assessment. Secondly, I want briefly to look at any problems likely to arise when changes are made to the entitlement of unwaged trainees. Thirdly, I want to look at the way in which the changes will affect young people who are still in education or training at the age of 19. Fourthly, I want to make a couple of brief comments about the Government's future strategy in these areas.
I want to start by joining the hon. Member for Chichester in expressing surprise at the paucity of information in the initial regulatory impact assessment, and to express my relief that a partial supplementary assessment was published recently. There was a wonderful letter at the back of the initial regulatory impact assessment, which was no doubt among the many things on the Paymaster General's desk that she had to sign at the end of a busy day. She had to put her signature beneath this sentence:
In fairness to the Treasury, we have had the supplementary partial regulatory impact assessment, which is pretty clear on the costs. Some issues might arise in relation to the costs based on our assumptions about what individuals will do in responding to these changes, but the cost side of the equation is pretty clear, as I am afraid it usually is when any Government introduce a change in policy. We always know what it will cost, and those cost estimates tend to be reasonably reliable.
It is far less clear what kind of benefits we can achieve through these changes. Some might be achieved simply through creating a fairer system and having a more
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socially acceptable set of benefit entitlements. That was the implication of the comment made by the hon. Member for Wolverhampton, South-West when I asked him whether he would still be in favour of the two changes even if there were no economic benefit. It is quite possible that we would be in favour of them for other reasons, although I doubt that that would be the case in relation to educational maintenance allowances. If we had spent additional money on those and there had been no increase in the staying-on rate, I suspect that few of us would think that it had been money well spent.There are, therefore, reasons for us to look very closely at the economic benefits of the proposals.
This area of public expenditure is competing with every other one for a slice of the national cake and for available expenditure, which is likely to be quite scarce after the next election, given the state of the public finances. If we look at the section of the regulatory impact assessment that discusses benefits, which the hon. Member for Chichester was generous enough not to read out earlier, we find that it states:
In other words, all that the section on benefits says is that the benefits are what the Bill does, and that it is going to introduce a degree of flexibility in relation to changes that we do not yet know will actually take place, but that are simply expected to take place. On that basis, the Paymaster General has signed a piece of paper stating that she is satisfied that the benefits justify the costs. I am glad that she did not say that the benefits exceeded the costs, because it would be very difficult to establish that from the information that we have. This is an important issue, however.
The hon. Member for Chichester alluded earlier to some of the estimates that we would expect the Treasury to have made in order to come to a reasonable monetary estimate of the benefit of this legislation. The Treasury must have made some sort of assessment of the effect of the extension of child benefit and the child tax credit to unwaged trainees. Presumably, it could have an impact in two ways. First, it could encourage individuals who would otherwise have gone into paid employment to go into unpaid employment. That could have a significant cost to the Exchequer. Secondly, it is quite possible, as the Government have acknowledged, that it might act as an incentive to draw people out of formal education into unwaged training, which could end up being less expensivein that narrow sensefor the Government.
However, we are left with no sense of the estimate that the Government have made of the effect of these changes. Without that, we have no sense of what the Government would consider to be a success or a failure in terms of the effects of these changes on people's behaviour. If we are to know how successful the provisions have been, and whether the extent of the
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incentives is sufficient, we need to know what the Government expect. I hope that the Economic Secretary will be able to say more about that later.
Mr. Mark Francois (Rayleigh) (Con): I am following the hon. Gentleman's argument closely, and I think that we all agree that there is some slight confusion about the Government's figures on the benefits of these changes and exactly how much they are going to cost. This could have been a Department for Work and Pensions Bill, or even, arguably, a Department for Education and Skills Bill, but it is a Treasury Bill. Is there not a delightful irony in the fact that the Treasury, of all Departments, cannot be specific about the figures involved?
Mr. Laws: The hon. Gentleman makes a good point, and it is made stronger by the fact that it is the Treasury that should be acting to exert discipline in these circumstances. However, if the Treasury is seen to be the lead Department, it is much more difficult for it to enforce a degree of rigour in relation to the costs and benefits.
The costs and benefits are also relevant to any incentives that might be created by the changes for people to extend their courses. The Government have expressed their concern that there might be an incentive for people who have turned 19 to carry on their courses for longer. This is not an area in which I claim to have expertiseinput from colleagues from the Department for Work and Pensions and the Department for Education and Skills would be useful here. Will there also be an incentive for employers to switch from having young people in training on a waged basis to doing so on an unwaged basis in order to exploit the changes in benefit entitlements? The Government have suggested in some of their comments in the regulatory impact assessment that they are concerned about that, and there are allusions to the need to deal with the issue. However, we are given no sense of how they intend to do so. The effects that the changes will have in regard to child benefit and child tax credit also relate to those people who stay in education beyond the age of 19. We need to know what effect the Government expect that to have.
It would also be helpful if the Economic Secretary could clarify whether the costs of the Bill have been built in to the existing public expenditure estimates, or whether the Chancellor will need to make an additional provision for this expenditure in the next Budget. In other words, is this already in the Treasury's public expenditure plans, or will they have to be increased to take account of these provisions?
We need to consider a number of issues relating to the substantive non-cost issues resulting from the two changes. The first category relates to the changes in regard to unwaged trainees. The Paymaster General said earlier that she believed that all the 80,000 people currently in unwaged trainingthat was the figure as at September 2004would receive child benefit and child tax credit under the changes. That is not the impression that I get when I read sections 9 and 10 of the supplementary partial regulatory impact assessment, as it seems that the Government have had to make a judgment about how they extend this entitlement in practice, and how they define and seek to regulate the category of people who are counted as unwaged and in training.
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The Government appear to have had two different options: one was to extend those entitlements to all unwaged trainees, and the other was to try to come up with some definition. I think that the definition that the Government have come up with is that those benefits will be extended to
I am therefore dubiousI admit that the Paymaster General said that she would come back to me on thisabout whether her comment that all 80,000 individuals on unwaged training would be covered is likely to be realised in practice. I suspect that a small group of people will be missed out, but without the expertise in that area I am unable to speculate on how large that group may be. I hope that the Economic Secretary may be able to comment on that later and tell us whether any groups might otherwise miss out.
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