The Economic Secretary to the Treasury (Ed Balls): I am today laying before Parliament, the annual European Community Finances White Paper Statement on the 2007 EC Budget and measures to combat fraud and financial mismanagement (Cm 7090). This White Paper is the 27th in the series. It gives details of revenue and expenditure in the 2007 EC Budget and covers recent developments in EC financial management and measures to counter fraud against the EC Budget. It also includes information on the upcoming review of the EC Budget and recent measures taken to improve the management and control of the EC Budget, including the initiative the Government announced in November 2006.
The Chief Secretary to the Treasury (Mr. Stephen Timms): The tax credit system has delivered three key achievements: it has improved incentives to work, reduced the tax burden on low to middle income families and helped to dramatically reduce child poverty. The National Statistics published on 22 May show that the total number of families benefiting from tax credits rose to 5.94 million in 2005-06. These statistics contain a wide range of other information about tax credits, and show that:
339,000 families benefited from the childcare element of Working Tax Credit (an 11 per cent. increase in the number benefiting in 2004-05).
89,000 families benefited from the disabled worker element (a 13 per cent. increase compared to 2004-05).
As a proportion of gross spending, end year adjustments leading to an overpayment have halved since the introduction of new tax credits to just ten per cent.
In line with expectations, end of year adjustments leading to an overpayment have fallen by a further £100 million since 2004-05, building on the significant progress made between 2003-04 and 2004-05 when overpayments fell by a fifth.
Tax credits today provide support to 20 million people including 6 million families and 10 million children. Take-up of tax credits is a significant success. In 2004-05 take-up of the Child Tax Credit rose from 79 per cent. to 82 per cent., with over 90 per cent of the money available being claimed. Take-up among those on incomes below £10,000 is 97 per cent; and take-up among lone parents is 93 per cent. This is higher than for any previous system of income-related financial support for in-work families.
Tax credits play a major role in moving people into work and helping people move up the employment
ladder, ensuring that work pays over welfare. Tax credits and economic stability have helped to increase the number of people in work by over 2.5 million since spring 1997.
families with children are, on average, £1,550 a year better off, while those in the poorest fifth will be, on average, £3,450 per year better off; and
a single-earner family on half average male earnings with two children is £3,900 a year better off.
The tax credit system has also played a key role in tackling child poverty. Since 1998-99, 600,000 children have been lifted out of relative poverty, compared to a doubling of child poverty in the previous 20 years.
Tax credits are designed to tailor support to families' specific circumstances, and to respond to their changing needs. Household incomes and circumstances that can, of course, change during the course of the year. Payments are therefore subject to adjustment during the course of the year and, if necessary, at the end of the year once these changes are known. The only way to avoid these end-year adjustments would be to have a system where payments were fixed, based on past information. This would mean that families could not benefit from this flexibility to give extra support when they need it most. Statistics published today show that between 2004-05 and 2005-06 720,000 families experienced a fall in their income, and benefited from extra support through tax credits.
Building on the significant progress made in 2004-05 when overpayments fell by a fifth, National Statistics show that end-year adjustments leading to an overpayment fell by a further £100 million in 2005-06. The figures for end-year adjustments do not show the impact of measures announced at the time of the 2005 Pre-Budget Report. Once these come fully into effect the level of end-year adjustments are expected to fall by a further third in future years.
HMRC is making good progress in implementing this package of measures, and this is already making a significant improvement to the way in which the tax credit system operates and to the outcomes for families:
the amount by which ongoing tax credit payments can be reduced in order to recover an in-year overpayment has been restricted. This gives greater certainty of award for claimants, and reduces the effect of reported changes on continuing payments.
the income disregard has been successfully increased to £25,000. This has ensured that almost all families with increasing incomes will not have their tax credit entitlement reduced in the first year of the increase, further boosting work incentives and reducing overpayments. Analysis based on data from the first two years of the system's operation indicates that about 600,000 families per year will benefit from the increase in the disregard, and two-thirds of those beneficiaries will be in the bottom 30 per cent of the income distribution.
the renewal period has been successfully reduced to five months. As a result, 1.4 million more claimants had their 2005-06 awards finalised and were off provisional payments by 31 August 2006 than by this point in the previous year. As a result of this success, in the 2006 Pre-Budget Report the Government announced that in 2007 the renewal period will be further shortened to four months. This will further reduce the time over which claimants are paid on the basis of information rolled forward from the previous tax year, which is often out of date.
new reporting arrangements have been introduced to increase the number of changes in circumstances that are reported to HMRC and reduce the time taken to report these changes. This has shortened the time when people are potentially paid too much (or too little), and was supported by an advertising campaign when life changes. HMRC have also sent a mailshot to claimants to remind them of the new reporting requirements and initial feedback suggests that tax credit claimants are aware of the need to report changes of circumstances promptly to HMRC.
HMRC has started to adjust future payments when an estimate of lower current year income is reported but not make a one-off payment for the earlier part of the year. When the award is finalised after the year end, any necessary adjustments to payments will be made. This will tackle the problems associated with families overestimating falls in income.
ahead of the renewals exercise, earlier this year HMRC also wrote to around 2 million low-income claimants to encourage them to provide an up-to-date estimate of income so that their provisional payments for 2007-08 can be more accurately set.
In addition to these measures, Budget 2007 announced a four-week run-on in entitlement to Working Tax Credit from the day a claimant ceases to work over 16 hours. This will reduce the number and value of overpayments occurring when people are late in reporting that they are no longer entitled to Working Tax Credit.
Accuracy in processing and calculating awards rose from 78.6 per cent. in 2003-04 to 97.7 per cent. in 2005-06. This improved performance of the tax credits system has meant that fewer overpayments are being caused by IT or administrative error.
The service received by tax credit customers has also been improved. Award notices and guidance have been improved and the "reasonable belief test HMRC uses to decide whether to write off an overpayment has been clarified. HMRC has also improved its processes for dealing with disputed overpayments, and claimants can now expect disputed overpayments to be dealt with within four weeks.
Since the introduction of tax credits HMRC has had processes in place to deal with hardship and where appropriate can provide additional payments or collect money owed over a longer time or, in exceptional circumstances, write-off an overpayment.
End-year adjustments would be a feature of any flexible system that could respond across the year to families' circumstances as they change. Eliminating the need for adjustments would require a move to a fixed and less responsive system.
The Minister of State, Ministry of Defence (Mr. Adam Ingram):
I am announcing today, subject to trades union consultation and appropriate Parliamentary consent, the creation of a new defence support group by merging together ABRO, retained DARA business units and certain other defence support facilities. This new group, operating as a trading fund, will begin formal trading by April 2008 and will focus solely on the delivery of the Defence Industrial and Technology Strategies by being a flexible, responsive, operationally excellent organisation
that provides a cost competitive in-house maintenance, repair, overhaul and upgrade capability in support of the Armed Forces, operating where appropriate in partnership with industry.
DARA is undergoing a major transformation programme: the Fast Jet and Engines businesses closed in March 2007; the Rotary Wing and Components businesses are currently going through a sale process; and we have already announced the retention of the electronics business at Sealand. The VC10 business unit at St Athan has also been subject to a market testing exercise. However, as it is now apparent that sale is unlikely to offer best value for defence, the sale of the VC10 business unit will not now proceed. By retaining ownership, MOD will better manage the interface between the VC10 business and the Defence Training Review, both of which are based at St Athan in South Wales. A decision will be taken shortly on whether the best value for defence can be secured by transferring; the Rotary and Components businesses outside the MOD. If not, these business units will also form part of the new defence support organisation.
Commitment from the MOD to sustain essential levels of capability and capacity will provide the new defence support group with greater clarity and allow it to implement a programme of continuous improvement. At the same time, the new organisation will look to consolidate and build on ABRO's and DARA's existing defence industry relationships and partnerships, by entering into agreements on future equipment programmes. These will ensure MOD retains the Intellectual Property and design skills required to maintain operational sovereignty in key areas as set out in the Defence Industrial and Technology Strategies.
This announcement draws both organisations more closely into delivering key MOD strategies and supporting the Armed Forces. As the plans for the new organisation develop during the course of 2007, we are committed to consulting closely with staff and trades unions.
The Council once again failed to reach agreement on measures to establish a recovery plan for the European eel, due to inconclusive discussions and intransigence by some Member States. It is expected that decisions will be taken at the next meeting of the Council in June.
The Council was not able to reach agreement on implementation of a recovery plan and new quota allocation for bluefin tuna in the eastern Atlantic and the Mediterranean. This is despite significant pressure from myself, other member states and the Commission. In the end the Presidency responded to calls from France and Italy, who are the main stakeholders in the fishery, to delay. Although the result was disappointing, the Commission did declare that it would close the
fishery once provisional quotas were exhausted. It is expected that decisions will be taken at the next meeting of the Council in June.
The Council held a policy debate base on a Presidency questionnaire on the Commission's Report on cross compliance. Member States expressed support for a number of measures proposed by the Commission to simplify and improve the system of cross-compliance in the Common Agricultural Policy.
The Council reached political agreement by qualified majority on a Presidency compromise proposal, laying down for the first time rules governing the conditions under which meat chickens are kept. I voted in favour of the compromise text which puts in place a package of new measures including detailed requirements for holdings where meat chickens are kept, the introduction of a maximum stocking density limit, data collection and scientific monitoring of impacts on chicken welfare, training for the industry and a possible new welfare labelling regime following a report from the European Commission. The Directive will come into force in 2010.
The Council unanimously adopted conclusions on the outcome of a recent conference on Animal welfare -Improving by labelling. The Council also unanimously adopted conclusions on better regulation in the plant varieties and seeds sectors.
Spain supported by some Member States expressed concern about the exclusion of banana as a sensitive product in the draft Council conclusions concerning the market access to the EU market for the African Caribbean Pacific countries (ACP) products.
The Council took note of an update by the Commission on Avian Influenza and agreed that the item should be withdrawn from the agenda of future Council sessions, unless there were significant issues to report.
The Commissioner for Health and Consumer Protection gave an update on the EC-Russian Federation veterinary and phytosanitary agreement negotiations. He also reported that Russia had also banned meat from various EU establishments due to evidence of salmonella and appealed to Member States to ensure they are fully applying the Memorandum of Understanding with Russia, so as to avoid any further problems.
The Minister of State, Department of Health (Caroline Flint):
The Government have today sent a copy of the Department's review of all officially held papers for the
period 1970-1985, including those returned to the Department from a firm of private solicitors, on blood products contaminated with Hepatitis C to Lord Archer of Sandwell's non-governmental independent inquiry and to other interested parties.
The Minister of State, Department of Health (Ms Rosie Winterton): The Government have today laid before Parliament their response to the Health Select Committee Report on Workforce Planning (Cm 7085).
The Government are responding to the conclusions and recommendations raised by the Committee covering issues such as ensuring workforce planning is a priority, the importance of strategic health authorities leading the process locally, the need for a national perspective from the Department and the Committee's concerns about the effects of the recent growth in National Health Service workforce capacity on the NHS financial position.
The Minister for Security, Counter Terrorism and Police (Mr. Tony McNulty): Copies of the Government's fourth progress report on implementing the recommendations of Sir Michael Bichard's Inquiry into events surrounding the murders of Holly Wells and Jessica Chapman have been placed in the Libraries of both Houses today. Our last report was made in May 2006 and there have been many positive developments since that date. Some 21 of Sir Michael's 31 recommendations have now been substantially delivered and we continue to press ahead with the more technically complex issues which remain outstanding.
Since we initiated work to implement the Recommendations from the Inquiry, the ambitious and far reaching programme of work has already delivered major improvements to the sharing of information to protect children and vulnerable adults. And it is increasingly apparent that our agenda is now just one part of a much bigger framework covering the use of information to support public protection. So the Government are determined, as they were from day one, to implement the necessary improvements from this crucial work, which demands continuing focus and priority. This latest update clearly reinforces the Government's ongoing commitment to full delivery.
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