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Baroness Miller of Chilthorne Domer: My Lords--

Lady Kinloss: My Lords--

Lord Peyton of Yeovil: My Lords--

The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, there is plenty of time because the fourth Starred Question has scratched.

Lord Peyton of Yeovil: My Lords, will the Minister be good enough to explain in clear terms who exactly is expected to benefit from this absurd legislation? It will not be the animals; it will not be the customers; it will not be the owners. If he cannot answer the question, perhaps he will go to the authors and get them to do so in clear, intelligible terms. It will make quite a change.

Lord Donoughue: My Lords, I shall do my best to meet the high standards that the noble Lord always expects. In fact, the European Union directive derives from way back in 1964 and has been in place since that time to ensure that we have proper standards of meat hygiene. It has been amended and was last amended in 1991. The identity of the beneficiaries is quite clear. The

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beneficiaries are public health and, therefore, the public. Animal producers are also beneficiaries in the sense that the legislation helps to maintain--and, in our case, helps to restore--the confidence of consumers in meat. I believe that the legislation is perfectly well justified.

Baroness Miller of Chilthorne Domer: My Lords, does the Minister agree that, when the Government have undertaken this welcome and detailed examination during the next few months, questions of animal welfare where abattoirs are very distant from the communities that they serve and questions about rural employment could open the possibility, if it were necessary, for a derogation?

Lord Donoughue: My Lords, we certainly bear in mind most closely questions of animal welfare. We are well aware that it is not always in the interests of an animal for it to be shipped a long distance. Rural employment concerns us considerably; indeed, we have in operation a major consultation exercise to help ensure the prosperity of rural society. As regards derogations, that is not a matter for us. There is a derogation in relation to small abattoirs. Our legal advice is that that applies only to structures and not to the level of charging. The department has written to the European Commission to ask for advice on the matter and to ascertain whether it would in any way allow less onerous terms about levels of inspection.

Lord Hoyle: My Lords, does my noble friend the Minister agree that the announcements made today, especially in relation to SRM, will be greatly welcomed by the industry?

Lord Donoughue: Yes, my Lords. Indeed, I can assure my noble friend that the announcements were most welcome. The delay on SRM charges alone is worth £20 million to the industry. I believe that the review we are undertaking will encourage those concerned because, although we will abide by European Union rules, as we must, we shall also ensure that we do not accidentally over-implement. Both of those factors will be most welcome to the industry.

Lady Kinloss: My Lords, can the Minister say why the veterinary hourly fee is not the same throughout local hygienic abattoirs, at least in North Yorkshire? Further, can he say why there is no uniform tariff? Does the Minister agree that the increasing fees charged to small, hygienic abattoirs will eventually force many more to close, with the inevitable loss of jobs? I should declare an interest here in that my elder daughter uses one of the small abattoirs and fears that, if it closes, she will have to take her animals much further and, therefore, cause them much more stress.

Lord Donoughue: My Lords, I agree with the points made about the role of abattoirs, and especially about the importance of small abattoirs. We are well aware that the imposition of a higher level of fees impacts

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disproportionately on small abattoirs. That is why we have delayed the introduction of the new charges and why we are undertaking this review.

Lord Luke: My Lords, we welcome the review on this side of the House as we do the other parts of Mr. Rooker's announcement with regard to specified risk material. However, if the review shows that the overall burdens on small abattoirs in this country are greater than on their equivalents in Europe, will the Government pay for that excess? Alternatively, how else will they be able to relieve the burden?

Lord Donoughue: My Lords, we must await the results of the review. As regards comparisons with other countries, the department has carried out its own review with such information as is available. I also understand that the Meat and Livestock Commission is undertaking a more thorough review, although we do not have the results as yet. The general indications are that our continental neighbours do in general impose the levels of inspection and the standards of charges as are required. For example, our impression is that Belgium and Denmark impose higher standards, while Germany imposes standards which are equivalent to ours.

It is possible that one or two other countries, such as Spain--the noble Baroness mentioned Portugal during an earlier discussion--and Ireland may have differences within the system. We are looking further into the matter in that respect. However, if we receive any evidence, or if the noble Lord can give us any, to show that countries within the European Union are not properly imposing the European directive on charges, we shall certainly go straight to the Commission and demand action.

Business

3.6 p.m.

Lord Carter: My Lords, as soon as possible after Amendment No. 1 of the Committee stage of the Tax Credits Bill has been dealt with, my noble friend Lady Symons of Vernham Dean will, with the leave of the House, repeat a Statement which is to be made in another place on the NATO summit. Thereafter, my noble friend Lord Williams of Mostyn will, again with the leave of the House, repeat a Statement on the London bombings which is also to be made in another place.

Lord Henley: My Lords, I thank the noble Lord for making that announcement. However, bearing in mind the fact that the Government have known for some considerable time that a Statement would be made by the Prime Minister in the other place on the NATO summit, would it not have been possible for the noble Baroness the Leader of the House to have rearranged her business in Northern Ireland, as Minister for Women, in order to make the Statement herself, as I believe the House would expect?

Lord Carter: My Lords, my noble friend the Leader of the House very much regrets that she is unable to be

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here in person to repeat the Prime Minister's Statement to your Lordships' House today. However, she is unavoidably absent from the House as a result of a longstanding and important ministerial commitment in Belfast in her role as Minister for Women. The visit was arranged as long ago as October last. My noble friend Lady Symons, as Foreign Office Minister in your Lordships' House, has been asked, and has agreed, to repeat the Statement this afternoon.

As I said, my noble friend the Leader of the House is performing an important public engagement in Belfast. It was arranged in October and was publicly announced in February. It is an important initiative. I am sure that noble Lords on the Conservative and Unionist Benches would be outraged were that particular part of the United Kingdom to be treated any less favourably in that regard than other parts of the country. This is only the second occasion since my noble friend became Leader of your Lordships' House that the Prime Minister has made a Statement in the other place and my noble friend has not herself repeated it in this House. It seems to me that the Opposition Chief Whip is straining at a rather odd procedural point.

Tax Credits Bill

3.8 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

House in Committee accordingly.

[The PRINCIPAL DEPUTY CHAIRMAN OF COMMITTEES (Lord Tordoff) in the Chair.]

Clause 1 [Certain benefits to be known as tax credits]:

Lord Higgins moved Amendment No. 1:


Page 1, line 7, leave out first ("tax")

The noble Lord said: In moving Amendment No. 1 I believe that it would be for the convenience of the Committee if I were to speak also to Amendments Nos. 2, 3, 7 and 8, including discussion on Schedule 1 stand part. If ever there was a pure Alice in Wonderland piece of legislation, then it is Clause 1 of this Bill, which we seek to amend. Your Lordships will recall that in Lewis Carroll's book Alice's Adventures in Wonderland there is a semantic exchange between Alice and the other members of the tea party. The following quotation illustrates the point I wish to make about this clause. The March Hare asked,


    "'Do you mean that you think you can find out the answer to it?' said the March Hare. 'Exactly so,' said Alice. 'Then you should say what you mean,' the March Hare went on. 'I do,' Alice hastily

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    replied; 'at least--at least I mean what I say--that's the same thing, you know.'" The heading of Clause 1--the clause which we seek to amend-- reads:


    "Certain benefits to be known as tax credits". The clause seeks to change the meaning of words which are extremely clear. This is not a tax credit Bill and we are not dealing with the concept of a tax credit. If one needs further support for such an argument, one has only to read the official publication of the Office for National Statistics entitled, The UK National Accounts Concepts, Sources and Methods which makes it absolutely clear that,


    "If a refund or allowance can be calculated independently of a procedure for calculating the tax payable and uses different criteria and does not depend on the actual amount of tax to be paid or the marginal rate of tax it is not integral to the tax assessment". In other words, if it is not integral to the tax system, it is not, and should not be construed as, a tax credit.

That brings us to the matter of why the Government should be engaged in this extraordinary semantic operation. Before the general election the Prime Minister made it absolutely clear that it was the Government's intention to cut the social security bill and to spend the money saved on education and health. They have failed to do that. The Bill now before us increases the already large bill for family credit by about £1.5 billion. By calling that increase and the change in the structure a tax credit, the Government seek to suggest that this is a tax reduction rather than an increase in public expenditure. No doubt we shall return to these points later.

The Department of Social Security is increasingly being taken over by the Treasury. The Contributions Agency has already been moved from the DSS to the Treasury. The whole trend is in that direction. Changes will be implemented but, as the Child Poverty Action Group has pointed out, what is really involved is a means tested wage subsidy. Rather than the Inland Revenue fulfilling its traditional role of collecting money, it will find itself in the unusual role of giving people money. However, it will not give them money as part of the tax system. This provision will not constitute a tax credit; it will be a straight hand-out, whatever the wording of the clause. Amendment No. 1 and the amendments grouped with it seek to call the provision what it really is. I am glad that we have deferred the question of the title of the Bill. No doubt at a later stage we shall alter that too.

I wish to make a number of substantive points. An extra £1.5 billion is to be given to a particular group of people. It is therefore not surprising that many of those who represent that group--many of whom carry out extremely valuable work--do not object to the increase in expenditure which will take place. However, nearly all of them have serious doubts about the way in which the system will operate. If it were to operate as a tax credit system, we on this side of the Committee might well be in favour of it. However, the method of its implementation is not only alien to the ethos of the Inland Revenue; it also puts a serious burden on business. It has serious administrative costs and it increases rather than reduces dependency on the welfare

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system. It creates more problems with regard to fraud and is likely to increase the stigma of drawing benefits. Above all, it is an extremely complex arrangement. Why, therefore, have the Government decided to go ahead with what is not a tax credit scheme but something different?

I refer to the examination of Mr. Martin Taylor of some of these issues on behalf of the Government. That suggests that the Government wished to make it a genuine tax credit system. However, as we all know, they have decided that that is not possible. This, again, is something we shall need to probe. The CBI has made a number of points as regards the feasibility of the system. It has said that the Inland Revenue discovered a number of intractable problems with regard to making this a genuine tax credit system. I refer, for example, to dealing with changes in the level of the award. As I understand the matter, the award will be stable for a period of 26 weeks. There will be different tax rate bands, particularly when the 10p band is introduced. There is no mention of the fact that the 20p rate is to be removed. It is said that it is difficult to adjust codes after a period of unemployment. Finally, there is reference to the unstable wages of many of the employees who will receive the credit. If the system can cope--at any rate on a six-monthly if not on an annual basis--with changes of that kind, it surely should be able to cope with changes which take place only every six months or so. These again are matters we shall need to probe. Those are the reasons given for not having a real tax credit system and for deciding to keep the curious change of name in the clause which we seek to amend.

The Chartered Institute of Taxation has stated that there is to be no direct link between the PAYE tax period or the pay on which it is based and the amount of credit paid out to the employee. One is bound to ask why, as the only difference being introduced concerns the method of payment and the Government are arguing that the problems involved in introducing a real tax credit system are insuperable, they did not abandon the measure? The answer lies with the public relations connected with a working families' tax credit. This was announced by the Chancellor of the Exchequer, Mr. Gordon Brown, as very much the flagship of the welfare reform programme which the Government are introducing and as an important component of the so-called "welfare to work" programme.

In that context it is not irrelevant to consider what the Bank of England has stated. It says that the impact of this change on the labour market--that is, the increase in numbers employed--will be "very small". If the Bank of England takes that view of this flagship measure in encouraging people into work, it will be interesting to find out in the course of our proceedings exactly why the Government are going ahead in this way despite all the disadvantages I have mentioned. It might well have been more sensible to abandon the idea and not face this curious matter of the title of the Bill and the purpose of this clause.

The Government argue that it is important to call the measure a tax credit as it will then appear on pay slips and without that knowledge people who are seeking employment will not realise they receive extra money

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for taking up a job. I find that a remarkably paternalistic approach to the problem. If the only advantage is that it is paid through the wage packet, there are, as we know, an increasing number of exceptions--for example the self-employed--who are not paid through the wage packet. While that is a semantic point in terms of presentation, it is certainly not unimportant. One is well aware from the massive number of representations received on the disadvantages of the proposal that bodies as widely disparate as the CBI and the Institute of Directors on the one hand, the TUC on the other, and a large number of groups in between ranging from the Child Poverty Action Group and the Low Pay Unit to the Federation of Small Businesses, believe that the change is a bad change and that serious problems could have been avoided either by pursuing the case for a real tax credit scheme or, alternatively, paying through the existing arrangements.

Finally, we are told that insuperable difficulties are involved in making it a real tax credit, which would make the clause unnecessary. At the same time we are told at paragraph 5.13 of the Budget report, an extremely glossy document, that,


    "The Government sees a case for improving the transparency ... It is examining, for the longer term, the case for integrating the new Children's Tax Credit with the child premia in Income Support and the Working Families Tax Credit", and so on. If that is the long term aim, why are we told that it cannot be done at the present time? Acting as the Government propose will have disadvantages. The only advantage--a doubtful advantage, in my view--is that it will be paid through the pay packet.

We shall return to all these points. The Bill starts off on the wrong foot. The first clause seeks to represent what the Government are doing as something which, quite clearly, they are not doing. For that reason I have much pleasure in proposing Amendment No. 1 and the related amendments. I beg to move.


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