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Lord Higgins: I am not clear what Regulation 46 is. We have in front of us a number of draft regulations. Is the noble Baroness referring to secondary legislation under this Bill or under some other primary legislation?

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Either way, which clause in primary legislation enables the Government to do what the noble Baroness suggests?

Baroness Amos: It is Regulation 46 under this Bill. It deals with issues such as eligibility criteria. Perhaps I can assist the noble Lord by writing to him specifically on this point.

Lord Goodhart: I must confess that I find the noble Baroness's reply most disappointing. Obviously, the amendment is not intended to cover all people, particularly women, who require retraining in order to gain access to jobs. It can deal only with women who have working husbands because the WFTC will, by definition, apply only to couples where one partner is in a job.

Within its limitations, the amendment is desirable. Obviously, some women who have been out of the workforce for a number of years now feel able to return. After such a time they may need retraining because the work involved may have changed. That happens in many jobs. It seems to me that in those circumstances it would be desirable not only to claim the childcare credit when the mother has returned to part-time work, say, but also to pay for childcare during her training to rejoin the workforce.

I believe that there is an overwhelming case for allowing the mother to receive the childcare tax credit while she is retraining and I am extremely disappointed that the Government were unable to respond positively, particularly as the whole purpose of WFTC is to increase incentives to work. The amendment is targeted precisely on getting people back into the workforce. I do not mind whether the change is made through primary or secondary legislation. If the Government were satisfied that they had the necessary powers to do so by secondary legislation and were prepared to give such an undertaking, I should be completely satisfied. But they are nowhere near that; they talk only about further reviews and have made no commitment to accept either primary or secondary legislation which will deal with the issue.

I shall not press the matter any further on this occasion, but I repeat that I am extremely disappointed. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No. 14:

After Clause 2, insert the following new clause--

Working Families' Tax Credit: Claimant

(" . Regulations made by the Board under section 2(1)(c) shall provide that, in the case of a claim for working families' tax credit, where a married or unmarried couple is included in the family, the claim shall be made by and payment shall be made to whichever member they agree should so claim and, in default of agreement, shall be made to the member having the principal responsibility for care of the children of the family.")

The noble Lord said: This is a much more important amendment. It is the first of a series dealing with the payments which should be made through the wage packet and the payments which should be made directly by the Inland Revenue. The Government accept that

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some payments should be made directly. First, there is the case where an employer has no contact with the Inland Revenue because he does not deduct PAYE or National Insurance contributions from his employees' wages. Secondly, there is the case where a couple agree that the tax credit to which they are entitled should be paid to the non-working partner. In any event, payments have to be made directly by the Inland Revenue to the self-employed where there is no employer to provide the wages packet. That means that a substantial proportion of those entitled to WFTC will receive it directly.

We on these Benches have said that we do not like the Bill and we voted against it in the other place. However, we accept that in this House the Government are entitled to have their Bill. Therefore, we shall not support any changes which are wide enough to be regarded as wrecking or near-wrecking amendments such as would be a right for either all employers or all employees to opt out of the payment through the employer.

But since the Government have accepted in principle that in some cases it is legitimate for payment to be made directly rather than through the employer, we do not regard it as in any way improper to try to expand the categories where payment is to be made directly if there are reasonable grounds for doing so and if those changes do not go to the heart of the Bill.

In our view, Amendment No. 14 falls within the category of changes to the Bill which it is legitimate to make and cannot be regarded in any sense as a wrecking amendment. It raises the purse-to-wallet issue. It has long been recognised that the best way of helping children in poor families is to get money into the hands of the mother. That is why child benefit is paid to the mother and that is why, until now, family credit has been paid to the mother. Both the Child Poverty Action Group and MENCAP want that system to continue.

I was tempted to table an amendment to provide that WFTC would go automatically to mothers in the case of couples, as Amendment No. 16 in the name of the noble Lord, Lord Higgins, provides. I was reluctant to do that because I accept that, to a large extent, that would destroy the main purpose of the Bill to secure a general practice of payment through employers. But the Government have rightly accepted the principle that WFTC can be paid by the Inland Revenue to the caring parent rather than by the employer to the working parent if the partners agree.

9 p.m.

Lord Higgins: Does the noble Lord accept that the choice of how a person wishes to receive the payment does not constitute a wrecking amendment?

Lord Goodhart: If the noble Lord, Lord Higgins, waits a little longer, he will see that what I propose is that in the case of couples, there should certainly be a choice, if they both agree, and ultimately, there should be a fall-back position in favour of the caring parent if they do not agree. Therefore, in substance, I accept that.

As I said, I do not wish to see the payment go automatically to the mother without any element of choice on the part of the parents. But, as I said, the

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Government have accepted that WFTC can be paid to the caring parent if the partners agree. I should say that I am not entirely happy even with that because it leaves open the possibility of consent being obtained by intimidation. But it is certainly better than nothing.

What is the situation if the couple cannot agree? The draft regulations, which I have seen, simply provide:

    "In the case of a claim for working families tax credit, where a married or unmarried couple is included in the family, the claim shall be made by whichever partner they agree should so claim". There is no default position there at all. By contrast, the corresponding regulation for income support provides that, in default of agreement between the partners, the claim is made by whichever partner the Secretary of State shall, at his discretion, determine. So if there is no agreement, it then goes to the Secretary of State to decide which of them is to receive it, in line, no doubt, with established principles.

In March, the Inland Revenue published a memorandum to say that where there is a dispute between the partners about which of them should be paid and the application for payment comes from the partner who mainly cares for the children, it will consider exercising its powers of care and management by accepting the application even though that application is technically defective.

What does that mean? It means that the Government are deliberately creating a lacuna in the legislation and then proposing to fill that gap by disregarding their own regulations. There is only one possible reason for that; that is, that the Government want to make sure that the mother's right to compel payment of WFTC to herself is kept firmly off the face of the regulations so that she is less likely to become aware of her rights.

That impression has been strengthened greatly by the draft application forms which I have now seen. The claim form itself does not make it sufficiently clear that it must be signed by the claimant's partner as well as by the claimant. That will lead to many defective forms, most of which will result merely from a failure to understand that both partners must sign and not from any disagreement between them.

The explanatory leaflet makes it clear that both parties must sign. It states:

    "Your partner will have to fill in his or her details and sign the declaration at the end of the form". However, it does not say what happens if the claimant's partner does not sign that document. If I were reading that leaflet without any background knowledge, I should certainly draw the conclusion that if the claimant's partner does not sign, there will be no tax credit. No idea is given by the leaflet that if the caring parent makes a claim and the working parent refuses to sign, the caring parent can still receive the tax credit. That is contrary to the Select Committee's recommendation that payment should normally be to the partner at home but that the claim form should allow payment through the pay packet if both partners prefer.

The Government are trying to run with the hare and hunt with the hounds. They are telling the poverty organisations that in cases of dispute the caring parent will receive the money while they are doing everything

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they can to conceal from caring parents that they have the option to secure the tax credit payment to themselves.

On Second Reading, I said that the Government's proposed method of dealing with that issue was unacceptable. I repeat that. It is more than unacceptable: in my view, it is unlawful. The Inland Revenue's duty of care and management would make it possible to dispense with a second signature on a claim form, no doubt, if it was due to an oversight. But if the regulations provide simply that the payment goes to whichever partner the couple agrees, I believe there is no power in law to pay the credit to one of them in the absence of agreement by both. It is a clear principle that regulations cannot be set aside by reliance on the powers of care and management; nor can they be set aside, as the noble Baroness, Lady Hollis of Heigham, suggested at Second Reading, by reliance on ministerial Statements, either in this House or in the other place.

I have to say, with great regret, that I believe the Government's handling of this particular issue has been disgraceful and that they must include a default provision in regulations. If they refuse to do so, I believe it should be written on to the face of the Bill. I beg to move.

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