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Baroness Hollis of Heigham: My Lords, Amendment No. 8 attempts to align the structure of WFTC with that of DPTC. It focuses on two things: the two different basic tax credits in DPTC compared with the single basic tax credit in WFTC; and the presence of an additional disabled child tax credit in DPTC. I shall deal with them separately.
On the first issue--that in DPTC there are two levels of family tax credit and only one in WFTC--the amendment calls for WFTC to have two types of basic tax credit: one for families headed by a couple; one for families, presumably a lower one, headed by a lone parent; and requires there to be a differential between the two types of credit on the ground that a second adult requires more food, clothes, and so on, as the noble Lord argued. I presume that the noble Lord is working by analogy with DPTC which has a basic family tax credit and a lower single person's tax credit. I hope to
DPTC, like DWA before it, has one rate for couples or lone parents--just like WFTC--and a different lower rate for single people who are not responsible for children but who are disabled. There is no analogy between that single rate and the WFTC. The higher rate of DPTC is exactly the same as the single rate in WFTC. The higher rate of DPTC is for couples or a lone parent household where one is disabled. The difference is that DPTC has a lower rate which cannot exist for WFTC because it is for single disabled people by virtue of their disability, and by definition the WFTC is not a single person's benefit. It is a family, household benefit.
I emphasise that lone parents are eligible for the higher family rate in DPTC. They do not receive the single person rate. Already the two benefits are aligned, just as the noble Lord argued. There is, therefore, no need for a single person's lower rate in DPTC if one wishes to align the two tax credits because WFTC applicants never qualified because that benefit is for single people.
The first part of the clause would not be about aligning the two tax credits because they are already aligned. It would make them different. If the noble Lord wishes to do as he suggests, he can do so in only one of two ways. He must either make WFTC less generous for lone parents and align it with that of single disabled people; or he must make WFTC more generous for couples in order to produce a differential at considerable public cost.
Which of those two does the noble Lord want? If he seeks to treat lone parents less favourably by giving them a new lower rate analogous to the single individual's rate in DPTC, even though it is a household, it would save the Government, the taxpayer, money. It would take something like £550 million, over half a billion pounds, out of the pockets of 600,000 lone parents and their children; that is, nearly £20 a week. I cannot believe that he wants that. I think that he made that clear.
His only other option is to increase the couple's allowance for WFTC to maintain a differential. On his account, that would cost an additional £1.25 billion to create a new higher couple's credit. I cannot believe that he and his party want that either. We need to focus help where it is needed. We do not think that increasing the basic generosity of the tax credit by about 60 per cent would be one option.
Nor is it true, as the noble Lord argued, that there would be an incentive to separate. I do not know from where he gets these figures. If a couple separated, she would receive what the couple would get in tax credit, earnings for earnings, because they would remain the same household. If they were separated, he would be a
Lord Swinfen: My Lords, the noble Baroness has made my point. A single adult with children receives more than a couple with children. The noble Baroness said that if the couple separated the mother would still receive the same. There is no provision for the second adult. The family of two children with a second adult means that there are four people in the family; not three as with a single adult and two children. That second adult needs to be fed and clothed, too.
Baroness Hollis of Heigham: My Lords, I dealt with that argument at some length earlier. I am happy to go over it again but, given the lateness of the hour, the noble Lord might prefer to read what I have said in order to decide whether there is confusion or misunderstanding. If so, we can follow it up in correspondence or at Third Reading.
The point the noble Lord made, which I was addressing, was that, given this, there would be a positive incentive for couples to split up because they would both be better off. That was what he said-- I wrote his words down. It is not true, because the lone parent who would be left with the children would receive exactly the same. His argument would apply only if the lone parent received the same and the other parent received something, too. Therefore, it would be financially sensible to separate. But the father would receive nothing because he would be a single person; and the mother, as head of the household, would receive the same as if they were together. The point the noble Lord sought to make, that there was an built-in incentive to separate, cannot be true.
It is of course the case that all families are treated in the same way, whether they are headed by a lone parent or by a couple. That is what we were seeking to establish and therefore WFTC and DPTC are already allowed. I hope that the noble Lord, when he follows this up through reading or correspondence, will accept that.
I turn to Amendment No. 10 in which the noble Lord suggests that DPTC has an additional tax credit for disabled children that is absent from WFTC. As I said in Committee, the disabled child credit in DWA was introduced by the previous government after discussions with disability groups during its development and it has never made its way into family credit. When we debated the point in Committee, I said that the Government would reflect on the matter. It is an anomaly. I agree with the noble Lord, Lord Higgins, that it is not a justifiable anomaly. Therefore, I am delighted to repeat what my honourable friend the Paymaster General said yesterday on this Bill: that the Government will be correcting this anomaly by extending the disabled child tax credit to WFTC families from October 2000. That means that extra help will be available not just to a disabled child living in a disabled family, but to a disabled child living in a non-disabled family. In other words, it means that if a WFTC family has a disabled
I am extremely pleased about that; I am absolutely delighted. I believe that it will help low earning families with a disabled child and I know that the noble Lord, Lord Swinfen, has their interests very much at heart. I hope that the House will welcome that very good news and that the noble Lord will withdraw his amendment.
Lord Higgins: Before the noble Baroness sits down, I am not sure I understood correctly what she said a moment ago, although I congratulate her on her virtuoso performance on the previous amendment, which is linked with this one. She said that yesterday the Paymaster General said in relation to this Bill that the concession would be made. I am increasingly worried about the Treasury taking these things over. Surely, it would be more appropriate for the noble Baroness to have announced the change tonight. I believe that she is right to take credit for what is happening, but am I right in believing that she is therefore proposing to accept the amendment?
Baroness Hollis of Heigham: My Lords, I am not personally taking credit for what has been achieved because it is to the credit of my honourable friend the Paymaster General. It is her Bill on behalf of the Government. As this is not part of the legislation, it cannot be done by way of amendment. It will be done by way of statement and then subsequently by regulation, as appropriate.
My honourable friend issued the press release and statement yesterday, perfectly properly. It is her measure and it is to her credit. I shall convey all the thanks and appreciation of noble Lords to my honourable friend. The amendment rectifies an anomaly. It will help low-earning parents with a disabled child for whom life can be extremely difficult. It produces another £22 a week for that disabled child before the taper begins to take any money away. I am sure that the measure will be very well received. I have a copy of the press release if noble Lords wish to circulate it. Please join with me in welcoming it.
Lord Swinfen: My Lords, I apologise for asking the question again because I missed the beginning of the latest part of the Minister's peroration. Is she proposing to bring forward an amendment to put this into effect at Third Reading, or can it be done purely by regulations?
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