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Baroness Hollis of Heigham: My Lords, I am happy to give the noble Lord the assurance for which he asks. I do not need to write to him. I can allay his concerns. Under emergency procedures, the partner is the alternative payee. So if someone was incapacitated, the other partner could be authorised to receive the payment. I am grateful to the noble Lord for raising that point and for allowing me to clarify the position.

The noble Lord, Lord Higgins, asked whether I agreed in principle that it was right for the payment to go to the mother. I have said it so many times that your Lordships must be tired of hearing me say it--this is a working families' tax credit. It is not income support. It is designed to do two things. It is designed to give families support but it is designed to do that by encouraging parents into work. It is a work incentive. We believe that the best way of helping families and children out of poverty is to see one of those parents in work. We believe that the best way of ensuring that one of those parents is in work is to pay the entry wage if they are going back into work, or the minimum wage, so to speak, if they are already in work but their income has fallen by virtue of shorter hours, loss of bonus or loss of commission through the wage packet. But at the end of the day we respect the fact that this is a couple's choice. If they prefer for it to be paid direct to a mother who is not working for waged work at home, that is their choice. That is the Government's view. It is intended to be a work incentive. We believe that that is the best way to alleviate family poverty. But if the couple so choose for it to be paid to the mother, that is their choice. It would not be my preference but it is their choice. That choice is being fully respected.

Finally, the noble Lord asked about guidance if they did not agree. This point was also raised by my noble friend Lady Lockwood during the Second Reading debate. We gave an assurance that we shall seek to amend subsequent forms to cover that point.

Lord Higgins: My Lords, I am grateful to the noble Baroness for taking the two matters separately. Even at this late hour the debate covered points which would otherwise not have been clarified. In the light of her helpful remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Lord Freeman moved Amendment No. 14:

Page 2, line 45, at end insert--
("( ) The Board shall issue a code of practice as to the operation of both credits, after consultation with interested parties.")

The noble Lord said: My Lords, I shall be brief. I am grateful to the House for agreeing to take this amendment before the House rises. It is a further probing amendment. I am grateful to the noble Lord, Lord McIntosh of Haringey, for his very helpful responses in Committee, in particular the agreement to change the nature of the claimant's declaration on all the forms, which was most welcome, and for promising a rolling programme of review of the tax credit forms, in particular WFTC501. The noble Baroness referred to that or a similar form.

I readily appreciate that no fundamental changes can be made to the forms because they are geared in to existing computer systems and procedures in departments. But the commitment to that rolling programme of review, subject to one point that I wish to make, is accepted and welcomed. I am grateful to the Minister for also ensuring that there will be reporting to Parliament by the Board of the Inland Revenue on the operation of the tax credit scheme.

Clause 5 gives to the Inland Revenue the normal care and management responsibilities that we find in much tax legislation. It gives the Revenue broad discretion to operate the system and gives it non-legislative powers. But in this kind of legislation the devil is in the detail. It is important to continue probing some of the unanswered questions.

The issue I want to address is the normal Inland Revenue practice of issuing a code of conduct for the operation of a scheme such as the tax credit scheme. The code of conduct, which has not yet been issued, is separate from the explanatory booklet which is available in this House. Many noble Lords will have already read the draft that has been circulated.

I say to the noble Lord at the outset that, because I am dealing with practice, not policy--and I hope my noble friend Lord Higgins will agree with me--a reply in writing will be perfectly acceptable. I should not expect the noble Lord to go into detail as I did not give him notice of the points that I wished to raise.

My first point is: when will the code of conduct be issued? I assume that it will be as soon as possible, and well before the commencement date in October. Secondly, will the noble Lord confirm that there will be proper consultation on the code of conduct before it is put into its final form?

I wish to make four specific points on what could, in my judgment, be included in the code. First, we need to be clear as to when formal entitlement starts. Is it when an application is received, or when it is validated? That is an important point, simply because the practice of the Inland Revenue is very different from that of the Department of Social Security. Noble Lords will recall that the department's procedure regarding the payment of benefits is to receive, process, pay and then sample check at a later date. The practice of the Revenue, certainly when it comes to tax repayments, is to make sure that a particular claim is validated before payment

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is made. Therefore, if there is to be any significant gap between receipt of an application and payment, it is perfectly appropriate to raise the issue of back-dating to the date when the application was received.

The second point relates to the need for exemption of small self-employed applicants from having to file complete accounts and answer the detailed questions in WFTC501 and instead use the present system operated by the Inland Revenue for the small self-employed; that is to say, a simplified system, a simplified application form dealing with turnover, expenses and profits.

I am well aware of the argument that the Department of Social Security's system is being inherited by the Inland Revenue, but the Inland Revenue may well in week one be dealing with the small self-employed, using the simplified form of reporting, and in week two, unless there are changes, being asked to administer the working families' tax credit scheme, asking for a complete set of accounts. That will be confusing to perhaps 10 per cent of the total applicants for this credit. We should address this. There is plenty of time for the Inland Revenue by a code of conduct, a code of practice, or by amending its procedure, to simplify the reporting, to simplify the claim for the self-employed where turnover is beneath £15,000 per annum.

Last year the President of the Chartered Institute of Taxation said that he thought it unlikely that the existing form--in its new form WFTC501--could be completed correctly by more than one in five inspectors of taxes. Having read the form, I must say that if I were in the position of a small self-employed individual I would find it very difficult to complete it. Please may we have an assurance that this will be put right before April 2000?

Thirdly, a small point perhaps to your Lordships, but significant to many claimants, under the old DSS system one could send one's application form in using a post-paid envelope. The Inland Revenue, I think I am right in saying, withdrew that procedure some eight years ago, and it is now seeking to employ the same principle: that is, as far as I can see from the forms lodged in your Lordships' House for perusal, no envelope and no postage paid.

Finally, it is important to apply the principle of the helplines for both credits being at local phone charge rates. The Inland Revenue gives this benefit not only during weekdays in normal working hours, but also in the evenings and at weekends, for income tax self-assessment. I beg to move.

11.45 p.m.

Lord Higgins: My Lords, the House will be grateful to my noble friend Lord Freeman for his comments in an area where he has very considerable expertise. I am sure that the Government will wish to take his views into account.

As to the form of response, I have a slight feeling that we are in danger of becoming a correspondence college rather than a debating chamber, and that would be dangerous. I hope that the noble Baroness, Lady Hollis of Heigham, will not think me discourteous in making

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that point. None the less, I hope that we shall get a response one way or another from the Minister concerned.

Lord McIntosh of Haringey: My Lords, when people ask us to write to them I am reminded of "Yes, Minister", when Jim Hacker asked "How can I write letters?" and Sir Humphrey replied "But, Minister, you don't write letters; you sign them." We should always bear that in mind.

The simple answer to the noble Lord, Lord Freeman, when he said in the amendment that there should be a code of practice, is that there will be. I have to say a little more, because he asked some very precise questions.

In the Inland Revenue, as the noble Lord well knows, there are always codes of practice to explain the administrative procedures and how they will operate in practice. That is the way it has always worked, particularly in those parts of the tax system which relate to compliance, where codes of practice help ensure that customers know their rights and know that they are being treated fairly and reasonably, in the way in which all customers in their position would be treated.

For example, the Inland Revenue has codes of practice on investigations, on reviews of employers' and contractors' records, on inspection of schemes operated by financial intermediaries, on inspection of charities' records and on investigations by the specialist investigation branch where fraud is suspected and in cases of other suspected irregularities. There are also codes of practice covering the Revenue's policy on giving advice and on dealing with any serious or persistent mistakes that might occur.

Clearly, the payment of tax credits is a new line of business for the Inland Revenue, but it will be conducted in the Revenue's usual effective and efficient manner. Tax credits will need to be looked at with the same critical eye that secures tax revenue, and many of the same sort of skills will be brought to bear to combat fraud.

The Revenue will, after consultation and by October 1999, be issuing a code of practice about how it will handle inquiries into tax credit applications. This will be in addition to the existing codes of practice about inquiries into taxpayer's tax affairs. As the amendment suggests, consultation on the code will be essential to ensure that it commands broad acceptance by applicants and that they can be certain of fair and appropriate treatment by the Inland Revenue. This consultation will begin shortly.

Finally, from April 2000 employers will also have responsibilities to administer tax credits--much in the same way they already administer PAYE and NICs. Because the handling of tax credits will be part of their PAYE and NICs systems, the guidance for employers about how the Inland Revenue will handle examination of these records will be included within the current code of practice on review of employers and contractors' records. The additional material will be developed in consultation with employer representatives, as has been the Revenue's normal practice.

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The noble Lord asked me four specific questions. The first was whether the code of practice will cover the start of formal entitlement. He asked that it should be backdated to the date of receipt of the form. We can do better than that. It will be backdated to the date of the intent to claim. If necessary, that can be made clear.

Secondly, the noble Lord asked about a simplified form of accounts for exemptions for those self-employed with small businesses. We need to stay within the current system of reporting, which is not unlike the current standardised accounting information within self-assessment. The form for the self-employed will be kept under special review to keep it as simple as possible.

The noble Lord also asked about post-paid envelopes. They will continue.

The noble Lord asked finally about the availability of helplines with local call charges on a seven-day basis. I do not appear to have an answer to that so I shall have

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to sign a letter to him--which somebody will write! On that basis, I hope that the noble Lord will feel able to withdraw his amendment.

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