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Lord Whitty: I understand the concern that we ensure that the Metropolitan Police are properly funded. In my view, the Bill has the balance right.

We are changing the current system, whereby the Home Secretary effectively decides directly the funding of the Metropolitan Police, to one where there is some

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democratic decision-making, through the mayor, and oversight of the police, through the Metropolitan Police Authority.

However, I accept what the noble Lord, Lord Patten, said about the need to preserve confidence in the police and the delivery of police services. In my estimation, that will in part be assured through the operation of the new Metropolitan Police Authority. We therefore need some reserve powers, which is what we have provided in these clauses to deal with the, in my view inconceivable, political circumstance, that the mayor did not provide adequate resources for the police. I cannot envisage any mayor setting a budget which would threaten service standards or the public's confidence in the police.

Moreover, I would assume that before the budget was set there would be a fair degree of informal contact between the Home Office and the authorities within London, and that if the mayor were inclined to set a budget which the Home Secretary was likely to regard as inadequate, that information would be conveyed and the mayor would heed that information, in order to avoid just such a direction as is provided in this reserve power.

It is important that the first responsibility should rest on the mayor to set the budget. I do not think it is sensible to do what the amendment would do, which is to bring the Home Secretary back into prominence in setting the budget and having authority over the police force directly. The single financial structure created by the Bill is designed to give the mayor and assembly responsibility for setting the aggregate budget for the authority and the four functional authorities. If we were to involve on a routine basis the Secretary of State in effectively determining the size of that budget before the total budget process was complete, that would be incompatible with that structure and with the objective of making clear to the electorate of London that it was the mayor's responsibility.

That having been said, clearly we require those reserve powers. They are there to be used in unlikely--indeed, extremely rare--circumstances. I therefore hope that the noble Lord will recognise that to push the amendments so that the Home Secretary effectively predetermines this element of the budget would be counterproductive. However, I repeat that we need the reserve powers as specified in the Bill.

Lord Dixon-Smith: I was not sure for a moment whether the noble Lord the Minister was saying that the procedure in the Bill was unnecessary or that my amendments were unnecessary. However, it is clear from the tenor of what he said that he feels that the procedure will be called into use only on very rare occasions. I think he actually said that it was unnecessary.

However, I return to the question of the primacy of decision-making with regard to the Greater London Authority's budget. Under my amendments, the mayor would in fact determine, before he went to the Secretary of State, what the police budget should be. The difference is that under what I propose the mayor would take that proposal to the Secretary of State and gain his agreement to it before he took it to the assembly and the assembly discussed the matter and it became part of the authority's budget.

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The difference between us is marginal. However, there should be sufficient flexibility in the Government's approach to these matters for them to be able to consider making a change along the lines that I have suggested, if I do not have the wording of the amendments sufficiently precise to achieve the purpose which I have enunciated.

I shall study carefully what the Minister has said. I am sorry that he has a tickle in his throat which caused him problems, but that did not alter the quality of the content. I do not think that I entirely accept his conclusions, and I would certainly prefer to see the Government move on this, but, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 222A:

Page 45, line 36, leave out paragraph (a) and insert ("the Authority--
(a) has made calculations in relation to a financial year in accordance with sections 70 to 75 above and sections 47 and 48 of the Local Government Finance Act 1992, or
(b) has made substitute calculations in relation to a financial year in accordance with sections 70, 71 and 73 to 75 above and Schedule 6 to this Act and sections 47 and 48 of that Act,

On Question, amendment agreed to.

Baroness Farrington of Ribbleton: I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begin again not before 8.40 p.m.

Moved accordingly, and, on Question, Motion agreed to.

Tax Credits Bill

7.40 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that the Commons reasons be now considered.

Moved, That the Commons reasons be now considered.--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

[The page and line refer to HL Bill 39 as first printed for the Lords.]


Clause 6, page 3, line 31, at beginning insert ("Subject to subsection (1A),").

The Commons disagreed to this amendment for the following reason:
1ABecause it is not appropriate for smaller employers to be exempted from paying tax credit to their employees.

Baroness Hollis of Heigham: My Lords, I beg to move that the House do not insist on their Amendment

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No. 1 to which the Commons have disagreed for the reason numbered 1A. I shall speak also to reason numbered 3A.

Amendments Nos. 1 and 3 were introduced by the noble Lord, Lord Goodhart, and were passed by this House, during our Committee stage debate of the Tax Credits Bill. They would allow employers with fewer than 10 employees to elect that any tax credit payable to their employees should be paid by the board. They would also enable regulations to be made governing the making and revoking of such elections.

The House of Commons has now considered the amendments and has disagreed to them. The reason given is that it is not appropriate for smaller employers to be exempted from paying tax credit to their employees.

Your Lordships will not be surprised to learn of this decision in another place. As I said when we debated these amendments in Committee, payment of tax credits by employers is central to the Government's policy of making work pay, and be seen to pay. The tax credits will be inextricably linked to the rewards of work because they will be shown on the employee's payslip as an addition to net take home pay. This will help to break the perceived link with benefits and will reduce the stigma which is often attached to claiming in-work support.

So these amendments really strike at the heart of the Government's tax credit policy by potentially exempting up to 825,000 employers--70 per cent of the total--from paying tax credits. The amendments would also be extremely complicated to operate because of the difficulty of identifying quickly those employers who would be eligible for the opt-out and wished to elect it. As I pointed out in Committee, in all cases of doubt the Inland Revenue would have to contact employers to check, first, how many people worked for that employer, and, secondly, whether or not the employer was prepared to pay tax credits through the payroll. That would mean delays in finalising tax credit awards and confusion for employees who would not know where they were from one award period to the next if employers moved in and out of the "fewer than 10 employees" category.

Your Lordships made much of the fact that employer payment of tax credits imposes some additional burdens on business. As I have said before, the Government have from the outset recognised that there will be some extra costs to employers in paying tax credits through the payroll and we are doing everything possible to keep those extra costs to a minimum. Since May 1998 we have been consulting representatives of employers and payroll software suppliers on the details of the scheme and significant changes have been made to meet the representatives' concerns.

We have also, as your Lordships are aware, decided that small employers who do not operate a PAYE scheme should not be asked to pay tax credits through the payroll. This is a practical measure to ensure that employers who currently have no dealings with the Revenue in their role as employers--for example, if they employ simply a nanny or a gardener--are not

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brought into the Revenue's employer database simply through once having a tax credit recipient on their payroll.

The new Small Business Service, announced in the Budget, will provide better and more targeted support and assistance to small businesses with: a new business guide, business tax starter pack and guidance for new employers; and, as was raised by the noble Lord and the noble Earl, Lord Russell, a new helpline service for new employers offering fast-track support.

As part of the Small Business Service all new small businesses will be provided with assistance with their payroll operations from April 2000. The DTI is currently consulting on the method of delivery of that service. The intention is that the service should be delivered by means of a voucher scheme whereby all eligible businesses would be able to redeem a voucher with any commercial provider on a list held by the Small Business Service. That scheme should do much to ease the burden on small firms which are running a payroll.

Specifically, in the tax credits context, all employers will be given ample guidance in the coming months and after April 2000 enabling them to pay tax credits smoothly and with the least possible extra work. There will be a targeted publicity campaign which will involve all the media. There will be seminars across the country which will be of particular interest to small businesses.

I hope that all I have said will convince your Lordships that Amendments Nos. 1 and 3 are unnecessary and inappropriate. They have been considered at length in the other place and have been firmly rejected there. The House of Commons did what this House asked it to do; namely, to think again. The Commons thought again and overwhelmingly reaffirmed the position which existed at the end of the Bill's passage through the other place. Therefore, I urge your Lordships to accept the Commons reasons for disagreeing to Amendments Nos. 1 and 3 so that the passage of this Bill will not be further delayed.

Moved, That the House do not insist on their Amendment No. 1 to which the Commons have disagreed for their reason numbered 1A.

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