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Lord Higgins: My Lords, the House will be grateful to the Minister for spelling out many of the arguments made previously. The purpose of our original amendment was to ask the other place to think again. I thought it appropriate to listen to the debates in the other place.

I confess that whenever I go to another place and sit in the Gallery, particularly during Prime Minister's Questions, I get the impression that there has been a serious mistake. Everyone appears to be sitting on the wrong side. On the occasion in question, that was not so. While there were a number of Members on the Opposition Benches, the only ones on the Government Benches were the Minister and the Whip, albeit that they were joined by the PPS half way through the debate. It is extremely arguable that the other place paid appropriate attention to what is undoubtedly an important matter.

It may be that Members in the other place were watching the debate on television. One of the problems is that MPs tend to watch the proceedings on TV in their rooms rather than be present in the Chamber. I always thought that an unfortunate development and certainly not one to which that House agreed. The amount of attention that seemed to be given to the debate on the Floor of the House on 22nd June was not as great as one might have expected, given the importance of the issue.

As I pointed out in Committee, not only did the National Committee for Single Parent Families support our amendment, as one might expect, but the Low Pay Unit, the Trades Union Congress, the Confederation of British Industry, the Institute of Directors and the Federation of Small Businesses all came down in favour. In Committee, I asked whether anyone had come out in favour of the Government's position but the noble Baroness did not respond. Perhaps she would like to do so now.

In the debate on the previous amendment, the Minister referred to the research by the Institute for Fiscal Studies, which is equally applicable to Amendment No. 2. The noble Baroness suggested that

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250,000 people, who, presumably, would not otherwise be in work, were likely to go into work. The general employment situation is such that more people are becoming employed, but presumably those are an additional 250,000 people.

It was not at all clear to me whether the IFS analysis referred to the incentive for people to get into work, involving massive expenditure of £1.5 billion, rather than the method of payment. If the Minister is to make a case for either the previous amendment or this one, it would have to hinge on the method of payment that would result in an increase of 250,000 jobs. Perhaps the noble Baroness can say whether it is the method of payment rather than the extent of the wage subsidy--as it has been described by a number of outside groups--that is likely to do that.

The reason given by the other place for rejecting an amendment that your Lordships felt appropriate is that,

    "it is appropriate for tax credit paid to employees to be paid by their employers".

Following the debate and Division in another place, a select group would have gone to a little room behind the Chair to think up reasons for rejecting your Lordships' amendments. It does not seem that they did a good job of drafting. One would have expected the reason to be that it is appropriate for tax credit only to be paid to employees by their employers rather than the form of words on the Marshalled List. There is no supporting argument. The reason does not say why it is appropriate for tax credit paid to employees to be paid by their employers.

I refer also to whether the choice that we say should be given to lone parents is reflected in the choice that the Government have already given to couples but not, as the noble Baroness rightly spelt out--and I always admire how she manages to make her arguments so clearly from the Dispatch Box without reference to her notes--so far as married couples or partners are concerned who are both in work. We accept that that is something on which the Government have stood firm. However, the Government have said that where one person is working and the other is not, they will have a choice as to which of them receives the tax credit and by which method--whether through the pay packet to one person or the other.

Baroness Hollis of Heigham: My Lords, I must correct the noble Lord. We have said that there will be a choice as to which person the credit is paid--not that they may choose how it is paid. If she is at home, it can only be paid to her at home. If she is in work, it can only be paid to her in work. There is no choice as to how it is paid, only to whom it is paid. That question does not arise with lone parents because there is only one person to whom the credit can be paid--the lone parent.

Lord Higgins: My Lords, I fully accept that there is only one person to whom the credit can be paid where that is a lone parent. It is also the case--because if it is paid to one partner it is paid in one way and if to another

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partner, it is paid another way--that, to the extent that they are given a choice one way or another, they can determine which way the credit is paid.

Baroness Hollis of Heigham: Yes, my Lords, that happens if one of them is at home--not at work. Equally, they can still give that same choice to her and they would both be in work. Or they could give that same choice to her and she would be in work, not he. In other words, they are determining to whom it is paid. They are not determining the mechanism by which it is paid. The mechanism follows the choice of who it is.

Lord Higgins: Yes, my Lords--and to that extent, they have the ability to decide that it will be paid one way or the other, by deciding to which partner it will be paid. In any case, we believe that it is appropriate that lone parents should have the choice. That is the point we seek to make and it arose in the debate in another place. Referring to my honourable friend Mr. David Willetts, Dawn Primarolo said that,

    "we are reaching the end of our consideration of the Bill. Does he accept that the purpose of the tax credit is to provide a work incentive and to reinforce the rewards of work, and that, throughout our consideration of the Bill, that has been our central argument in support of the Bill?" My honourable friend replied:

    "The argument that we have to boost in-work incentives does not mean that we have to compel people to receive the payment in a specific way".--[Official Report, Commons; 22/6/99; col. 959.] Effectively, what we were arguing for with this amendment--and it is still a sound argument--is that the lone parent should have the choice as to whether or not this is paid through the pay packet.

There is an inherent view--I said a "paternalistic approach" in Committee--that lone parents are unable to comprehend the fact that if they are in work they get more, in the sense that they get what they are paid by way of a wage and they get what they are paid by way of a benefit. The idea that a lone parent, or indeed anyone, is incapable of understanding that rather simple point seems to us to be quite extraordinary.

In addition, as regards lone parents taking a job, it is only when they are actually in the job and see their pay packet that they realise they get more when they are in work. It is not something that they are able to see in advance. In any event, once they are in the job, they then find that there is a distinction as far as concerns their pay packet; but they also get a tax credit. For other reasons which have been elaborated in considerable detail both in Committee in this House and also in the other place--for example, the arguments about whether or not there is a stigma (we already know the extent to which family credit is taken up is very high), and the question of confidentiality, about which we still have some doubts--we think it is perfectly reasonable, and will not significantly influence the extent to which people will go into work, that lone parents should be given this choice.

I have one further point to make in relation to the attitude of the Government. I have in mind the use of an expression by Ms Primarolo in another place, which

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I do not think is one that the noble Baroness has used. She said that we must have the arrangements for paying the amounts to lone parents because it will drive home that work pays. Again, it seems to be to be a rather harsh attitude towards lone parents that you have to drive home to them the fact that they will be paid. As many outside groups have suggested, it is largely in the form of a wage subsidy. As I understand it, it is still the case that, once they get their pay packet, they will be able to see that this is something which is separate from the basic wage.

In debating the previous amendment, my noble friend pointed out that there is a burden on businesses. There is a real danger here, not for the vast mass of small businesses or large businesses but for some businesses which are less reputable than the others. For example, if a small business of the kind I have just described finds that it has to go through the necessary procedure to pay someone through WFTC as against paying someone who is not in that category, it may choose to avoid the administrative hassle and problems involved if it takes on someone who is getting working families' tax credit by taking on someone who is not receiving the benefit. To that extent there may indeed be some degree of discrimination. The Government have sought to meet that point by way of clauses in the legislation relating to non-discrimination. On the one hand, that demonstrates that they believe there is such a risk; but, on the other hand, we cannot be sure that this will not happen in practice.

For all those reasons, it seems to me that the amendments we put forward were appropriate. I regret the fact that those in another place did not appreciate our arguments and that the Government have continued to maintain their dirigiste attitude towards the policy, which we believe is not justifiable.

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