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Baroness Hollis of Heigham: My Lords, does the noble Baroness mean not so much the child tax credit as child support reform?
Baroness Byford: My Lords, I believe that I do. I apologise. Perhaps I may clarify that later when I have had a chance to look at the papers to which the report refers.
Can the Minister explain the meaning of Clause 23(8) on page 16, which seems to indicate that if anyone claiming a tax credit cannot have a bank account, he or she will lose the credit. It states:
- "If the regulations make provision for payments of a tax credit, or any element of a tax credit, to be made by the Board by way of a credit to a bank account or other account notified to the Board, the regulations may provide that entitlement to the tax credit or element is dependent on an account having been notified to the Board in accordance with the regulations".
Can the Minister also clarify the consequences of subparagraphs 9(1), (2) and (3) of Schedule 5, which would seem to allow personal information relating to anyone entitled to tax credit, child benefit or guardian's allowance to be passed quite freely between certain government departments and agencies? Can she explain why that provision has been included in the Bill and, in particular, why it refers to a guardian, who frequently may have no blood relationship to the person for whom the credit is paid?
As the Minister knows, the business of payment has exercised my imagination for many years. I have spoken in debates and raised questions in the House on this issue, and I intend to raise it again. How will some recipients receive their payments? In a nutshell, the Government have decided to save themselves something in the region of £400 million a year by ceasing to pay sub-post offices for the continued payment of pensions and child benefits in cash or by giro cheques to those who urgently need it to be paid in that way. As a result, more than 3,000 sub-post offices have closed and it is rumoured that another 3,000 are due to go.
A sub-post office is a franchise, and the franchisee pays for the privilege of holding that franchise. When the business is rendered non-viable, he or she receives no compensation, no redundancy, and the business cannot be sold because there is nothing of value left to
offer. The sub-postmaster goes to the wall and his customers have to travel further to receive their state entitlements. In less than two years from now, they will be unable to draw their benefits except through a bank account.It sounds simple—"Get yourself a bank account so that we can pay your benefits into it and save the state some money"—and yet the National Association of Citizens' Advice Bureaux still reports monthly that many of its clients are refused bank accounts or are having insurmountable obstacles to opening them placed in their way.
I have asked before and I ask again today, how will entitlement benefits pass from the Treasury to the pockets of the poor? How will that happen? Can we produce a simple diagram or flow chart which shows the process from the collection of tax to the disbursement of benefit for every class and sub-division of our population?
The poorest of our population are under the greatest threat. Even now, many of them pay out a great proportion of their benefits and entitlements in order to get to their sub-post offices to collect the amounts due to them. In this country, if you pay your bills on time, save up for what you want until you have enough money to pay for it and eschew the finance houses, you will find yourself refused credit should you ever need it. Similarly, a credit reference is an essential part of the clearance process for a bank account. Under all the systems of which I have so far heard, no credit history is almost as bad as a lousy record. Those who are reasonably expert in this field calculate that up to 2 million people will not qualify for a bank account. In her response today, will the Minister make a definite statement about the method of payment of these benefits?
What restrictions will be placed on the passporting of other benefits? In the past, for example, entitlement to family credit automatically opened the door to benefits related to NHS costs and to help with certain travel costs—for instance, for visiting relations in prison. Will the Minister confirm that restrictions are intended? Will she spell out what those restrictions may be?
Can the Minister also explain how and why a net family income of £11,250 has been chosen? It seems a little low in the light of the Chancellor's generosity over the child tax credit limits.
In conjunction with the Budget Statement, the Bill seems to open state aid to many families earning rather large joint incomes. At the same time it does not appear to grant proportionately more benefit to the less well off and those lower down the income scale, a matter to which other Lords have referred.
I am, as always, concerned for those for whom accessibility is a problem. As I have mentioned, it can be a problem because of distance; because of a lack of transport or the cost of transport; because of the complexity of the changes for those less well equipped to understand and insist on their true entitlement; and, to a certain extent, because of the lack of detail and clarity on the face of the Bill.
Many noble Lords have referred to the low take-up of the working families' tax credit—62 per cent only. I, too, wish to pick up the point raised by the noble and learned Lord, Lord Howe of Aberavon, on the question of independent taxation for women and moving towards a joint payment to the family. If they prefer it, will a family be able to have the child benefit paid directly to the carer through a separate account rather than having it paid into a joint account over which the other partner may have greater control? We have fought for many years to ensure, particularly with child benefit payments as they were, that benefits go to the carer in an unthreatened way. My concern is that making payments in the way envisaged by the Government could jeopardise that freedom, which has been gained at some cost.
Will the Minister comment on what the Government consider will be the cost of introducing this new legislation? In 1992-93, the Government spent some £4.2 million to promote the take-up of benefits; by 2001-02, that had risen to £26.5 million. That is a huge increase in spending on advertising to encourage take-up, and yet we know that take-up is low, with many families not taking up their entitlement. As to unclaimed benefit, some £2.55 million was spent in 1998-99, which had risen to more than £3 million by 1999-2000.
I welcome parts of the Bill but I am concerned about the costs. The Minister will know—I have raised the issue with her many times before—that I am extremely concerned that those on lower incomes should not be put in double jeopardy by having to spend a high proportion of their benefits on getting to a post office to claim them.
5.9 p.m.
Earl Russell: My Lords, in some ways the Bill is a little like a hedgehog. One very hot summer night I woke up and came downstairs without any slippers—and rashly trod on one. Underneath the rebarbative exterior, I found a very small, very soft, very pink and very innocent object concealed in a welter of ladders and half-empty paint pots and all the other objects one has around the fringe of a house. The Bill is not nearly as bad as it looks.
People say that the Bill is difficult. Yes, it is—but that is mainly because the concepts, the terminology and the way of thinking are in many ways unfamiliar to us. For those of us who have experience of the United States' tax system, it is considerably more familiar. The basic distinction between a tax credit and a tax allowance is that for a tax allowance you get back the 40 per cent or whatever the percentage is; for a tax credit you get back the whole thing.
One of the skills one learns in opposition is that of seeing all hell in a grain of sand. I do not think that the Minister would entirely acquit me of having any of that skill. However, since I have been working on the Bill, between last Saturday night and now, I have been able to see rather fewer grains of hell than I could previously. That is an unusual experience when
dealing with a Bill. In that context, I congratulate the noble Baroness, Lady Andrews, on the determination with which she stuck to evidence in the face of a House whose general mood was at the time rather hostile.The other speech of the day has been that of the noble and learned Lord, Lord Howe of Aberavon—which might well have been subtitled,
- "Look on my works, ye Mighty, and despair!".
I am talking of circularity. I cannot help remembering the noble and learned Lord's first Budget, when he offered us income tax cuts in order to pay our VAT bills. That was a circular transaction. What we have here is not a pure circle; it is a spiral. It is the transfer of money from the childless to the childed. That is an approach in which one can see a purpose. The whole of the funding of the education system is that. A House which has in the past been wholly hereditary cannot with great ease condemn that principle totally. So the fact that there is an element of circularity is not fatal.
The noble and learned Lord complained, perhaps with more justice, about a tax on jobs. But you cannot have, at one and the same time, a total ban on a tax on jobs and a total ban on any increase in tax on income. We on these Benches believe that income is the fairer and more sensible place to put the tax. But you must be able sometimes, as a point of principle, to increase revenue. If you are to be banned from doing it in one place, you must be free to do it in the other.
In the course of tackling some very real problems, we run into some of the thorniest problems in the social security system. We did not create them; nor did our predecessors. Many are in the nature of the case. If we do not get it right first time, I do not find that particularly surprising. The noble Lord, Lord Saatchi, criticised the Government heavily for changing their mind and changing their policy—as indeed they have done on some points with some rapidity. But we cannot have this both ways. Either we criticise them for refusing to learn from experience, or we criticise them for changing their mind. What do we want? Both are mistakes; but I would rather they made the mistake of changing their mind rapidly than of not learning from experience. If there is any criticism to which the Bill is liable in that area, it is the second.
The general idea, as the Minister put it, is to make work pay. I have noticed that most of the fiercest critics of the Bill—notably the noble Lord, Lord Saatchi, and the noble Baroness, Lady Noakes—were not Members of this House during the Parliament of 1992-97. The Minister will remember the debates we had in that Parliament on poverty traps and the constant refrain of the people who were worse off because they were working. I should like to think that during those debates we were of some assistance to each other.
It is that thinking that has helped to produce the Bill. That is why there is such long tapers. The Minister always used to warn me that we could not make this approach work unless we made the tapers long enough to make it very expensive. She was right, but it is on the whole better that people should be better off by working than by not working.
I remember an interesting conversation with my noble friend Lady Williams of Crosby in the spring of 1997, shortly before this Government came to office for the first time. She said that they had become very interested in the principle of the tax credit—about which, from her American and Harvard experience, she knew a good deal. She said that it was a good principle, and that I should view it with a cautious sympathy. She said that it would be necessary to ensure that, in their enthusiasm for the principle, the Government did not neglect the interest of those who were unable to obtain work.
In the Bill—the first of the tax credit Bills of which I have been able to say this—that point has been taken, and I am very glad to see it. The Chancellor has brought together two basic principles. One is all the various forms of support for children which people receive whether or not they are in work; the other is the support for low-paid work—which encourages work. So he answers the point made by Roy Hattersley on "Any Questions?" two weeks ago; namely, that the Government had done a great deal for the poor in work but practically nothing for the poor out of work. I should not like to think that this is the Government's last word on the subject. I very much hope that it is not. However, it is a word that I am extremely glad to hear.
The problem of poverty traps is not the whole story of the benefits system. I should not wish the Government to become obsessive about it. However, I shall not dwell on the other matters that I should like them to be thinking about. The Minister knows perfectly well what they are.
I am glad, like my honourable friend Mr Webb, about the decision to pay the benefit to the main carer rather than through the payroll packet. The decision to pay such benefits through the payroll packet was in order to teach people the importance of work. I do not believe that that needed doing. The importance of work, if you have been out of it for a long time, is social as well as financial. It is a lonely job being stuck at home all day, especially if your only company is that of children too young for conversation. Such a decision was unnecessary. Also, it was proving a considerable difficulty between employer and employee.
The National Association of Citizens Advice Bureaux reports several recent cases of employees being dismissed because they were claiming the working families' tax credit. That really will not do. The association has produced a proposal for a fair employment commission which seems very reasonable.
We hear a good deal about burdens on business. There are burdens on everyone who has responsibility—some welcome, some unwelcome.
They should in all cases be kept down when possible. But one cannot live in society without carrying burdens. Employers have to accept that as much or as little as the rest of us.It does not seem that the system of payment through the payroll has been ideal. It has been suggested that we deal with the matter by leaving out Clause 21(4). That is one possible way of amending the Bill, but there will be others.
I was also interested in what the noble and learned Lord, Lord Howe of Aberavon, said about thresholds. Exactly the same point was made in another place by my honourable friend Mr Webb. The answer to the problem of how to work it out without an excessive burden is by increasing the tax burden on those at the top of the scale. We would do it by an extra tax on those earning more than £100,000 a year, who I hope will not plead poverty. It can be achieved so that the effect on people in the middle of the scale is pretty well tax neutral. If the complications of the scheme prove greater than we fear, the Minister might want to think again about the suggestions of my honourable friend Mr Webb. They were kindly met and are worth considering.
When she abandons the principle of payment through the payroll or creates an alternative, the Minister will find that there is some problem about who the main carer is. I recall one large happy family featuring two couples who had swapped spouses. They spent the summer together in a large country house, all looking after each other as they ran into each other. The primary carer was the person who happened to be nearest when the boy fell over and cut his knee. The Minister would have some trouble working out who the primary carer was in that situation. I am not asking her for an answer now. We shall have to consider the issue in Committee. However, I should like at least an assurance that she is thinking about it and that she knows that it is a difficulty. There is not always one single person with primary care for the children. The way family law is moving now, we do not feel it right that there should be. After a divorce or separation there should, when possible—which is not always—be a continuing responsibility resting on both parents.
A great deal of the rest of the comment on the Bill comes under the heading that I have put down confusingly in my notes as "thorns and roses"—opposite in their effect, but closely associated in their appearance and therefore confusing to decide how to handle. Change of circumstance is one issue under that heading. There is no right way of handling it. I admire the way in which the Government have tried to tackle it. I do not know how it will work out. I ask the Minister only to continue to keep the issue under review and to keep in touch with my honourable friend Mr Webb, who has done a great deal of constructive thinking about it.
I also ask the Minister to bear in mind the problems raised by my honourable friend about the burden of keeping records. I recently found myself in the process of doing my annual tax return, but discovering where among the litter of parliamentary Bills and White
Papers all my various old cheque stubs are is not quite as easy as I would wish. If I had a large number of young children present as well, it could be well nigh insuperable, but that would not be evidence of any fraud on my part. We should think about the burden of record keeping that we are putting on people.I agree with the noble Baroness, Lady Andrews, about passporting. We also need to think about passporting for medical equipment. My mother in law, who is 92 and has angina, relies on a nebuliser. She is not on benefit, but if she were she would find it very difficult to afford, because it is an expensive piece of equipment.
I am tempted to imagine that I see the hand of the Minister in the provisions for the disregard of maintenance as income. If so, I ask her to accept my hypothetical congratulations.
I share the concerns of the noble Baroness, Lady Byford, about the commencement date, mainly because I am not at all certain that the universal bank will be up and running in April 2003. I agree with the noble Baroness about the closure of sub-post offices, which is becoming a disaster. If the system were running with neither sub-post offices nor the universal bank, we could have a very nasty situation. If I were a Minister, I would have a contingency plan. I dare say the Minister does. I am not sure that she is going to share it with us, but I should be awfully glad to know that she has one. The more you have contingency plans, the less you need them—they are like umbrellas.
We may also have to think through leaving out Clause 24(2) about a small business exemption. This comes back to the problem of the payroll and burdens on business. I hope the Minister will also consider leaving out Clause 38. After all, that would only be following the example of JSA, which can hardly be regarded as quite such a wild and radical example. That is one case in which the point made by the noble Lord, Lord Saatchi, about the regulation-making power is clear. Entitlement can be changed at a stroke of the Le Pen, if noble Lords will forgive the phrase.
There are two sections of tax credit. The credit for children is justified by need and the credit for work is justified because earned. Leaving either of those out would be a potential injustice. I hope the Government will not lead their successors into that sort of temptation.
I also hope that people will think about the point that has been made by several noble Lords about housing benefit taper. There is also a problem with requiring different information to be notified for tax credit and for housing benefit. The complication of preparing two sorts of record for the two sorts of submission makes one worry. However, I have no answers to the problem. If the Minister, any other noble Lord or any outside body does, I shall listen with great interest.
I hope that the Social Security Advisory Committee will apply, as it has done to other matters that have been transferred to the Treasury.
The noble Lord, Lord Rix, is right. I hope that the Minister will listen to him. I do not know whether she can do it in this Bill or whether we shall have to do it in another. One keeps hoping for finality, but in this life it does not happen, alas.
I welcome the Bill. There is a great deal of work to do on it. The problems will not be over when we have done it, but we are attempting something that is well worth attempting.
5.28 p.m.
Lord Higgins: My Lords, this has been a fine debate. However long one has been involved in these matters, one cannot wind it up without feeling that some diffidence is appropriate. When I first saw the title of the Bill, I had a strong sense of déjà vu. As long ago as 1972, the then Chancellor of the Exchequer, Mr Anthony Barber, as he then was, put forward proposals for a tax credit scheme. They were followed by a Green Paper on the subject later that year, which was devised by the noble Lord, Lord Cockfield, as he now is, who was with us earlier this afternoon. It was then examined by a Select Committee whose most prominent members were the noble Lords, Lord Barnett and Lord Sheldon, and the noble Baroness, Lady Castle, as they now are.
Alas, despite that Select Committee report, the incoming Labour government dropped the whole idea. Now, many years later, we find ourselves again with a Tax Credits Bill, although one must stress, as my noble friend Lord Freeman did, that whereas the previous scheme was a genuine negative income tax or tax credit scheme, the proposals in this Bill are not. It does, however, reflect the Chancellor's obsession with the idea of tax credits. It has also been combined with his vacillation.
I shall not repeat the long list of changes we will have experienced over the four years. My noble friend Lord Saatchi has spelled them out, and my honourable friend Mr Willetts—in a fine pamphlet dealing with this matter—has listed them. Indeed, the changes are to be found in Clause 1. Nevertheless, to introduce five new tax credits, abolish four of them and introduce another two does not exactly show the firm hand of government. That brings me to two other points.
First, the vacillation has been an extraordinary waste of legislative time. Although not all the proposals have been dealt with in legislation, much of what the Minister and I have debated in recent years has now been overtaken by this scheme. It is not—as the noble Earl, Lord Russell, has suggested—a matter of the Chancellor learning from experience and then changing his mind. The proposals have not been given a sufficiently long run to enable one to learn from experience.
The second effect of the Chancellor's changes of mind is an increase in the burden on small businesses, which find that the problems they have to deal with are constantly changing. The Bill will place a very considerable burden on business because of the proposal that these tax credits—I prefer to call them benefits—should be paid through the payroll. As my
noble friend Lady Byford pointed out, there are real difficulties in that, particularly in relation to opening bank accounts and the problems with credit rating agencies which I myself raised with the Minister just a short time ago. There is a very considerable burden on business.There is also some obscurity about the administrative cost of the proposals to the Government. Page 39 of the Explanatory Notes states that,
- "The annual administration costs in relation to tax credits cannot be determined until the rates of the new tax credits are set".
The Bill is one of great complexity. My noble friend Lord Saatchi has advocated that we should deal much more in this House with financial matters. My own feeling is that this Bill is actually a Money Bill in the strict sense of the term. Regardless, it is fortunate that we are dealing with it. Because of the way in which the Government have handled the matter in another place, whole chunks of the Bill have received no consideration there at all. Perhaps the Minister will confirm that the whole of Part 2 did not receive any scrutiny in another place because of the way in which the Bill itself was—I use the euphemistic term employed by the Government—"programmed". We shall have a considerable task in scrutinising the Bill, but we shall have to examine it very carefully.
As a number of noble Lords—particularly my noble friend Lady Noakes—have pointed out, the Bill itself is bedevilled with regulations. A great deal of what is to happen will appear in regulations. The Select Committee on Delegated Powers and Regulatory Reform seemed to have been somewhat placated by the fact that the regulations in the first instance will be subject to affirmative resolution, although the subsequent ones will not. However, I feel bound to say that I do not think that that is the same as having them in advance. I very much hope that, as the noble Lord, Lord Freeman, said, we will have them in advance of the Committee stage, when we can debate and if possible seek to amend them. Simply having a yes-no vote, even on an affirmative resolution, does not enable the House to ensure that the initial set-up is appropriate.
As I said, the Bill is greatly complex. Inevitably, that will result in a number of consequences. As many noble Lords have pointed out, the first consequence is the problem of low take-up—which is a very serious problem indeed. Reference has been made to what is happening in relation to the working families tax credit. Perhaps the Minister can confirm whether the quoted figure of, I think, 62 per cent is correct. There is also a very real problem in estimating the proposals' overall operation cost, which I understand is estimated at about £2.7 billion. As that estimate must have been based on assumptions about take-up, will the Minister tell us what assumptions have been made about take-up of the Bill's two major benefits?
The other problem is fraud, a matter to which another place did give considerable attention. As my noble friend Lord Northbrook pointed out, of about
29,000 investigations, there have been only about 300 prosecutions. It is a real problem because the complexity and the payment-payroll link will allow considerable scope for fraud. Consequently, however, the Bill provides for the imposition of pretty severe penalties.I am sure that the noble Baroness, Lady Andrews, will be aware that there is concern in the Child Poverty Action Group and elsewhere at the increase in penalties accompanying the change from a work and pensions regime to a tax regime in which the penalties are clearly much more severe. As the Child Poverty Action Group rightly points out, although we must all be against fraud, one must take account of the fact that there is a distinction between a tax imposition which is determined as against a benefit which is to be claimed. They are not the same, and I am glad to see that the noble Baroness agrees with us on that. We shall have to pursue the issue in Committee.
One point which has come out very clearly in the debate is the great extent to which Government intervention in individuals' affairs has been increased. Until now, we have had a social security system that works on a set basis and a tax system that operates at the higher income levels. However, there is a pretty large group in between who do not fill in self-assessment forms and are not involved with the benefits system. The size of that group will now be very significantly reduced. Perhaps the Minister can give us some idea of how many extra people will—I hesitate to use such a pejorative phrase—fall into the clutches of the Inland Revenue? There will be very considerable government intervention in individuals' lives, requiring individuals to respond in a very complex situation.
There is no doubt at all that the Bill provides for a substantial increase in means-testing. The Minister invariably objects to my using the term means-testing and prefers use of the word targeting. The reality, however, is that people will be "targeted", to use her word, up to an income of £58,000 annually. That is some targeting. It is also a very real problem.
As this scheme is designed to accompany improvements in health expenditure and so on over 20 years or more, I should perhaps take a slightly longer view. At some stage—given the overall crisis in pensions and so many people on means-tested benefits, and if we are to continue with the type of tax imposition announced in the most recent Budget—we shall have to ask who is going to pay for all this. As a longer term view, that is an interesting proposition. My noble and learned friend Lord Howe of Aberavon asked who would pay for the measure. That is a matter which we shall need to consider carefully.
If one looks at it in broad terms, I suppose one can say of the Budget that the whole of the health expenditure will probably be funded by the increase in taxation on companies and the rest of the increase in taxation—a high percentage of it—will pay for the costs incurred by the Bill's provisions. In some ways one may say that is a good thing when one has regard to the effect of those provisions on child poverty. The
noble Baroness, Lady Andrews, referred to that matter, as did the noble Lord, Lord Rix. I hope that the Minister will comment on the 16-hour rule and related matters.On many occasions recently we have debated the whole question of child poverty. The noble Baroness, Lady Andrews, was hopeful that the Government's measures in the Bill would have an effect on child poverty. Clearly they will have some effect. However, if one considers the Government's record on that matter, that is a different issue. At the previous election the Labour Party's manifesto stated,
- "Over one million children have been taken out of poverty".
I hope that the Minister can clarify one further point. I refer to a matter of constant contention between the two sides of another place and this Chamber; namely, as regards treating these matters as increases in public expenditure, not as reductions in taxation. It is therefore interesting to note a change in the Government's attitude on page 216 of what once upon a time used to be called the Red Book. The relevant wording is an incredible example of weasel words. The document states:
- "The Government has consistently argued that tax credits paid through the pay packet should be classified as negative taxation".
In many ways the Bill has admirable objectives. It is always difficult to oppose a measure whereby people receive taxpayers' money. One is looking at one side of the equation in the Bill and not at the other. My noble and learned friend Lord Howe of Aberavon was right to ask where the money is to come from. I am a little
confused to the extent that the money coming in looks as though it will all go into the National Insurance Fund, which is devoted either to the health service or to pensions. I am not at all clear how it is suddenly switched into the credits. However, I noticed with interest that a few days ago the Leader of the House in another place said that there was to be a national insurance Bill which, apparently, is related to the Bill we are discussing. Perhaps the noble Baroness will tell us what is likely to be in that national insurance Bill and whether it is related to the Bill we are discussing.In his opening remarks my noble friend Lord Saatchi set out clearly our objections to the Bill. They are fundamental but we must at least hope that the Government are now creating a framework which will remain stable for a reasonable length of time. There is, none the less, much scope for improving the Bill which is before us. We shall do our very best in the course of the Grand Committee—I must say that it is rather strange to deal with such a major Bill in Grand Committee—to ensure that it fulfils its admirable objectives as far as possible but also to ensure that many of the disadvantages which have been pointed out in the course of the debate are taken into account and that the Bill is suitably amended.
5.46 p.m.
Baroness Hollis of Heigham: My Lords, I am delighted that we have had such an interesting and in some senses unusual debate. I particularly welcome—I am sure that the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, will agree—hearing the voices of the noble and learned Lord, Lord Howe of Aberavon, and others who do not usually contribute to more conventional social security debates. It is refreshing to hear different perspectives.
In winding up the debate, I state the usual proviso that so many questions were asked that I simply cannot answer them all in the time available without sending your Lordships to sleep even earlier than would otherwise be the case. I shall write to those noble Lords whose questions I cannot answer tonight. Apart from making some general comments that I cannot resist, I should like, first, to pick up the points about Treasury issues, tax, social security, integration and national insurance, then, secondly, to go on to questions about the particular form of tax credit we are discussing, particularly as regards means-testing and take-up, which your Lordships pursued. I want to address the implications for disabled people. I then want to look at issues of accessibility in terms of the online payment methods that the noble Baroness, Lady Byford, has gallantly fought to ensure are available. I then want to discuss a favourite topic of your Lordships' House—I refer to burdens on employers—before picking up the point about fraud which one could perhaps have anticipated and some structural points before making some final comments. I hope that your Lordships will accept that I shall try as best I can to pick up as much as I can within that general framework.
I am particularly glad that the noble Earl, Lord Russell, welcomed so much of the Bill. I am delighted that the more work he did on it, the more supportive he became. That is not always the history of social security legislation. Therefore, I am particularly grateful for his warm remarks.
I refer now to the speech of the noble Lord, Lord Saatchi. I was intrigued by the amount of time he devoted to Kant. He made the point that Kant argued that moral adulthood meant no means testing, as far as I recall from my reading of Kant. But, of course, Kant wrote before the introduction of income tax which was introduced in the Napoleonic Wars by a Tory as I recall and, when scrapped by the Whigs—Liberals—was reintroduced by another Tory, Robert Peel. I wonder, therefore, whether the noble Lord will be quite as keen to quote Kant in the light of the experience and history of income tax which I am sure Kant would also have deplored.
I turn to the comments made by the noble and learned Lord, Lord Howe. I believe that he identified some of the same issues in his maiden speech back in November 1964 when he tested the possibility of whether a negative income tax might allow for the problem of selectivity without stigma, as I believe it would be termed today. I believe that in 1964 he called on all Members of the House not to condemn proposals simply because they involved a test of means. He argued that we should respond to differing needs as well as to differing means and that, as a result, the package should ultimately have a real flavour of humanity. I am happy to commend the Bill to the noble and learned Lord on precisely those tests. I hope that he agrees with my argument.
I was intrigued to see how extensively the Politeia pamphlet by David Willetts was quoted. I am sure that Mr Willetts would be delighted that it was read so widely by the people who mattered; that is, those on his own side. That, of course, is not always the case.
I turn to the first substantive point, which involves the interaction between the social security and income tax systems and which raises questions of tax. The noble Lord, Lord Saatchi, said that the tax burden was falling on the poorest. No, my Lords: those earning below the personal allowance have not been affected by the Budget changes to NICs and income tax. The tax credits system means that even after allowing for the Budget's changes to NICs, a single-earner family on medium earnings with two children will be £3.90 a week better off. A single person aged over 25 working 35 hours at the minimum wage will be more than £20 a week better off.
We have to operate in that way because, as the noble and learned Lord, Lord Howe, identified—and as the noble Earl, Lord Russell, confirmed—the matter is nominally complicated in the Bill because one is trying to bring together the financial consequences of the tax and national insurance systems when we know that earnings and wages do not reflect family size and that income tax is disaggregated but that tax credits seek to attend to family needs and family means. Therefore, one is integrating earnings and wages—which bear no
resemblance to needs or means—an income tax system that is disaggregated and a social security system that is based on households. That is why, as the noble Earl, Lord Russell, rightly identified, we have to deal with the situation as we are doing. It is worth reminding ourselves that since 1997 the poorest fifth of our citizens have received an income gain of about £2,400 on average. We should be proud of that.The noble and learned Lord, Lord Howe, supported by the noble Baroness, Lady Noakes, inquired about unmarried couples. He will not need me to remind him that that arrangement has been in place since the additional personal allowance was introduced in 1988 and is therefore not new in the Bill.
The issue about same-sex couples may or may not come up in subsequent legislation or in a proposed Bill that will be introduced by, I believe, the noble Lord, Lord Lester. Tax credits in that regard follow the social security and tax systems, and a same-sex couple is not at the moment recognised as a household.
The noble Baroness went on to make slightly more rebarbative comments—she said that tax credits fiddle—
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