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Baroness Hollis of Heigham: I am pondering the implications of that last remark. I do not think it is what is needed, but I shall perhaps have a conversation.

Amendments Nos. 17 and 18 together are aimed at bringing forward the issue of the compliance costs to employers of paying tax credits with wages. They insert a reference to the expenses of the board alongside the proposition that the board's accounts should include an estimate of the cost of tax credits to employers.

Members of the Committee opposite would like to impose a requirement to have the board's accounts reflect an estimate of employers' costs of administering tax credits. It would, of course, not be right to require the board to account for costs other than their own. The proper place to address employers' costs will be in the revised Regulatory Impact Assessment which is being prepared in the light of announcements made in the Budget.

I am sure that we will have considerable debate on the issue when we reach Clause 24 of the Bill, which I shall not seek to anticipate, except to remind Members of the Committee that savings of £11 million a year are expected from the changes to the system for employers, and that those changes have been welcomed by employer groups.

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To confirm that point, consultation has shown that organisations have supported the move to streamline the system of payment via the employer. Admittedly, we quote from the CBI, which tends to represent the major employers, but the CBI states that its members:

"support and welcome the attempts made by the government to simplify the rules for tax credits. In particular...abolition of the need for employers to provide a proof of earning certificate—which should considerably reduce the number of routine administrative enquiries employers receive, simplification of the notice periods...providing automatic funding for employers who are already in receipt of advanced funding",

and,

"support the principle of moving from a fixed 6-month payment of tax credits to a rolling 12-month period".

I could quote from the Institute of Payroll and Pensions Management or from the Association of Convenience Stores, the Institute of Directors and other organisations. Clearly, all businesses would prefer not to be paying out student grants or being responsible for the introduction of orders on child maintenance and the like. Having said that, the changes the Bill introduces over the existing tax credit system, with its accompanying savings of £11 million and its simplification and streamlining of procedures, have been warmly welcomed.

It does mean, as the noble Earl, Lord Russell, suggested, that this is in part due to the fact that the child tax credit will be paid to the main carer and employers will now only be responsible for that element which is paid to the adult, the working tax credit, and therefore that too simplifies the situation.

A couple of specific quotes have been made by the previous speakers. The noble Lord, Lord Saatchi, echoed the NACAB point made by the noble Earl, Lord Russell, on Second Reading relating to improper or illegal behaviour by employers, given the use of tax credits to try to reduce people's hours, or even to dismiss them.

I said on Second Reading that such behaviour was illegal and could be pursued through the courts. I had only some very slight anecdotal evidence from NACAB, and certainly when I have been asked about it I have had no consistent evidence of this happening. However, once a person is an employee, he or she is protected against detriment or dismissal by the provisions in Schedule 3 to the Tax Credits Act 1999. Similar protection will be provided by Schedule 1 to the present Bill. I am happy to put that into Hansard so that NACAB in particular knows to which section of the Bill they can return.

Earl Russell: I know very well that the protection exists, and I am grateful for it. The question on which I hope the Minister might have a quiet word with her noble friend Lord Sainsbury of Turville is how that protection might be made more effective, because it is certainly not sufficiently effective at the moment.

Baroness Hollis of Heigham: Obviously any case is a bad case in that sense, but I am in a dilemma because I have seen no serious evidence that this is a sustained

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problem. I am not in any sense suggesting that the examples are not well-founded. However, I do not know how serious a problem this is. The point has never been made to me as I have gone round talking to groups of lone parent advisers for example. That it happens, on occasion, I do not doubt, but how serious or sustained a problem it is, I do not know.

All I can do at this stage is try to help make clear the legal rights and legal dependencies of employees in the situation. We should not reward bad employers by seeking to change the structure of the Bill, which in my view is so beneficial to everyone else. That would be absurd. It is like saying that if a man threatens violence you do not make him pay child support, and you reward violent behaviour. You cannot do that.

However, if I can help by making clear any of the legal provisions that protect employees in this situation, and indeed follow that discussion with Lord Sainsbury, as the noble Earl suggested, to see whether he has any DTI evidence of this happening, I am, of course, very happy to do so, because any case is a bad case.

The second point I wanted to raise was the distinction between small employers and larger employers. There are two points there. First, there is an assumption that somehow a cap in hand process is very difficult, and that we should therefore lift this burden off the shoulders of small employers. I do not accept that description of the situation facing them. Whatever the size of their company, all they have to do is to pay out what the tax credit office tells them to pay. They do not have to do any of the calculations themselves. If they need funds, and the funds that they are holding for national insurance are not sufficient to meet their bills, the Inland Revenue will provide those funds.

The arrangement in place with the Inland Revenue is as near to being automatic as one can get it. That has been recognised by employing companies.

On a more philosophical point, I am not comfortable about trying to draw lines between small and medium-sized companies—those of up to 15 or 20 employees, or whatever the noble Lord has in mind—and larger ones. That was the argument used to stop discrimination against disabled people. I am sure I will have the support of the noble Earl, Lord Russell here. Ever since the Conservative government passed the very important Disability Discrimination Act 1995, we have been seeking, with all-party consent, not to say that someone's right to disability protection depended on the size of the company that employed them.

In the same way here, we are concerned about making the move into work pay. It may not currently pay, because wage rates on entering work are often much lower than median wages. That problem is more likely to happen with smaller companies rather than large ones. It is therefore more important that the money is paid through the payroll for smaller companies than it is for greater ones.

The noble Lord, Lord Saatchi, may not share our approach to this, and obviously businesses might well prefer not to be involved with this at all. However, it

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could not be a simple procedure. We must ensure not only that work pays, but that it is perceived to pay. The technical point is that it would be unreasonable to expect the board to account for costs other than its own. I hope that with that explanation the noble Lord will feel able to withdraw his amendment.

Lord Northbrook: Can the Minister say where the figure of £11 million comes from for the savings of employers' costs?

Baroness Hollis of Heigham: The figure of £11 million has been provided by the Inland Revenue and accepted by the organisation, based on some of the changes being made. I shall be happy to write to the noble Lord about the particular improvements of this scheme over the previous one which will allow him to assess whether he feels the figure of £11 million is realistic.

6.30 p.m.

Baroness Andrews: I have listened with interest to what the Minister has said. I should declare an interest as an employer of a small business in the voluntary sector, which has grown from nothing to 35 to 40 people. During that time, many different evolutionary systems of tax credits have been introduced. They have been handled with great comfort and grace. Like any other small and, it is hoped, good employers, we see this is as very much part of being a good employer. In essence, these are support and benefit systems and tax credit systems which support a productive and effective workplace.

We employ many young people with children and we have not found it difficult to do so. From my experience in the voluntary sector, I can say that I have heard no complaints from organisations of our size. I support the provision and the general philosophical point that has been made; namely, that this is very much concerned with developing a positive culture of good employer/employee relations.

Baroness Hollis of Heigham: I welcome the support of my noble friend. If the argument of discrimination against particular employees and pressure on hours were to apply, it would be more likely to apply under the old working families' tax credit system that we currently have in place, because by definition it has tended to target lone parents. By applying the working tax credit to adults, irrespective of whether they have children, if the employer is seeking to discriminate then, if he is a low-paying employer, he is going to end up discriminating against his entire workforce.

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