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Lord Higgins: Perhaps I may say once again how immensely helpful it was to have the draft regulations which the noble Baroness provided. It enabled us, ahead of our discussions this afternoon, to be aware of the Government's intentions in relation to student income.
The noble Baroness referred to the need to relate what is in the Bill to more normal Inland Revenue practice, and presumably tax law. I now notice, but I had not previously realised, that we are both agreed that subsection (8) as it stands is not satisfactory and the Government's Amendment No. 53 makes some changes to that. If it is indeed to be aligned with tax law more generally, can the noble Baroness give us any idea where in particular in the tax law we might find the corresponding provisions, and also whether there is some degree of case law which might limit the apparently unlimited ability of the Inland Revenue in this case to decide what is or is not income?
Baroness Hollis of Heigham: The scope of income definition has been discussed with key interest groups, including the Low Income Tax Reform Group, with whom I think the noble Lord, Lord Freeman, has been in contact. We are aware that they have further points to discuss and officials will be taking those discussions further.
On the point raised by the noble Lord, Lord Northbrook, on the definition of self-employed, I can confirm that it will be clearly defined for the self-employed. Indeed, they will benefit from the alignment of the definition with tax, so that they will be able to use their tax accounts.
Lord Freeman: I could not hear that.
Baroness Hollis of Heigham: The self-employed will be able to draw on and use their tax accounts for these purposes, and that is one of the great advantages of the new tax credit scheme.
I do not know whether I can immediately give the noble Lord, Lord Higgins, the exact reference in tax law that he sought. If I cannot do so this evening I shall certainly write to him.
On Question, amendment agreed to.
Baroness Hollis of Heigham moved Amendment No. 50:
- Page 5, line 43, leave out "circumstances may be prescribed in which" and insert "regulations may provide that"
On Question, amendment agreed to.
The Deputy Chairman of Committees (Lord Haskel): If Amendments Nos. 52 and 53 are agreed I cannot call Amendment No. 54.
Baroness Hollis of Heigham moved Amendment No. 53:
- Page 6, line 1, leave out subsection (8) and insert—
On Question, amendment agreed to.
The Deputy Chairman of Committees: If Amendment No. 55 is agreed I cannot call Amendment No. 56.
Lord Higgins moved Amendment No. 55:
The noble Lord said: This provision gives the board power to estimate the amount of income of a person, or the aggregate income of persons, for any tax year for the purpose of making, amending or revoking an award of tax credit. I am not clear why it is necessary for the board to have that power, or indeed how it would set about such a task. In the latter part of the clause there is a limitation of that; that such an estimate does not affect the rate at which he or she, or they, are entitled to a tax credit, in which case I am not clear what the purpose of the estimation is. Perhaps the noble Baroness could enlighten us. I beg to move.
Baroness Hollis of Heigham: Clause 7 establishes the principle that tax credits are based on the income of the tax year. As I sought to explain earlier, annual income may be either the income of the current or the previous year. However, current year income cannot be known until the end of the year and so the system would not really be responsive if adjustments to reflect current year income were only made at the year end. Those who need more help because their income has dropped would have to wait until the end of the year on a lump-sum payment, while those whose incomes have risen significantly would be overpaid and would then have to pay back much of that money at the end of the year. That would be a far from sensible way of targeting money on those who most need it.
I am not going to return to the old question about what is entitlement. I could do so, but I wonder whether I have already given the noble Lord sufficient information. Without it, we cannot adjust the awards in the process of the current year. If the noble Lord would like a more detailed explanation, I shall be happy to give it to him.
Lord Higgins: I understand the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham moved Amendment No. 56:
The noble Baroness said: Amendment No. 56 is a drafting amendment which forms part of the package of changes distinguishing between entitlement and awards. At this point I have to remember to refer for a moment to Clause 16, although I know that the noble Lord, Lord Higgins, will be cross with me. However, it is necessary for me to do so in order to explain the reason for the amendment.
Currently, Clause 16 provides that the Board may decide to amend or revoke an award where it has reasonable grounds for believing that the award is incorrect or that the person to whom it has been made,
On Question, amendment agreed to.
Clause 7, as amended, agreed to.
Baroness Hollis of Heigham moved Amendment No. 57:
The noble Baroness said: Clauses 8 and 9 of the Bill provide the framework for entitlement to child tax credit. Members of the Committee will be aware that we have made available—I am grateful to noble Lords for their appreciation of this—the draft child tax credit regulations to indicate the detailed provision that will sit within that framework.
I could go into some detail as to why we are doing this, but we have discussed the matter fairly thoroughly in terms of seeking to offer support for
I refer now to the point made by the noble Earl, Lord Russell, on Second Reading. There is increasing recognition that many more families now share responsibility for children than was previously the case. This occurs in particular where families have split up and where there is encouragement from the Child Support Agency, the Lord Chancellor's Department and the like, that even though partners may split up, parenting continues. We seek to encourage the ability of children to retain contact with both of their natural parents as much as possible.
The increase in shared responsibility between families therefore raises the question of whether, in the future, directing support solely to the family mainly caring for a child will continue to be the right approach when more than one family has responsibility for that child.
We are taking a reserve power. We do not want to move too quickly on this. It has major read-acrosses for other benefits, such as housing benefit, as the noble Earl, Lord Russell understands. It would require extensive consultation with the relevant groups, who might otherwise be apprehensive about some of its implications. It also involves expensive IT changes.
None the less, in response to the legitimate and proper issues raised on Second Reading, it seemed right to make some protective changes to the Bill at this stage to equip us to deal appropriately with shared care cases if in the future it seems right and proper that we take a different approach. I could go into detail about the individual clauses if that would be helpful, but they allow us to take that power. I hope that noble Lords will accept the amendments. I beg to move.
"(8) Regulations may for the purposes of this Part make provision—
(a) as to what is, or is not, income, and
(b) as to the calculation of income.
(8A) Regulations may provide that, for the purposes of this Part, a person is to be treated—
(a) as having income which he does not in fact have, or
(b) as not having income which he does in fact have."
Page 6, line 6, leave out subsection (9).
Page 6, line 8, leave out "revoking" and insert "terminating"
"has, or they have ceased to be, or never been, entitled to the tax credit".
In the light of the necessary changes to the Bill in relation to awards and entitlement, which we have already discussed when considering Clauses 3 and 5, it has become apparent that it is inappropriate for the Bill to use the words "revocation of awards". As I explained earlier, awards and any payments under those awards are the vehicle for delivering support during the year, prior to entitlement being finalised at the end of the year when all the relevant facts are known. Viewed in that light, it is clear that once it has been made, an award cannot simply disappear, which is what the reference to the revoking of awards might be taken to imply. Using the word "terminating" seems a more accurate description of what is going on. I beg to move.
7 p.m.
Page 6, line 16, leave out "this Part" and insert "child tax credit"
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