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Baroness Hollis of Heigham: My Lords, these amendments relate to the accounting requirements on the Board of Inland Revenue in relation to tax credits. Subsection (5) requires the board to show how much it has paid out by way of child credit and working tax credit; its administrative costs in respect of those credits; and how much it has received by way of tax credits.
Amendment No. 11 seeks to make payments of tax credits to be accounted for as deductions from "inland revenue". I assume that in tabling his amendment the noble Lord had in mind the reference to "inland revenue" in Clause 2(3)—which refers back to the 1890 Act. We have already discussed this matter.
There is, of course, a wider point about the responsibility of the board to account properly for the deductions that it makes from tax receipts in order to make payments of child tax credit and working tax credit. It is right that the board should be required to account for the tax credit that it pays out; and so it will do. This is already dealt with by Clause 2(5)(a) without the addition of the words proposed by the noble Lord. These amounts will, as a matter of fact, be the amounts that it has deducted from the "gross revenues" before paying them to the Exchequer.
Section 13 of the 1890 Act—I am sorry about all the history; I have learnt more about the founding of the Inland Revenue than I thought I should ever want to know—which imposes a duty to keep accounts, was originally drafted only with tax and duties in mind, as the noble Lord suspected. Clause 2(5) therefore amplifies Section 13 of the 1890 Act so that the duty to keep accounts is meaningful in relation to tax credits. Paragraph (a) requires the board to show how much it has paid out by way of tax credits; paragraph (b) requires it to show its administrative costs in respect of those credits; and, in order to ensure that the board is required to account separately for recoveries of overpaid tax credit, paragraph (c) requires it to show how much it has received by way of tax credits. That may address Amendment No. 14. What that is about is the recovery of overpayments—which means that money will flow into the Inland Revenue. I hope that the noble Lord is satisfied with that explanation.
Lord Higgins: My Lords, surely, then, the provision ought to read: "the amounts reclaimed by them in respect of tax credits". If that is the function of Clause 2(5)(c)—namely, that the board has to get back repayments—then that is what should be stated, and not that it has received money in respect of tax credits, because, with great respect, it has not; it has overpaid and then got the money back. That does not mean that it has received anything. It is to be hoped that it has received exactly the same amount in both directions, so it has still not received anything. If that is the function of subsection (5)(c), I do not think that it does what the Government want.
Baroness Hollis of Heigham: My Lords, I am happy to look again at the drafting, but I would have to take professional advice. My understanding is that the amounts received by the Inland Revenue in respect of tax credits followed the wording in the previous legislation of 1999. I was seeking to elucidate the seeming oddity of the Inland Revenue receiving tax credits: it does so if it is recovering overpayments. We are again into a debate about the appropriate use of words. I can only give the noble Lord my best advice.
Lord Higgins: My Lords, as this amendment is the last of this bunch, we can agree that it is all about the appropriate use of words. But it is not a good idea to have words in legislation that are positively wrong or that say the opposite of what was intended. It is not true that the Inland Revenue will receive any money in respect of tax credits. If the function of the subsection is to say it may get back what it paid out, the most it has received is what it paid out, which is nil. Therefore, it has not received any tax credit. If the subsection's function is simply to say that the amounts it reclaims are overpayments, surely the Minister can table an appropriate amendment at Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Saatchi moved Amendment No. 12:
- Page 2, line 27, after "expenses" insert "of the Board"
The noble Lord said: My Lords, in moving the amendment I shall speak also to Amendment No. 13. As we learnt in Committee, the Government propose to impose on employers, regardless of their size or profitability, the burden of administering the new tax credits scheme.
In Committee we raised the point that large companies might be able to cope with the administrative burden and therefore we should not shed too many tears for them, but we expressed concern about small businesses which employ only a few people. They do not have and cannot afford the departments to administer such a complicated scheme. Therefore, this modest amendment seeks to require the Government, at the minimum, regularly to assess and record estimates of the costs to employers of carrying out the new tasks required of them.
We believe that having such a regular responsibility would have a salutary effect in focusing the Government's attention on the costs to business of implementing the Bill. I remind your Lordships that the Government's so-called Better Regulation Task Force recognises the regulatory burdens associated with tax credits. In a report on payroll burdens, it stated that businesses now see themselves becoming unpaid benefit officers.
In another place and in Committee several attempts were made to move the Government to take pity on the plight of small businesses, but they have remained strangely unmoved by the pleas from small businesses, their regulatory body and the Opposition Benches; both ours and the Liberal Democrats'. The reason might become apparent if I recall two things the Minister said in Committee, which illustrate that there is a great philosophical—although she prefers "theological"—gulf across the Dispatch Boxes about the nature of the tax credits.
On the first Committee day, in response to concern about small employers, the Minister said, with mild irritation,
- "all they have to do is to pay out what the tax credit office tells them to pay".—[Official Report, 16/5/02; col. CWH 36.]
- "12 pages of print. Even with my poor eyesight, it is big enough to read".—[Official Report, 21/5/02; col. CWH 86.]
The Government do not in any way identify with the employer's problem, because their attitude is, I repeat,
- "all they have to do is to pay out what the tax credit office tells them to pay".
In Committee, it was clear that the Minister was radiantly sincere about the good that the Bill is bringing to families and businesses up and down the land. It is moving to hear her passion on the subject, but will she see that there may be a higher good than that the Government can bestow on employers and citizens: the good of independence? It is not necessarily desirable for companies to be in thrall to government offices to pay what the Government tell them to pay; nor for citizens to be dependent on filling in forms to gain sums of money from the Government.
Our Benches prefer to stress independence, inner directedness and self-determination on the part of people and companies. Those qualities are the essence of being grown-up. Sometimes the Government give the impression that they prefer people to remain as dependent children. I hope that on this occasion the Minister will show a little more sympathy for small businesses than she or the Government have done in the past. I beg to move.
Baroness Hollis of Heigham: My Lords, I was not entirely sure where the noble Lord was coming from. We were listening to a speech about the burdens on small businesses, which half-way through became about the dependency culture of the people employed in small businesses. I am not sure where his primary sympathies lie.
I shall try to take both points in turn. I am sure that the noble Lord does not want to go into compliance costs for employers; we come to that issue under later clauses in the Bill. Neither do I, except to repeat that, overall, business will save something like £11 million in the cost of administration and that the simplification of the Bill compared to the existing tax credits system has been widely welcomed by employers' associations.
The noble Lord made much of my phrase that employers would have to pay out only what the tax credit office told them to. The noble Lord appeared to believe that small businesses would themselves have to make elaborate calculations. On the contrary; I was saying that they would be expected only to set the amount they would need to add to wages against the moneys they would be collecting from tax and national insurance, and that it would be the simplest form of administration that could be devised. It was a point about simplicity and the minimum of burden rather than any dismissal of the behaviour of small businesses.
The reason why tax credits are necessary in the first place is that those small businesses are paying relatively low wages. They might actually think that it is in the interests of their workforce that, as a result of tax credits, their employees are now able to enjoy a higher standard of living—including better diet, better housing, and so on—than would otherwise be the case if they were solely dependent on the wage for which they work.
Moreover, in terms of the wider point about the dependency culture and workers, I should stress that we discussed earlier the reasons for developing and building on the working tax credit and disabled
person's tax credit. For many workers in this country, especially if they have dependent children, the entry wages that they receive are not sufficient, as they perceive it, to make it worthwhile for them to work. As a result, this Government have introduced a minimum wage and a tax credit system, both of which make it financially advantageous to work, where appropriate, as a way of addressing what would otherwise be family poverty; in other words, we are helping people to help themselves.Therefore, for the party opposite to accuse these Benches of increasing dependency when it opposed the minimum wage and tax credits as a means of ensuring that anyone coming off benefits and moving into work finds himself substantially better off is, to use the cliche, a bit rich. I hope that the noble Lord will accept that I am glad to say there is no meeting of minds on this issue.
4.30 p.m.
Earl Russell: My Lords, before the Minister concludes, perhaps she will kindly acknowledge that not all the parties opposite opposed the minimum wage.
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