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Baroness Hollis of Heigham: My Lords, I am happy to give recognition to the support that the noble Earl has always given to the attack on both low pay and low income.

Lord Saatchi: My Lords, I am sorry that there is no meeting of minds. I beg leave to withdraw the amendment and look forward to better luck at a later stage.

Amendment, by leave, withdrawn.

[Amendments Nos. 13 and 14 not moved.]

Lord Saatchi had given notice of his intention to move Amendment No. 15:

The Chancellor of the Exchequer shall lay before Parliament an annual report on the Board that shall include—
(a) the accounts of the Board;
(b) an estimate of the take-up of the working tax credit; and
(c) an estimate of the take-up of the child tax credit."

The noble Lord said: My Lords, I do not wish to move Amendment No. 15 but should like to move Amendment No. 16.

[Amendment No. 15 not moved.]

Lord Saatchi moved Amendment No. 16:

    After Clause 2, insert the following new clause—

The Chancellor of the Exchequer shall lay before Parliament an annual report on the Board that shall include—
(a) the accounts of the Board;
(b) an estimate of the take-up of the working tax credit;
(c) an estimate of the take-up of the child tax credit;

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(d) data on the number of investigations carried out into fraud, the number of prosecutions and the number of convictions; and
(e) an estimate of the cost to employers of operating tax credits."

The noble Lord said: My Lords, this amendment would require the submission of an annual report to the Treasury giving an account of the care and management of tax credits. In particular, the report would contain the board's estimates of the total take-up of each tax credit, the statistical, and other, assumptions upon which such estimates are made, and the actual take-up of each tax credit. The board's reports would be published by the Treasury so that where the take-up of any tax credit was less than the forecast level the report would set out the Treasury's estimate of the amount of moneys not spent by reason of the deficiency of take-up to which the estimate related. It would also contain the Government's proposals for increasing take-up to the forecast level.

Under the amendment, the report would also show the amount of tax not paid as a result of tax credits and the amount of tax credits paid to persons otherwise not liable to income tax. The key elements of the annual report would be a total estimate of the take-up of the working tax credit, an estimate of the take-up of the child tax credit, data on the number of investigations carried out into fraud, and the number of prosecutions and convictions. The report would also contain an estimate of the cost to employers of operating the working tax credit as well as an estimate of the cost to employers of operating the child tax credit.

The background to the amendment is that the vast nature of this Bill and its new tax credits are untested and, unless proper provision is inserted in the legislation to monitor what actually happens, will remain inscrutable for some time. I shall not repeat the very real fears expressed in Grand Committee because the Minister is familiar with them. However, because of the Government's record on the preceding tax credits, which they are trying to correct, it is feared that the most needy people in our society will not take up this help. We hope that the Government will correct the record, but, as has been said, the forms are complex. The Government have, quite rightly, tried to make them simpler, but the procedures are still quite intimidating to many people who do not have the excellent eyesight of the noble Baroness. Perhaps the Government will assess whether or not we are justified in our fears and agree to lay an annual report before Parliament on take-up.

Fears have also been expressed that the Bill will afford opportunities for fraud. We ask the Government to assess whether such fears are justified and to lay an annual report before Parliament on the extent of fraud and on their success in suppressing it. Concerns have been raised that the legislation will also impose an unassessed and large cost on employers, especially small employers, to the detriment of their business and enterprise. Therefore, if they will do nothing else, perhaps the Government can at least

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estimate the cost to employers of operating and working the scheme; and, indeed, lay an annual report before Parliament on such costs to employers.

Our suggested new clause makes the most modest request upon the Government—a government who often speak of "openness". I hope, therefore, that the Minister will now have an open mind and accept the proposed new clause in the spirit of openness and respect for accounting to Parliament. I beg to move.

Earl Russell: My Lords, I do not often support amendments that request the submission of annual reports, but, as I believe the Minister and I are agreed, we are in a process that is still at an experimental stage and it is possible that we can achieve a period of stability that will have its advantages. We shall certainly need to review the operation of the measures introduced under this Bill at some stage.

The whole of the social security system hitherto has tended to be drawn up on the assumption that people are either in or out of work. However, we all know that it is not quite as simple as that; indeed, that is the principal problem that this Bill is trying to tackle. I believe we are agreed that it is likely to take several attempts to get it right. On the whole, there are political advantages in involving as many people as possible when considering the evidence upon which that has to be decided.

The proposed annual report would be capable of doing some good, but I have one small regret; namely, that it does not include any report on the possible danger to employees of claiming tax credit and being threatened with dismissal for being an annoyance to their employer. Such situations do arise. One needs to be even-handed. The amendment does not say that the report should not include such information. I hope therefore that those compiling the report will feel able to investigate that possibility.

The problem regarding the cost to employers is a real one. I am not certain whether it is best dealt with on a flat rate or by a general estimate, as set out here. That is a matter we should keep an eye on because it is capable of becoming a burden to small businesses. I hope, therefore, that the Minister will accept that this proposal is not meant to be unhelpful; indeed, it might advance our progress at later stages.

Lord Freeman: My Lords, I support the amendment moved by my noble friend Lord Saatchi. I very much agree with the remarks made by the noble Earl, Lord Russell. The Minister will recall that we debated this issue at an earlier stage in the sense that another amendment looked at estimates. The Minister was kind enough then to indicate that she might be able to describe what might, or might not, be forthcoming in an annual report—an ex post report.

In addition to the annual report—something that I support most strongly—can the Minister say whether, as a supplement in terms of information, there might also be included in the regular quarterly reports that come from the board—and which, I believe, do cover

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some other tax credits, especially the disabled person's tax credit—reference in the same format to the working tax credit and the child tax credit?

Baroness Hollis of Heigham: My Lords, such reference already exists. As noble Lords have shown some concern about these issues, however, I should perhaps give a fuller answer, and make a slightly longer contribution than I have done so far in addressing specific points.

The new clause proposed in Amendment No. 16 attempts to impose an obligation on the Board of Inland Revenue to produce and present to Parliament an annual report on the take up of tax credits and to include the board's accounts in the report. The noble Lord, Lord Saatchi, has made his case for such a report, as he did in Grand Committee. As I said in Committee, however, I believe that this new clause is unnecessary. In explaining why it is unnecessary, I should like to deal with the two substantive and core issues covered by the new clause—the scrutiny by Parliament of the tax credits system, and the question of take-up levels.

As noble Lords will be aware, there are several well established ways for Parliament to scrutinise precisely the information that noble Lords wish to be reported. Parliamentary Questions are, of course, one such method. In particular, however, the Board of Inland Revenue already publishes an annual report covering all that department's activities. This report includes departmental accounts and is presented to Parliament by the Paymaster General. Details of the board's administration of tax credits are, therefore, already made available to Parliament. Noble Lords will also be aware that the chairman of the Inland Revenue appears annually before the Public Accounts Committee so that the committee can more closely scrutinise the details of the annual report. That level of scrutiny may even exceed that proposed in the amendment.

With regard to accounting for tax credits payments themselves, that is a matter for the Treasury, which clearly sets out those details in the Financial Statement and Budget Report—the FSBR—at Budget time. If I may, I draw the attention of the noble Lord, Lord Saatchi, to tables C7 and C13 of chapter C of this year's FSBR for details of tax credits paid out in the years 2000-01 and 2001-02. Clearly, therefore, Parliament already has ample opportunity to debate the details of the Budget. Indeed, my right honourable friend the Chancellor of the Exchequer recently discussed at some length the treatment of tax credits with the Treasury Select Committee in the other place. Moreover, as I said, the Board of Inland Revenue already reports annually to Parliament, and my right honourable friend the Chancellor of the Exchequer reports to both Houses and the Treasury Select Committee on the Treasury's accountability for tax credits.

The amendment also requires the board to publish data on fraud investigations and prosecutions. Of course there must be the utmost transparency in this. However, I again remind noble Lords that the Board

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of Inland Revenue's annual report already includes details of the Inland Revenue's work on countering fraud and non-compliance. This will include precisely the details on tax credits investigations that the noble Lord, Lord Saatchi, seeks in his amendment. We therefore seem to be discussing almost a "scissors and paste" operation in which we should rearrange and republish information that is already published. I am slightly puzzled by the proposal. The way in which the information is provided currently allows one to contextualise it in terms of how the Treasury and Inland Revenue are meeting their responsibilities.

The new clause would also impose on the board an obligation to set out in an annual report the cost to employers of operating tax credits. I remind noble Lords that employers are not involved in paying child tax credit or the childcare element of working tax credit. Employers shall only be required to make payments of working tax credit. Again, such provision is unnecessary; it seems to be another "scissors and paste" proposal. The costs to employers for their part of the responsibility will be addressed by the revised regulatory impact assessment which is being prepared in the light of announcements made in the Budget. That is the right place to deal with this information as the board could not be responsible for formally accounting for costs other than its own. Indeed, the Government take the regulatory impact of legislation very seriously indeed, which is why we introduced the concept of a regulatory impact assessment. I remember crossing swords with the noble Lord, Lord Higgins, when we first debated the issue and he asked why we were making the proposal. I think that it is now accepted that this is a more transparent way of holding the Government to account than that which preceded it.

The noble Lord, Lord Saatchi, seems to believe that an annual report of these costs would be of more value, but I do not think that that is correct. A full and comprehensive assessment of the cost in the regulatory impact assessment will provide all the information he is looking for and probably more. This does not have to be produced annually because the cost to employers is unlikely to fluctuate year on year given a constant set of legislative obligations. I should also remind noble Lords that the Government provide comprehensive impact assessments whenever legislation is introduced or amended and there is a significant regulatory impact.

4.45 p.m.

Lord Saatchi: My Lords, it would help greatly if the Minister will confirm that regulatory impact assessments are conducted annually. I was under the impression that they were produced when legislation is introduced but not thereafter.

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