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Lord Higgins moved Amendment No. 17:


The noble Lord said: My Lords, in moving this amendment, I shall speak also to the other 55 amendments that are associated with it.

This set of amendments—no fewer than 56 in total—clearly requires some explanation. Earlier, the Minister gave a courteous reply to the points that I had raised about the vast mass of government amendments that appeared at short notice before the Bill's

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Committee stage. In the course of our discussions upstairs, we debated those amendments. It seemed to us that there was a case for bringing them to the attention of noble Lords on the Floor of the House.

My noble friend Lord Saatchi has already referred to the vast amount of money that will be expended on tax credits. The Bill will be a major item in public expenditure. Perhaps the Minister would clarify exactly what that sum will be. I believe that it comes to almost the whole amount of the increase in taxation that the Chancellor introduced by increasing social security payments from the private sector as against the business sector. It is roughly comparable in scale to that sum.

We discussed the matter in Grand Committee. It is a great deal more convenient for the Grand Committee to sit upstairs rather than in the Moses Room, where one has the greatest difficulty hearing what is being said. The layout upstairs is also preferable. It was the first occasion on which I and, I believe, the Minister had been in a Grand Committee upstairs, and I was not fully aware of the normal procedures. They include the provision that, unless government amendments are objected to, they should go into the Bill. I was persuaded by the noble Lord, Lord McIntosh, to whom I defer on matters of procedure, to accept that view. If one wanted the issues to be debated on the Floor of the House on Report, it would not have been appropriate to object to the amendments.

On reflection, I believe that I made a mistake in following that line because, not infrequently, attendance in Grand Committee is not as large as it might be. Of course, the attention of the House is drawn to the matters which are debated in Hansard, and that is an improvement on Commons Hansard because the debates appear in the main publication.

None the less, if one wants attention to be drawn to an amendment on the Floor of the House, there are only two ways of doing so. Either one objects to the government amendment, in which case I understand that it would not be included in the Bill following the Committee stage; or, alternatively, one tables an amendment on Report to reverse the government amendment.

As I said, given the importance of this set of amendments and the other sets of restructuring amendments, I believe that on balance I was probably mistaken not to object to them all the way through, although that would have been a singularly tedious way of proceeding. It would perhaps have been only slightly less tedious than what we have done in bringing the matter to the attention of noble Lords on the Floor of the House; namely, reversing all the government amendments, which is what these amendments seek to do. That is an incredibly tedious procedure because the points in the Bill where the amendments appear have changed since the Bill was discussed in Grand Committee. I believe that we should consider how best these matters may be dealt with if a Bill goes to a Grand Committee.

Having said that, I also believe on reflection that it was a mistake that the Bill was dealt with upstairs because it is, after all, a major, flagship government

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Bill and involves a huge amount of public expenditure. That would have been my view in particular had I realised that all these amendments were going to be made.

In her usual—I am almost inclined to say "habitual"—helpful way, the noble Baroness responded to a suggestion that I made during a break in Grand Committee when a Division took place on the Floor of the House. I suggested that we should group the amendments into various categories. If we had not done so, I suspect that we should have been there until Christmas. Therefore, as we now go through the Bill, we have no fewer than five categories of government amendments, including a huge number of individual amendments which cover individual points. This group is in the first category, and I believe that it is worth while to spell out what it does.

Effectively, the amendments, which the Government have inserted and which, for the purposes of debate, we suggest should be knocked out, draw a distinction between the award of tax credits under which payments are made during the year—the crucial word there being "award"—and entitlement—the crucial word being "entitlement"—which is settled after the year end when the current year income is known. As I understand it, the amendments also include some technical changes to provisions concerning the recovery of over-payments and the paying out of under-payments—we referred to those matters earlier—when entitlement turns out to be different from the amount paid under awards during the year.

The system which the Government are introducing in the Bill is very complex so far as concerns both the entitlement and award of tax credits. In the elaborate explanatory document which the Government produced, they point out that different provisions will be applicable—we shall come to some of those points later—depending on whether an individual's income goes down or goes up. The individual will be able to claim adjustments during the year if his income goes down. If it goes up, it will be taken into account, both with regard to award and entitlement, only if the amount of the increase in the year exceeds 2,500. I hope that the noble Baroness will confirm that I am right in that.

I am afraid that all my old Treasury hackles tend to rise at this point—the Treasury halo takes a long while to wear out—so far as concerns allowing people to receive an extra 2,500 in income without the Treasury doing anything about it. Of course, that is not the case in relation to income tax. If someone's income increases from one year to the next, then, so far as concerns income tax and if that person is not outside the scope of income tax for whatever reason, he will be taxed on the 2,500. However, that is apparently not to be the case in relation to tax credit.

We have not been given any justification for that arrangement. We were given a justification as to why the 2,500 limit applies in relation to tax credit. We were told by the noble Baroness, and it is spelt out in the booklet, that, since most people's income increases a little during the year, it would involve a huge number of adjustments. That is one reason that has been

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advanced. However, I have not been given any justification as to why someone who receives tax credit should not be penalised for an increase in income of 2,500 within the year, whereas someone who pays income tax but does not receive tax credit should pay tax on the 2,500. We have not had any justification for that arrangement. If the Inland Revenue wants to reduce the number of calculations that people have to make, it can say that everyone who receives an increase of up to 2,500 in a year will not be taxed on it. That would be an expensive solution and I am not sure that the shadow Chancellor would necessarily want me to support it. But there is a fundamental difference here between the tax credit system and the taxation system.

Of course, as we know, the tax credit system applies to people with an income of 50,000 a year if they receive the working tax credit and 50,000 plus if they receive child tax credit as well. I believe that that is right; the noble Baroness will correct me if I am wrong. At all events, the figure goes way beyond the level at which income tax first becomes payable.

Therefore, this set of government amendments seeks to deal with the distinction made between the award of, and entitlement to, tax credit. Clearly, whatever one's view, that is something that one accepts with the system as a whole. As I said earlier, if we do not set this matter straight, the system will become unworkable. If the Bill went through as the Commons had left it, again, it would have been unworkable.

Therefore, noble Lords are fulfilling their function of seeking to improve legislation. With the help of the noble Baroness, we have done that in relation to a number of social security Bills. Consequently, the House will realise that the purpose of these amendments is to ensure that the Bill is debated on the Floor of the House. Perhaps a rather more elaborate explanation of exactly what the Government have in mind would be helpful, in particular in regard to the points that I have made. I beg to move.

5.15 p.m.

Lord Newby: My Lords, I do not want to discuss the substance—or reversal—of these amendments. I believe that we debated them in Grand Committee to a considerable extent. I simply want to take issue with the noble Lord, Lord Higgins, about whether or not this is the type of Bill that should be dealt with in Committee on the Floor of the House.

In my view, this is exactly the kind of Bill that should be dealt with in Grand Committee rather than on the Floor of the House because I suspect that not more than six Members of any party understand the detail of it. Certainly, having sat through the Committee stage, I do not believe that more than about six Members of any party participated in the debates or even came to listen to them.

I believe that one of the great problems in relation to this House and the way that it works is its gross inefficiency. By far the greatest single part of that inefficiency is the manner in which we take Committee stages of Bills on the Floor of the House when they could be dealt with, in parallel with other Committee

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stages, upstairs. I believe that this is exactly the type of Bill which should be dealt with in Grand Committee, and I consider it to have been an extremely sensible way of proceeding.


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