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Baroness Hollis of Heigham: My Lords, I am delighted that your Lordships agree that at this stage we are not discussing post offices or the location of post offices; we are discussing whether claimants can be required to receive payment through an account if that account is available to them.

The amendment would by removing Clause 25(8) prevent the Revenue ever making it a requirement that clients should receive their tax credits by automated credit transfer, even when they already had a bank account and when other benefits, such as child benefit, were being paid into it. About 85 per cent of tax credit and benefit clients have a bank account, yet under the amendment they could demand that although they have a bank account they should be paid by, say, Giro in perpetuity. That is what removing the subsection would do.

To answer the point impressed on me by the noble Earl, Lord Russell, I have already made clear our commitment that clients who prefer not to use an ordinary bank account will be able to access their credits and benefits in cash at a post office. We expect that that transfer to the Post Office will be made by ACT—if not directly through a bank, such as Lloyds, or whatever, down the road—either into the basic bank account with outlets at the Post Office, about which the noble Lord, Lord Higgins, pressed me on our progress, or even via the more basic card account at a post office. That may meet the noble Lord's concern.

The noble Earl, Lord Russell, asked me to give an assurance that payments can be received other than through a bank. Yes, my Lords, they can be received through the card account at a post office, which is so simple, and into which benefits or credits are paid and from which cash is withdrawn. That is all that it does. There are no cheques, credit, problems with overdrafts or anything like that. Indeed, that may be the first step towards people becoming comfortable with an account and moving to other forms of banking mechanisms that allow them to pay by standing order, direct debit and so on. But I can give the noble Earl the assurance that he sought.

Claim forms will invite people to give details of their bank account when they claim. If they cannot or do not do so, the Inland Revenue will contact them to ask

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them for details and provide guidance for those who need help in opening an account, including setting up the basic account at a post office.

So as I said, the transfer of cash will take place by ACT, but the cash can be withdrawn at a post office if necessary—not through people's own bank, not through the basic bank, but through the card account. I have gone further and said that where, for example, parents with care want the protection of a separate account—I know that that has concerned the noble Earl, Lord Russell, in the past—they can have it and the child tax credit can be paid into a different account from that into which wages may be paid. So there is that security as well.

We have gone further still—again, I hope that the noble Earl will find this worth while—and said that, exceptionally, where even the Post Office card account is inappropriate—for example, in the case of travellers or of an ex-offender with no fixed address—some form of credit payment document may be required. We have taken careful steps in the Bill and in draft Regulation 12(3) to ensure that, where necessary, the Revenue can make payments by alternative methods.

We have given the final assurance, even beyond that, that we will not require payment by ACT until suitable facilities are available, including the post office card account—not just the basic bank or universal banking system. There will be no gaps in provision. I entirely accept that the transition must be seamless.

Lord Higgins: My Lords, I am most grateful to the noble Baroness, who is gradually helping to clarify the matter. Earlier, she appeared to be implying that an individual who was already receiving social security payments through a bank account would not be allowed to draw the tax credit by one of the other means. Perhaps I may also thank her for something. Just before Third Reading, she kindly sent round an example of the proposed tax credit claim form. We are grateful for that; it was interesting to read it. But it states:

"You need a bank or building society account into which we can pay credits. If you do not have an account, or want to use the Post Office or open a new account for tax credits, see Notes, page 31".

Unfortunately, the noble Baroness kindly sent us the form but not the notes, so we do not know what is proposed for individuals who receive the form and say that they want to use the Post Office or open a new account for tax credits.

Baroness Hollis of Heigham: My Lords, I apologise for that. If the notes are ready, I shall send the noble Lord a copy.

There is no problem if someone already has a bank account and wants to be paid by another ACT method. What I was saying is that what the noble Lord could not reasonably expect us to permit is people, while having a bank account and being used to it, to continue to be paid by Giro, or even order book, say, in perpetuity. On the noble Lord's first point, if they want to use other methods of payment such as the basic bank or a card account at a post office—that is

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a simple money in, money out account with no other facility—there is no problem. I hope that the noble Lord will accept that.

Given all of those undertakings, I should have hoped that I had met your Lordships' concerns. The amendment provides that even where a client already has a bank account or already has some credits, benefits or wages paid by ACT, he could none the less continue to require his or her child tax credit to be paid by some other method—by order book or, more likely, Giro.

Why did the previous administration seek to introduce a smart card for benefits payments—although we know that, given the overrun on cost and time, we had to pull back from that? For two reasons: they were worried about the cost of transactions; but above all, they were worried about fraud and safety. About £150 million a year is already lost in fraud because of Giro and order book payment methods. The larger the value of the benefit or credit, the greater the safety risk. What is a Giro? Essentially, it is an uncrossed cheque. Which has been the worst area of wide-scale fraud in social security? Housing benefit. Why? In part, because it has been paid by Giro, and tenants have stolen Giros from other tenants and landlords have in turn stolen them from their tenants.

The Government have been addressing those issues, as your Lordships will know. I have—rightly—been pressed to address the issue of fraud in housing benefit, part of which is attributable to the use of giros and the fact that they can be cashed by other people. We are making progress, but we must do more. Fraud occurs because handling giros is like handling uncrossed cheques.

I cannot believe that the noble Lord would wish to see benefits or tax credits, which could be of substantial value, being paid by giro, as in the case of housing benefit. At the very point at which we are trying to eradicate fraud in housing benefit, we should not import it into the tax credit system in the method of payment. That would be madness.

The child tax credit, in particular, is a high value credit. If it includes the cost of paying childminders or nurseries, it could be worth £300 a week, £600 a fortnight, £1,200 a month. Would any of your Lordships want that sort of money handled by giro or uncrossed cheque? Of course not. Yet, the amendment would mean that vulnerable people who live in rough areas or who are less financially sophisticated could be exposed to difficulties, just because of a sentimental attachment to ration books and giros. That is not safe. Nor will childminders and nurseries be keen to be paid in cash in that way.

The amendment is concerned with the way in which clients are paid. The payment will still be available in cash at the post office, if that is what the client wants. Furthermore, under ACT, the client will not have to draw out all of the £300 and wander home with all that cash, as would happen with a giro or a ration book. With a bank facility or a Post Office card facility, the client can draw out the £50 or £80 that she needs at that time. That will allow the client to budget and will mean

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that she does not put herself at risk. With ACT, clients can draw out what they need, when they need it. They can also use whichever post office they wish, which is not the case at the moment.

The money will be available in cash at post offices. It will be a more economical form of transaction for the taxpayer—a penny per transaction with ACT, compared to £1.40 per giro transaction—and will be more convenient for the clients, who can withdraw what they need, rather than the full lump sum, where and when they need it. It is a speedier form of payment. For childcare, in particular, people may need to adjust the arrangements several times a year. With ACT, necessary adjustments can be made to the payment almost immediately; with order books or giros, it would take some time, and there could be problems. It may also have the longer-term financial benefit of bringing people into the banking system. Above all, the system is safe and secure. It will reduce fraud of the sort that has bedevilled the housing benefit giro system and should reduce the theft that so many pensioners with order books fear.

The amendment is profoundly misguided. No one in the Chamber would advise a friend to receive or transmit sums of £300, £600 or £1,000 by the equivalent of order books, giros, ration books or uncrossed cheques. We are ensuring that people will have their cash at their post office. I hope that I have given the noble Earl, Lord Russell, the assurance that he wanted. We will not move to any system until we are confident that it is available to all who need to use it. I hope that, with that explanation, the noble Lord, Lord Higgins, will withdraw the amendment.

5.45 p.m.

Lord Higgins: My Lords, I listened carefully to what the Minister said, and I shall read it with even greater care in Hansard.

Much of what the Minister said was right, but she was rather over the top about what the amendment would do. It is not clear that it would have the effect that she suggested. If I were wrong about that, the clause would not read as it does. It says that the board can make regulations, and then it says:

"If the regulations make provision for payments of a tax credit...by way of a credit to a bank account".

If my amendment were as dramatic as the Minister sought to portray it, it would not say that. It would say:

"Regulations shall make provision for payments".

It does not. The clause is oddly worded, with an "if" at the beginning. I do not accept that the amendment would be as dramatic as the Minister says.

There is still considerable doubt about this aspect of the Bill. I was almost tempted to suggest that we should take the opinion of the House, but, on balance, I have decided not to. The important thing is that, when the regulations are produced, we should scrutinise them with great care. That shows how important it is that your Lordships' House should retain the right to throw regulations out, even if we still

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do not have the right to amend statutory instruments and orders. The events of the past few days show how important that right is, if only for use as a deterrent, in certain circumstances.

I look forward to receiving the notes about the form to which I referred. Subject to that, and as we will have a chance to examine the regulations, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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