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Earl Russell moved Amendment No. 18:

"( ) The Secretary of State shall have discretion to allow an appeal out of time where the delay was caused by illness or other circumstances not within the control of the claimant."

The noble Earl said: My Lords, I must confess to remaining quite remarkably unstunned. I bring back Amendment No. 18 for a very limited purpose. The Minister told us in Committee when I moved it that a large part of the Bill was covered by the Taxes Management Act 1970, which conceded the principle that I wanted. However, she believed that there was a small area to which the 1970 Act did not apply. So I have brought back the amendment in order to discover in which parts of the Bill the principle of this amendment is not applied by the 1970 Act. I had tabled the amendment on Report but did not move it because it arose during the hours of darkness when it would not have been appropriate. I beg to move.

Baroness Hollis of Heigham: My Lords, I think that I can give the noble Earl the explanation he seeks. If I cannot, I hope that he will allow me to follow this up in writing.

Section 49 of the Taxes Management Act 1970 allows someone to ask the Inland Revenue to accept a late appeal if there was a reasonable excuse for not making the appeal in the time limit. Under the section, the matter is decided by the commissioners if the Inland Revenue does not agree with the appellant. Section 49 is in Part V of the Taxes Management Act, and so applies in relation to tax credit appeals by virtue of Clause 39(6).

The noble Earl was concerned in Grand Committee about whether special provision for late appeals was needed during the transitional arrangements for claimants' appeals. I think that those were the grounds on which he quite properly explored the issue in Grand Committee. Your Lordships will be aware that a new clause has been inserted into the Bill to allow tax credit appeals by claimants to be heard by the (Social Security) Appeals Service for a transitional period

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rather than by the tax commissioners. While those transitional arrangements are in place, Part V of the Taxes Management Act will not apply to them.

I have written to the noble Earl about the point he raised. I am also happy to confirm again that there is scope for late appeals to be brought to the Appeals Service, where it is in the interests of justice for late appeals to be heard. Applications for such late appeals are to be determined by a legally qualified panel member and not simply at the discretion of the Secretary of State. These arrangements, which are set out in Regulation 32 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, will apply during the transitional period for claimants' appeals.

The noble Earl pressed me particularly on which parts of the Bill are not covered by the Taxes Management Act. They are Part 2—"Child benefit and guardian's allowance"—and the transitional arrangements which I have just described for claimants' tax credit appeals. However, both are covered by equivalent arrangements in social security law which allow late appeals.

Earl Russell: My Lords, I think that, with that, the Minister has told me everything that I had hoped to hear. I thank her warmly and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 41 [Annual review]:

Lord Higgins moved Amendment No. 19:

    Page 26, line 40, at end insert "and take steps to ensure that each amount fully retains its value"

The noble Lord said: My Lords, to some extent, and perhaps to a considerable extent, Amendment No. 19 covers much the same ground as Amendment No. 2 with which it was not grouped. As we said, the ground covered by Amendment No. 2 had previously been discussed, on 23rd May, at col. CWH 143, in Grand Committee. This amendment effectively raises the issue of uprating the various tax credits.

Amendment No. 19 and those with which it is grouped, particularly Amendment No. 21, seeks to ensure that, after laying the report already provided for in the clause to which the noble Baroness, Lady Hollis, has referred, the Treasury must take action to ensure that three things happen: that the basic working tax credit is increased with price inflation, the child tax credit in line with earnings, and that the child care element of the working tax credit is increased by an amount not less than the increase in price inflation. What we are seeking to do here—we may or may not have been wholly successfully—is effectively to include in the Bill the assurances that the noble Baroness, Lady Hollis, has given us previously and today on Amendment No. 2, which we discussed earlier.

In our debate in Grand Committee, the noble Baroness made a statement which I found somewhat curious. She said that these tax credits,

    "are not part of the social security system".—[Official Report, 23/05/02; col. CWH 143.]

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I was struck by that remark. It seemed to me that they clearly are part of the social security structure, and it never occurred to me for one moment that they were not. As I have already pointed out, they are all concerned with a pretty massive redistribution of income to various cases which the Government feel ought to be helped. The question then is whether they should be uprated in the same way as other social security benefits. Reference was also made to the "Rooker-Wise amendment". More accurately, I think, it should be the "Rooker-Wise-Lawson amendment" as it was carried by a coalition of individuals who supported the proposals for uprating.

The noble Baroness also surprised me by saying, "We cannot accept this because the Government cannot bind their successors"—which is of course absolutely true. However, that does not mean that one cannot include in legislation provisions which are designed to continue indefinitely and can be designed to be reversed either by the same government or certainly by successive governments. So I do not really understand why she took the view that one could not include uprating provisions in the Bill.

I said that I hoped that our amendments had effectively embodied what the noble Baroness outlined in Grand Committee, at col. CWH 144, on 23rd May. Not surprisingly she began by saying:

    "It is slightly more complicated than that. We are dealing with three elements in tax credits. First the expectation is the basic working tax credit will be reviewed annually in line with prices".

She said that it would be reviewed, not uprated. She continued:

    "The Chancellor of the Exchequer has already made a commitment that the uprating of children's tax credit, to my delight, will be in line with earnings, which is better than prices".

So far, so good as regards what we seek to put on the face of the Bill in paragraphs (a) and (b) of our amendment. For the reasons I mentioned, I do not believe that the earlier objections to our doing that were valid.

As regards paragraph (c) of our amendment, the noble Baroness continued:

    "However, the situation is slightly more complicated because we do not want automatically to link"—

splendid grammar, as always, with no split infinitives—

    "the third element, which is the childcare element, to price inflation, because childcare costs do not necessarily follow those same trends".—[Official Report, 23/05/02; col. CWH 144.]

I was not clear whether the noble Baroness argued that childcare costs do not go up as much as price inflation or whether she believed that they went up more and therefore she wanted to retain a degree of flexibility. We, being charitable as always, put the second interpretation on her remarks; namely, that she thought that occasionally childcare costs might go up faster than inflation. It seems unlikely that they would go up significantly less than inflation. Generally speaking, service sector costs tend to go up more rapidly than other costs. That has always been the case

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as regards the wages of hairdressers—a well known example used in first-year economics exam papers. Paragraph (c) of our amendment proposes that,

    "the childcare element of working tax credit is increased by an amount not less than the increase in retail price inflation".

As I say, we do not accept the argument that the measure is binding on future governments. All kinds of measures are designed as if they were perpetual. I hope that the noble Baroness will accept that we merely seek to embody in the Bill what she has already said the Government undertake to do. I beg to move.

6.45 p.m.

Baroness Hollis of Heigham: My Lords, I am rather disappointed that the noble Lord felt that he needed to move the amendment after the discussion and debate we have had and the undertakings I gave in response to Amendment No. 2 in the name of the noble Earl, Lord Russell. I did not give assurances; I gave undertakings. I chose my words carefully as the noble Earl, Lord Russell, was anxious that it should not be a matter of expressing warm words but rather of giving an undertaking for which the Government could be held to account. I hoped that I had met your Lordships' concern. I was able to give that undertaking for the first time. Although my right honourable friend in another place had expressed sympathy for the proposal, she made clear today—I was able to repeat her assurances to the House—that we shall undertake to raise working tax credit in line with RPI this Parliament.

The noble Lord knows that the Chancellor of the Exchequer and my right honourable friend have already made it clear that the children's element will be raised in line with earnings. We have given a commitment to that extent. I sought to explain at some length—I thought that your Lordships had accepted my arguments—that it is not appropriate within such undertakings to deal with childcare in the way that the noble Lord proposes, partly because we do not know what will happen as regards supply and demand but, more generally, because we are in the middle of a childcare review.

There are all kinds of ways of meeting the very real need for childcare places. At present only one childcare place is available in all its forms for something like every eight children in the country. We are looking at ways to promote childcare. Earlier I tried to explain to your Lordships that perhaps a better or alternative way of doing that would be, instead of returning 70 per cent of the cost, to consider a different figure, perhaps a higher one or one that changes as people have more children. Given that, as far as I can see, childcare costs are almost certainly far more expensive in London than, say, in the West Country, it may be better to consider the matter on more of a regional basis. Alternatively, the right way to meet this need may be to look at support for informal childcare which might involve a different kind of financial structure than that which is envisaged.

For all those reasons it is not appropriate in my view—I thought that your Lordships had accepted that, certainly, judging from the warm response of the

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noble Earl, Lord Russell, he had—to include the measure that is proposed. We have never included that formula of words in social security or tax credit Bills. What we have done today—I thought that your Lordships welcomed that—is to give not just assurances but undertakings that the two key elements—the adult element and the children's element—will rise, in the case of the adult element, in line with prices and, in the case of the children's element, in line with earnings, this Parliament. Obviously, I cannot give undertakings beyond that. The noble Lord is pushing me far too hard, particularly as regards the childcare element, for all the reasons that I tried to explain earlier. Given that the Government genuinely have gone a long way to try to make crystal clear our commitments and obligations today in the undertakings that my right honourable friend has been able to give, I hope that the noble Lord will not press the matter further.

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