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Lord Higgins: My Lords, one of the more infuriating aspects of media coverage at this time of year is the way in which they seem constantly to say that Parliament has risen for the Summer Recess when that is not the case. We are here this evening debating an undoubtedly important matter, although it may be complicated for the media. I exonerate from my remarks just now the BBC television parliamentary programme, which does better at this time of year. Instead of transmitting our proceedings at 5 o'clock in the morning, it sometimes does so as early—or late—as 10 or 12 o'clock.
The regulations cover the disbursement of £2.7 billion to particular groups of people. That is effectively the amount that the Chancellor raised in his Budget from national insurance contributions from individuals. The object of these statutory instruments is to implement over time the Act that we have recently spent a great deal of time debating, during which the noble Baroness provided us with a number of draft statutory instruments. Much of the detail that one might otherwise go into is not necessary, because we only recently discussed the definition of income and other issues. This is a question of tying up loose ends, although my noble friend Lord Freeman has made an important point. I understand that we have some time to consider it, as the point at which payments are made under the Act is a considerable time ahead.
It is convenient to discuss the two statutory instruments together, as the noble Baroness described. The first is concerned with the definition of income and the second is concerned with income thresholds and determination of rates. The first is concerned with the qualifications and the second deals with what you get if you meet the various qualifications for a tax credit.
As we have said time and again, this is a considerable extension of means tests, up to very high levels of income—up to £50,000 a year. When we discussed the Bill I said that it was appropriate to have regulations for particular quantities or aspects of the matter that changed over time, but not for permanent matters, which ought to be on the face of the Bill. The regulations sensibly deal with things that are open to subsequent amendment, by and large.
However, as my noble friend Lord Freeman said, individuals will have very limited understanding of what is happening. The Minister said that the
department will talk people through it, but the idea of discussing some of these matters on the telephone fills me with alarm. Considering some of the calculations, the amount of likely misunderstanding will prove a much greater problem than the noble Baroness suggests.On page 5 of the first of the regulations, dealing with people who are overseas, I am puzzled by some of the matters that can be deducted in calculating income. For example, I do not understand why,
- "any banking charge or commission payable in converting to sterling a payment of income which is made in a currency other than sterling",
The next point that gives me considerable cause for concern arises in the table on page 7 of the first of the regulations. It is concerned with payments disregarded in the calculation of employment income. Item 9 lists the incredibly anachronistic extra-statutory concession that,
- "Any cash payment received by the claimant as a miner in lieu of free coal, or the provision of coal itself, in relation to which income tax is not charged under Inland Revenue Extra Statutory Concession A6",
The noble Baroness suggested that the regulations on income thresholds and determination of rates were Esperanto rather than algebra. Once again, I regret that we do not have a blackboard to draw up the five pages of possible algebraic calculations that are expounded. They will be very complicated and apparently the department will discuss each calculation with individuals on the telephone. It is not that they are not clear. If one reads all five pages, provided that one has at least an O-level—or probably an A-level, or whatever the appropriate qualification is nowadays—in algebra, one can probably get through them quite easily. They are perfectly clear, but they are extraordinarily complex. I think that both these sets of regulations are very much Inland Revenue-based regulations, whereas the other two sets of regulations are more concerned with the traditional work of the Department for Work and Pensions.
I have one particular point on the algebra. Some of the algebra deals purely with the terms of particular items such as MR over MI, which are defined in the text. However, some of the formulas include absolute numbers—such as £5,060 x N2 over N1. I hope that the noble Baroness can explain to us what these absolute numbers actually represent. If they represent
the threshold or the rate or whatever it may be, will amendment of these statutory instruments simply alter the particular numerical figures enmeshed in the algebra?Although these regulations are extremely complicated, on the whole they are not out of line with the debates that we had and the points that we raised when discussing the legislation itself. I therefore hope that we can have some clarification of these particular items which I think it was right to select in the course of our discussion.
Earl Russell: My Lords, after an afternoon in which the Government may perhaps not have regarded me as being particularly helpful, it is a pleasure to have in front of us regulations to which I can give a very warm but not altogether unreserved welcome. These regulations are attempting to do something rather good: they are attempting to produce a smoothing out process in the level of income between the disadvantaged and the more advantaged which I think will probably do more to increase equality than almost all the rest of what this Government have done. That I welcome. It is, of course, an extraordinarily complicated operation. While I was listening to the noble Lord, Lord Higgins, I was suddenly reminded of the old rate-equalisation grant which obviously served a necessary and valuable function but was in constant need of constant revision and uprating—as I suspect that these regulations will be, too.
There was one nice moment when the Minister was asking whether we wanted her to explain anything further that I was suddenly reminded of Dame Helen Gardner, at the Lady Chatterley trial, turning to the judge and saying, "You would not want me to explain that—I could".
I shall, however, make one small note of criticism. The Explanatory Memoranda are of not quite the quality that we are accustomed to receiving from the Department for Work and Pensions. In trying to discover what was going on, I had at all stages to turn to the regulations themselves. I did not really have a very clear idea after reading the memoranda.
I deal first with the definition and calculation of income regulations. I shall not resume my debate with the noble Lord, Lord Higgins, about the tapers; we have had that so many times in Committee. I think that we understand each other's positions, which are necessarily different. Most of the provisions follow the forms of operation of the Inland Revenue which are familiar. The provision for diversion of income, of course, will need constant revision. One of the greatest fields of human ingenuity has been finding different ways of diverting money from the Revenue, usually by separating the use of the money from its ownership. I do not think that any century has yet matched the skill of the 15th in doing that, and I hope that the 21st will not be the first to do so. So I shall be ready for occasional revisions of that.
I am very pleased by a number of the disregards in Regulation 19 of those regulations, particularly the one to which the Minister drew our attention about
maintenance for children. That is a very valuable and hard-won concession and I welcome it. I welcome also the disregard of student loans as income. That is something which I see with delight. Student loans are not so generous that one can afford them counted as income, and in any case they are not really income as one has to pay it all back again afterwards. I thank the Minister for the disregard of royalties and public lending rights which is a concession to my noble friend Lady Barker.I am glad to see the allowance of entertainer's expenses. I am reminded of a tax story in the New York Times. There was a violinist in a New York restaurant who, of course, had to wear a black tie every evening. Every year, he was audited by the Internal Revenue Service for his claim for expenses for the cost of laundering and dry cleaning his dress clothes. Every year he came out with flying colours, but every year they did it again the next time. The Minister, by getting this in here, has saved us all a considerable amount of bureaucratic hassle. I congratulate her on it.
I think that the Minister is probably also right to have the minimum cut-off point at £26. My wife receives an old age pension of 37½ pence a week, which I think must cost a great deal more to administer than she gets out of it. So I think that that is a sensible approach to that.
I must admit that I do not entirely follow the algebra in the tax credits income threshold operation. I actually do have an O-level in mathematics, but I got it only by the skin of my teeth. I was never more surprised in my life to be successful in an exam. Regardless, it is not enough to make me understand the algebra here. I think that I understand the theory behind it when it is explained in the Minister's words. I do not think that I have any complaint to make about it.
There is a point on banking charges and the difference between net income and gross income. What one receives from abroad, as I have been recently reminded on receiving a most unexpected royalty cheque from the United States, is actually a very great deal less than the sum on the cheque. So one is actually being assessed on the sum that one actually receives. I cannot see that that can really be a grievance. However, if it really worries the noble Lord, Lord Higgins, I merely say that it would cost us a great deal less if we were to go into the euro.
The noble Lord, Lord Freeman, raised a very serious point. However, to say that it is a serious and important point is not, I am afraid, necessarily to say that it has a logical answer. I remember that the point was made with considerable force in a CAB report, Benefits and Work, which I think was 1996, that the whole social security system, and the Inland Revenue system with it, was designed on the assumption that one was either in work or not in work. The nature of the economy nowadays is such that that is not the case.
I really do not think that there is any logical, coherent way in which any government can deal with that. I cannot see any reason for thinking that any way would be better than the way that we have here.
No doubt we shall be wanting to smooth it out in due course, and further regulations will be put before us, and further dinner breaks will be taken up on it. However, I have no complaint to make about the way in which it is done at the moment. It is simply a problem to which none of us has come up with a solution. Since that includes me as much as anyone else, I am in no position to make any complaint. I welcome the regulations only with the few reservations that I have expressed.
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