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Lord Higgins: My Lords, the House will be grateful to the Minister for that explanation. Although it is helpful to take the two sets of regulations together, I am not entirely clear about the relationship between the two. The Explanatory Memorandum for the Social Security Commissioners (Procedure) (Tax Credits Appeals) Regulations 2002 states:

"The Regulations have been drafted as a freestanding set. It is felt that this will make the regulations more user-friendly and avoid the need for cross-reference with the Social Security Commissioners (Procedure) Regulations 1999".

I understand that. However, would it not also have been sensible to bring the two sets of regulations together? I assume that that has not been done because the vires of the two are not the same. Nevertheless, the two have been presented together. Given that the arrangements are transitional and may eventually be overtaken by events, I think it particularly important that people should be able to read and consider them together.

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When we were discussing the Tax Credits Bill, I had reason to complain—I might almost say bitterly—about the failure of another place to scrutinise affairs as well as they should have done because of the way in which the procedures there had been programmed or "modernised". However, I cannot say that about the procedures in another place yesterday. My honourable friend Mr Mark Prisk, the Member for Hertford and Stortford, raised a number of issues relevant to these orders to which the Minister largely replied. I do not propose to go over that same ground again as the noble Baroness, the noble Earl, Lord Russell, and myself went over it in the course of discussing the primary legislation and I do not think that we need to go over every single aspect of it.

However, there is a basic difference between these Benches and the Benches opposite as regards the right approach for the appeals we are discussing. We continue to maintain that tax credits to a large extent constitute public expenditure and that only a small element—perhaps only 10 per cent of the total—can reasonably be regarded as having something to do with tax in the sense that a deduction is made from the tax that has been payable as opposed to benefit simply being paid out. The argument about the tax treatment in public expenditure terms of tax credits has a parallel in the debate about which tribunal should consider appeals against decisions—and whether it should be the usual social security tribunal or the Inland Revenue in the form of the tax commissioners.

I note that the President of the Office of the Appeals Service and Chief Social Security and Child Support Commissioner, Judge Michael Harris, states:

"The removal of Tax Credits from the Appeals Service is simply a barmy idea. Tribunals have Tax Credit experience and there is no reason why they cannot continue to cope with them. The Appeals Service will probably be asked to deal with Tax Credits for a short period of time initially, however if it is then transferred to the Inland Revenue this is a waste of public money. It is a political issue. Whatever their title Tax Credits are benefits not tax".

That coincides very much with the views that we on this side of the House have expressed.

At all events it appears that appeals will continue to be overseen by the social security appeals process until such time as the noble and learned Lord the Lord Chancellor sorts out the reform—I suppose that that is what it should be called—of the appeals procedure more generally. Can the Minister give us any indication of when that change is likely to take place? I say that without prejudice to the fact that we still think that it is more appropriate for such matters to be subjected to what one might consider the less inquisitorial approach adopted by the social security tribunal as opposed to that typically adopted by the Inland Revenue when people appeal against its decisions.

In the course of debating the Tax Credits Bill on 23rd May 2002—that appears at col. 157 of Hansard—I was not clear whether we were referring to general or specialist tax commissioners. The noble Baroness kindly said that she would write to me on that matter.

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I do not doubt that she did but, alas, given the cupboard that serves as my office here, I cannot remember what the answer was. If she can think of it off the top of her head, or if her officials in the Box can scribble it out frantically, as they appear to be doing, I may receive clarification on that point.

Incidentally, as regards appeals and whether people are entitled to tax credits, I heard in passing this morning a statement—I believe that it was on the "Today" programme or on one of the other news programmes—revealing the amount that is now not claimed by people entitled to social security benefits. That is certainly a large amount for, as the NAO pointed out in a recent report, about 20 per cent of pensioners do not claim all the benefits to which they are entitled. However, it was also asserted that the total sum claimed by people who receive benefits to which they are not entitled constitutes an even higher figure. That would be a large amount indeed.

I have one final point to make. The tax credits explanatory notes run to some 44 pages plus a form at the back. I have complained previously that the form has been shortened at the expense of lengthening the explanatory notes. It would therefore be slightly inappropriate for me to suggest that the explanatory notes should be lengthened even more. I refer to the TC600 notes on tax credits.

However, so far as I can see, despite all the information that is given in the notes, which run, as I say, to some 44 pages, there does not seem to be anything that might be helpful to claimants both with regard to what the appeals procedure is—however, that information would be rather complicated given that the procedure is in a transitional phase of unknown length—or what the penalties are for wrongly claiming in either of the two respects to which the Minister referred in her opening remarks. I should have thought that for the sake of half a page or a page extra on top of the other 44 or 45, there might be a case for covering those two points when the explanatory notes are reprinted.

There continues to be a difference between the two sides of the House. We still believe that it would be better to leave arrangements with the social security side rather than the Inland Revenue. Despite those important issues, as long as the situation does not change we remain content. However, I hope that the Minister will give us some idea when the transitional period is likely to end.

8.15 p.m.

Earl Russell: My Lords, I hope that the noble Lord, Lord Higgins, will forgive me for saying that although we share this side of the House, we do not always share all the opinions expressed on it. Hearing the noble Lord on the question of whether tax credits constitute public expenditure takes me back to many memories of committees upstairs. It also reminds me of an incident in 1649 and the Bill that made England a republic and restored the country to its ancient state of a commonwealth. One Member asked how England could be restored to its ancient state of a republic when

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it had never been one. Henry Marten, who was probably the nearest thing the Long Parliament knew to an atheist, replied that he was deeply troubled in his conscience by the interpretation of a text of scripture which said that a man who had been blind from birth had had his sight restored.

The question of whether a reduction in taxation amounts to public expenditure is in the same sort of theological realm as Henry Marten's question. It makes a good story, but it does not lead to any particularly easy resolutions. However, I shall not pursue that point further.

The regulations, as the Minister made clear, are transitional. We on these Benches are generally satisfied with the transitional regulations, although we retain some of the anxieties expressed on 24th January by my honourable friend Professor Webb in the other place in respect of the final form when the transfer to the Inland Revenue is complete. There is a question of change in this regard about which thoughts must be had and to which I am sure that we will return in due course.

I have a few specific points arising from the regulations. In Regulation 19 of the Tax Credits (Appeals) (No. 2) Regulations 2002, the Minister has found a most elegant way in which to deal with the conflict between the desire to reduce the size of the tribunal and the need for expert advice. I only wish that, between us, we had thought of that in 1998 when we spent ages arguing around a question to which that seems to be the answer.

On the other hand, there is a potential conflict between Regulation 19(3) and Regulation 14(1), and I should be glad to know how it could be resolved. Regulation 14(1) deals with cases in which medical advice may need to be withheld from the person who is the subject of it for fear that it may cause distress. It says,

"Where . . . there is medical advice or medical evidence relating to a person which has not been disclosed to him and in the opinion of a legally qualified panel member, the disclosure to that person of that advice or evidence would be harmful to his health, such advice or evidence shall not be required to be disclosed to that person".

This is presumably a mental health provision, which I understand perfectly well, but I would be glad to know how it is reconciled with Regulation 19(3), which says,

"A copy of any written report received from an expert in accordance with paragraph (2) shall be supplied to every party to the proceedings".

There is at least the appearance of a conflict, and if there is a resolution I should be glad to hear it.

The Minister will not be surprised to hear that I am also concerned about Regulation(2)(b), which relates to postal times. The Minister knows that that is a long-standing concern of mine in which I should declare an interest that I have not previously had to declare. Last week, I received a penalty notice of £60 for parking my car without displaying my residents' parking permit. The records show that the permit had been issued three days before the date of the alleged offence. I received it four days afterwards and I could not have displayed

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what I did not then possess because it was still in the post. I considered appealing but was given a 50 per cent discount on the fine if I paid within 14 days. However, I could not appeal until those 14 days had elapsed so I had to pay the full penalty. The Government's assumptions about the regularity of the post are grossly out of date and need rethinking.

There is in Regulation 2 of the Tax Credits (Appeals) (No. 2) Regulations a lack of a level playing field. It states that any notice that is,

"required to be given or sent to the clerk . . . or to the Board . . . shall be treated as having been so given or sent on the day that it is received".

However, a document that is sent to anyone else should be taken as being received on the day on which it is sent. That appears to involve the lack of a level playing field. That point should be added to the unreliability of the post. We cannot continue combining the commercial enterprise with the universal service obligation. If we put one thing on top of another we shall have a situation that will produce much resentment and about which I fear we may hear rather more.

Subject to those few points, and with the further addition that I should like to hear the Minister's comments on the few but interesting criticisms made by the Child Poverty Action Group, with which I shall not detain the House now, I welcome the regulations.

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