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Mr. Letwin: The Minister is right; she has not mistaken our argument. I am sorry if the term "second home" caused confusion. It is, literally, a second dwelling that is treated for capital gains tax purposes as a principal dwelling. We believe that if such a house is owned by someone who lives elsewhere in tied accommodation, it should be treated as a principal dwelling--the dwelling--for the purposes of the working families tax credit. We do not want it to be treated as a piece of capital that leads to disqualification from that credit.

I freely admit that we are not launching an attack on the Government. That would be dishonourable because they are merely continuing a practice that pertained in family credit. Our purpose is to spot a lacuna that it is now easy to cure because the Inland Revenue administers both measures. The definition is easily available from the Taxation of Chargeable Gains Act 1992, for the reasons that I identified--the records are in a single place and easily accessed. All we need is a simple change so that farm labourers and others who are in tied accommodation can obtain the working families tax credit to which their income would otherwise entitle them, notwithstanding the fact that they have purchased a house as a hedge against exposure to the property market because they live in tied accommodation. It appears that the Minister understands our concern. We wait to see whether she accepts the new clause.

I do not know whether the way in which we have drafted the new clause and the mechanism that we have used are appropriate. The Minister has at her disposal the vast resources of the Treasury Solicitor and parliamentary counsel. No doubt she can highlight deficiencies in the drafting and, perhaps, in the mechanics, but the principle is clear and right. I have constituents who are, and have always been, in work and whose income is zero. That might strike people who are not from rural areas as strange, but that is the case for many tenant farmers who find themselves at the bottom of the heap. They are precluded from receiving the working families tax credit by virtue of owning a house, which in many cases is modest, as a hedge against the fact that their tenancy forces them to be in tied accommodation. People in the countryside believe that to be unjust, which it clearly is. I hope that the Minister will tell us that, no matter which party is in power after the election, it will be a matter of political consensus to change the system by an appropriate mechanism.

Mr. Edward Davey (Kingston and Surbiton): Today we have seen the House at its worst and best.

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Time wasting and poor arguments in the debate on the business of the House motion were most unfortunate because that has prevented us from spending more time on this new clause.

I am persuaded by the arguments of the hon. Member for West Dorset (Mr. Letwin). I wondered what the new clause was trying to achieve because it was not obvious, but his remarks and the Minister's helpful interventions allow mere mortals to get our brains around it. He seems to have hit on an interesting issue. He made it clear that he was not trying to make a party political point, but trying to assist the Government in the operation of their policy. The argument is not just about the capital rules, but about a particular aspect of them; nor is it simply about social justice, but about labour mobility and the efficient operation of the labour market, especially as it applies to rural areas where most tied accommodation is to be found. We know how problematic and severe the difficulties are in many of those areas.

I doubt whether the Minister will accept the new clause. However, unless she has arguments to override the hon. Gentleman's case--I shall pay great attention to her comments--I hope that she will not dismiss the idea out of hand and that her response is in tone with the hon. Gentleman's remarks. We may well need to tackle the lacuna early in the next Parliament to ensure that there is social justice and efficiency in the operation of the labour market. This is a small but important issue.

Dawn Primarolo: I hope that I will be able to help the House and that the hon. Member for West Dorset (Mr. Letwin) will accept my reasons for not being able to accept the new clause, which relates to people in tied accommodation. He mentioned tenant farmers, but there is a long list of people who also live in such accommodation. The issue involves property that they might hold for their retirement or when they move occupations, when it will become their main residence. He fully appreciates that if the property were rented out and an income generated, the working families tax credit would probably not be triggered because the income from the property might take the family's income beyond its limits.

6.30 pm

When the Government designed and implemented the working families tax credit, we used family credit as a building block for reasons of speed. The working families tax credit became operational in about 18 months and it has been a huge success in providing help to working families. I think that the hon. Member for West Dorset acknowledged that fact when he said that a group of people should be entitled to the credit even though they do not receive it at present because of the way in which the rules operate.

Neither during the design period of the working families tax credit nor during its operational period have we received representations that this issue might be a problem. Foot and mouth disease and the problems that it has caused in rural areas have probably put the spotlight on tenant farmers even though they are not the only people affected. Despite that fact, the issue is low key and it has hardly registered on our radar in terms of the

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number of representations that have been made. None the less, the hon. Gentleman has highlighted the problem of tenant farmers. If they lived in the other house, there would be no question about their ability to claim the working families tax credit provided that they received no other income that would take them over the limit.

Mr. Howard Flight (Arundel and South Downs): The problem is not just foot and mouth, but that of declining farm incomes. Since the working families tax credit was introduced, I have been surprised to find in my constituency that many tenant farmers, who do not own other houses, rely on the credit to survive. Foot and mouth is not the immediate issue.

Dawn Primarolo: I am grateful that the hon. Gentleman is so appreciative of the credit. I will not descend to making a partisan comment--although I am sorely tempted to do so--because he makes a reasonable point about the issues involved.

I appreciate the comparison that the hon. Member for West Dorset made with capital gains tax, but the new clause will not necessarily produce the outcome that he seeks. It refers to all the functions covered by the Inland Revenue, and I cannot accept the mechanism that he suggests because there is a real risk that it could inadvertently change the application of the law in several other sectors. I am sure that he does not intend it to do that. For example, it could have implications when the Inland Revenue has to take a view on all sorts of tax issues relating to the status of a company, its shareholders, or employees when accommodation is provided. I am sure that he will accept that point.

The phrase in the new clause "all of its functions" worried me to such an extent that I had to ask one of my Revenue officials to return from a day's holiday to help us with this issue. It happens to be his birthday and I am sure that the House is extremely sorry to have deprived him of the opportunity to celebrate it with his children. [Hon. Members: "Oh dear."] Even Revenue officials are entitled to a day off occasionally.

The working families tax credit is governed by regulations, and regulations that come before the House are the appropriate means to implement such a change if the Government are persuaded that it is necessary. About 17,000 farmers and farm labourers already receive the working families tax credit, and it greatly assists them.

I hope that the hon. Member for West Dorset will take my word that the new clause does not provide the solution and that it would create problems elsewhere. Therefore, I hope that he will not press it to a Division. If he does, I regret that I will have to ask my hon. Friends to oppose it. I need to consider the principle in more detail as there are other complications. For example, tenant farmers are self-employed and the rent for land, which may be subject to a low rate, may be offset in their profits and losses.

This is not a huge issue. People are not knocking down the doors of the Treasury or the Inland Revenue or even writing to us about it. However, after the return of the House, I will be prepared to reconsider the matter and I undertake to speak to the hon. Gentleman about how we can deal with the problem. We shall certainly have corrected the problem by the time that integrated child credit takes over in 2003, but he is pressing me to act a little more quickly. I am willing to consider the issue

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in more detail and the secondary legislation route of regulations may be the best means of addressing the issue if the Government decide to act.

The hon. Gentleman will understand that I cannot give him an absolute commitment, but I give him my word that I shall consider the issue closely and talk to him again, if necessary, about the details.

Mr. Letwin: I am grateful to the Paymaster General for her reply. I take her point that a statutory change of type suggested by the new clause may have unintended consequences. I am delighted to hear that it may be possible to resolve the problem in regulations. Therefore, it appears that, whoever is in government, we shall be able to find a solution, and that fact will be widely welcomed.

The Paymaster General is right: she will not have received many letters on this subject. The representations that have been made to me and to other Members representing rural constituencies are almost the result of happenstance and of talking to individual constituents. As she and my hon. Friend the Member for Arundel and South Downs (Mr. Flight) suggested, the decline in farm incomes, which has been compounded by foot and mouth, has brought the issue to light. However, I regret to say that most of the people most affected are not in a condition to write letters to Ministers. That is why urgent action is needed. Regulations might be an appropriate way forward and I take the hon. Lady's word that she will consider their introduction. That is what we will do if we find ourselves in her shoes after the election. Therefore, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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