Draft Tax Credits Up-rating Order 2001

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Mr. Clappison: I have studied the statistics to which the Paymaster General refers. It may not have caught my attention, but I do not think that she has answered my earlier question. Will she say, or tell me where the figure appears in the statistics, how many higher rate taxpayers receive working families tax credit?

Dawn Primarolo: I do not have the statistics before me. I did not expect that we would discuss the latest round of working families tax credit statistics.

Mr. Peter Luff (Mid-Worcestershire): Extraordinary.

Dawn Primarolo: It is not extraordinary. An allegation is being made about higher rate taxpayers. Anyone who understands the relationship between the taper, the threshold and the premiums will see that the average types of claim made put people firmly within a certain income range.

Mr. Clappison: Does the hon. Lady accept that the combined effect of the taper and the increase that the order brings about will push receipt of working families tax credit further up the earnings scale?

Dawn Primarolo: When the Conservatives increased family credit premiums, which they did occasionally, a full range of people was entitled to some payment, and the same is true now. However, the hon. Gentleman's argument, which the statistics do not bear out, is that people on very high incomes are benefiting from enormous amounts of working families tax credit.

The hon. Gentleman's final point concerned working families tax credit fraud. He makes a serious point, because family credit was widely open to fraud. The difference between working families tax credit and family credit is that, because the former is paid through the wage packet and the Inland Revenue does the assessment, there can be wider checks on people's income range.

The only allegation of fraud that relates to the payment of child care tax credit is that people claim it for a child going to a particular child care provider and then move the child to another carer. In every case where such an allegation has been made, the facts have been checked. The Inland Revenue continues to monitor such claims closely; it is true that some people have changed their child care arrangements for a variety of reasons and gone to another provider. As yet—it is a hopeful sign—working families tax credit is not subject to the same amount of fraud as family credit, because that payment was made by giro; we are confident that working families tax credit goes to the people who should receive it. The compliance regime in the Inland Revenue means that we can continually assess fraud in respect of working families tax credit; if there is fraud, the working families tax credit can be removed. I do not know how many claims for working families tax credit claims have been terminated, but many people who apply for it are found not to be entitled to it because the Inland Revenue assess entitlement more rigorously in the first place.

I am not convinced that the hon. Gentleman believes that working families tax credit is a worthwhile payment, but I assure him that the matters he raised are being dealt with. They will continue to be carefully handled by the Inland Revenue to ensure that only those who are entitled to it who receive that tax credit.

11.14 am

Mr. Clappison: I am grateful for the spirit of the Minister's assurances, but there are more specific questions to which I would like answers. I appreciate that the Minister may not have the figures on fraud immediately to hand, but I am sure that she agrees that it is important that we tackle fraud robustly. If she does not have the figures now, I should be grateful if she would write to me on how many cases of fraud have been detected and in how many cases working families tax credit has been stopped. [Interruption.] I am sorry if the Whip finds that rather tedious, but he will have quite a few constituents, as I do, who are concerned that fraud is tackled properly and who want the Opposition to ask appropriate questions to ensure that benefits, which are ultimately paid for by the taxpayer, go to those who should receive them. I should also be grateful if the Minister could tell me how many prosecutions there have been in respect of working families tax credit wrongly or fraudulently claimed.

I shall go through in order the points that were made earlier. I note the Minister's statistics on disabled person's tax credit. I asked her about the number of people eligible to receive that tax credit, compared with the number who in fact received it, which, from memory, is around 23,000 people. It would also be interesting to know how many people on benefits would try to get into work if they were given the right encouragement—a point with which the hon. Member for Northavon (Mr. Webb) is familiar. I do not want to tempt him into making a long contribution, but, as he has just arrived, I welcome him to the Committee.

I do not want to stray into the issue of burdens on employers other than to say that I think that firms will find small comfort in the Minister's assurance that there will be no extra cost on them when, on the Government's own assessment, they already face extra costs of £105 million. Small firms with between one and four employees are disproportionately affected; a quarter of the costs fall on such firms.

On take-up of the tax credit—an important question, given that the order seems to extend the available amount—the Minister has confirmed that the latest figure is just over 1.1 million people. I note the Minister's comments and comparisons with family credit. Two points must be made on that. First, the figure is disappointing when compared with the Chancellor's original estimate in 1998 of 1.5 million people by 2001. The Chancellor revised that figure downwards the following year to 1.4 million people by April 2001. In either case, the take-up is way below the Government's original ambition—and we have heard about their expensive advertising campaigns after the disappointing take-up. I assure the Minister that, if we have the opportunity, we will ask more questions about that.

Secondly, the Minister has made comparisons between family credit and working families tax credit. I do not have the figures immediately to hand but I recall criticism about the level of take-up of family credit, which was, from memory, about 70 per cent. If 1.1 million is the right figure, that is not dissimilar from the number taking up family credit—which was the subject of criticism by the Labour party when it was in opposition. The Minister might say that more people are taking up working families tax credit than were taking up family credit, even if the proportion that was eligible is not broadly dissimilar. That might be the case, but the Minister has been unable to rebut the fact that working families tax credit is available to those who are high up the earnings scale and, as a result of the order, will be available to people who are earning even higher salaries.

The Minister asked about my personal circumstances. I am always a bit shy about giving such details, but I will say that I am in the happy position of having four children. I am not a lone parent; my wife stays at home to look after our family. Families such as ours receive nothing from benefits of this type from this Government. [Interruption.] The Government Whip is right: after the election, we will receive a benefit as a result of the reforms that the next Conservative Government will put in place.

The Chairman: Order. May we stick to the business before the Committee? The banter across the Room should cease.

Mr. Luff: On a point of order, Mr. O'Brien. Will you confirm that nothing in our Standing Orders prevents any member of the Committee from making a contribution from the Floor? As the Government Whip is so anxious to make his views known, perhaps he might like to catch your eye after the hon. Member for Hertsmere has made his point.

The Chairman: That is entirely a matter for the Government Whip.

Mr. Clappison: I apologise for allowing myself to be tempted off the straight and narrow by the good-natured interventions of the Government Whip, which I always take in good part. I will bring myself firmly back to the order.

The order and the one that follows in June will extend working families tax credit far up the earnings scale. It will take it that bit further—

Mr. Hendrick: Will the hon. Gentleman give way?

Mr. Clappison: Once again, I ask the hon. Gentleman to listen to my example; he might want to gainsay it.

If I were not in the position that I described but a lone parent on an MP's salary, which is a matter of public knowledge, with children aged 15, 14, 11 and 6, I would come within a whisker of eligibility for working families tax credit. I have not worked out the figures—the Minister might wish to supply them for me—but, given that a lone parent who is looking after three children would receive tax credits up to £45,500, I might be a beneficiary of working families tax credit, with my extra child and maximum child care costs.

I am sure that not many of my constituents would believe that, as an MP, I am a downtrodden person in need of assistance from the state. It might be that Labour Members have such constituents, but I never complain about an MP's income. However, constituents might be surprised to learn that their MP could be in receipt of working families tax credit.

The Minister made great play about the number of families receiving working families tax credit but, in fact, the orders extend it further and further up the income scale. We are creating more dependency and churning more money around. Higher taxes are recycled as what are called tax credits but which are, in fact, benefits, as everyone knows and every accounting procedure says. That enormous recycling process is part and parcel of what the Chancellor of the Exchequer has been doing for the past four years. He recycles vast amounts of public money, financed by higher taxation and all sorts of fiddling and meddling to try to make everyone feel that they are better off.

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