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9.39 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng): Our promise was to move people from welfare to work and it is a promise on which we have more than delivered. In this measure, we are making sure that work pays.

It has been a good debate, which I suspect is a good indication of the quality of debates that we will engage in when the Bill is sent upstairs to Committee; by all accounts it will be, as we have not heard of any intention on the part of Opposition Members to vote against it. In a characteristically generous moment, my hon. Friend the Member for Wimbledon (Roger Casale) referred to the Opposition's quiet acquiesence. That is the sort of acquiesence we like from the Opposition. It is more than welcome.

The Bill is a key element in the next stage of the Government's strategy for tackling child poverty and making work pay. The tax credits brought in by the Bill build on the important reforms that the Government have already introduced. During the previous Parliament, we increased child benefit substantially. At the same time, we increased children's allowances in income-related benefits to ensure that extra support was available to the poorest families. We introduced targeted tax cuts for families through the working families tax credit, the disabled person's tax credit and the children's tax credit.

Our policy has been to ease the transition from welfare to work. That is why we halved marginal tax rates for low-income workers through the introduction of a 10p rate of tax, ensuring that they keep more of what they earn. We introduced a basic level of fairness for employees through the national minimum wage. Those reforms are in place now and they are working now. The Government's personal tax and benefit reforms since 1997 have made a real difference.

It is worth while looking at the record of the Conservatives when they were in power. In 1979, 14 per cent. of children lived in households with below 60 per cent. of contemporary median income. By 1996–97, the figure had increased to 34 per cent. Under the stewardship of Conservative Members, the number of children living in poverty more than doubled. That was our inheritance. [Interruption.] It is no use Conservative Members saying no, no, no. That is the fact. That is the record. It has been

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our task through this Bill, among other measures, to bring that number down. It is not an occasion for self- congratulation or for complacency, but we are getting the number down. Opposition Members should delight in the fact that that problem is now being dealt with. We should be working together to find ways of ensuring that yet more children are taken out of poverty.

As a result of the improvements that this Government have made, families with children are on average £1,000 a year better off. Families with children in the poorest fifth of the population are £1,700 a year better off compared with 1997, but we are determined to do more. The Bill and the new tax credits will allow us to take forward the programme of reform.

We have heard some good speeches. My right hon. Friend the Member for Birkenhead (Mr. Field) and my hon. Friends the Members for Regent's Park and Kensington, North (Ms Buck), for Morley and Rothwell (Mr. Challen), for Mitcham and Morden (Siobhain McDonagh), for Colne Valley (Kali Mountford), for Corby (Phil Hope), for North Durham (Mr. Jones), for Clwyd, West (Gareth Thomas), for Redcar (Vera Baird) and for Wimbledon all made the point that an important start has been made, but that we need to ensure that the Bill is targeted correctly, and that the take-up is as good as we would all wish it to be, recognising that there are specific regional variations that should give us cause for concern, including in London. Indeed, we are determined to ensure that we improve take-up in our capital city.

Phil Hope: When my right hon. Friend read out the roll of honour of those Back Benchers who had participated in the debate, I could not help wishing to point out that only two were Conservative Back Benchers.

Mr. Boateng: I did not mention any Conservatives, but as I have been encouraged to do so I shall refer to their contributions. The hon. Member for Arundel and South Downs (Mr. Flight) made a considered speech. I did not agree with all of it, but I agreed with some points, not least those about fraud which were taken up by the hon. Member for Hertsmere (Mr. Clappison). No one should be under any illusions about our determination as a Government to tackle fraud. My right hon. Friend the Member for Birkenhead rightly drew attention to the need to ensure that we do not lose sight of the importance of tackling fraud. We do not intend to do so. People should be encouraged to claim everything to which they are entitled—that is part of the take-up issue to which several of my hon. Friends have referred—but we will introduce effective measures for deterring and investigating fraud and non-compliance.

The Bill lays down a clear framework for tackling fraud and two clauses in particular are important in that regard. Clause 33 introduces a new criminal offence of tax credit fraud and clause 34 gives the Inland Revenue new and more effective powers to investigate tax credit frauds. No one should be under any illusions: we intend that those powers should be used and we intend to ensure that the Bill addresses the need for penalties when a person has fraudulently or negligently provided incorrect information in connection with a claim or has refused to co-operate with an inquiry. Those powers are in place and will be used.

The child tax credit will deliver our commitment to introduce a single, seamless system of income-related support for families with children. It will replace the array

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of different support mechanisms with a single, payable tax credit for families, bridging the gap between welfare and work. It will enable families to take advantage of the credit, irrespective of the employment status of the parents. It will also remove the stigma all too often attached in the past to such measures. Reference has been made to the position of student nurses who will get mainstream support for their children, over and above child benefit, for the first time. Families will be able to get support for their children from a single Department, through a single coherent system that will respond to their changing circumstances.

We will go further to rationalise the way in which families get financial support for their children. As my right hon. Friend the Prime Minister announced in June, responsibility for child benefit will transfer to the Inland Revenue so that families will have to deal with only one department to get the support they need. That transfer is also accomplished by the measures in the Bill.

A crucial point was made by my hon. Friends the Members for Mitcham and Morden and for Colne Valley about the importance of child care. We need to get it right so that those who need child care to get back into the world of work, and to stay there, receive it in the manner that is most effective and most directly meets their needs. That is what we are doing, and it is part of a wider package of support for families. Part of the answer to the points that were made by my right hon. Friend the Member for Birkenhead lies in the fact that the Bill needs to be seen in the context of the wider package of support for families, especially working families, that we are introducing.

The Government have continued to make significant new investment to support vulnerable children, young people and their families. Sure start is part of that. The 2000 spending review more than doubled planned expenditure, with sure start's budget increasing from £184 million in 2001–02 to £499 million in 2003–04. Over 430 sure start programmes have already been announced, and more than 200 are operational. By March 2004, 500 programmes will be reaching 400,000 children at any one time. Around one third of young children in poverty will benefit.

We are working within the context of the children's fund. Through our wider social reforms, we are producing a fairer society for families by improving service provision for vulnerable children. That is the context in which the Bill has been proposed. The Government are committed to improving work incentives and making work pay. The unemployment trap—where the gains from moving into work are too low, or the associated barriers too great, to encourage people to take the step from welfare into work—has in the past led to an unacceptable waste of human resources. The working tax credit will help to tackle that.

The working families tax credit and the disabled person's tax credit, introduced in 1999, were an important start. They helped to make sure that work paid for families with children and for people with disabilities. Now, with the working tax credit, we are taking the next step forward, extending the principle of in-work support through the wage packet to people without either children

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or a disability. The working tax credit not only extends the principle of in-work support, but improves the way in which support is delivered.

The Government have listened to disability groups. The working tax credit will provide a single work-focused credit, so that the extra barriers to work that disabled people can face are addressed within this single system of mainstream support. We have also listened to parents. We will make sure that help with child care costs, provided through the working tax credit, is paid directly to the main carer, alongside the child tax credit. Couples can decide themselves how to share responsibility for looking after their children, and we will allow couples with children to add their hours together to qualify for the 30-hour element within this credit.

We are responding to the point that was made forcefully by my hon. Friend the Member for Redcar by ensuring that there is always a recognition that money in the purse does make a difference. We need to have the transfer of money from the wallet to the purse in order best to meet the particular needs that children have. We know that child poverty is best addressed by the work of women in the home and in the workplace. If we do not get the framework right, all that we seek to do in this area is likely to come to nothing.

I said at the outset of my remarks—as did my hon. Friend the Paymaster General—that we have to ensure that we build on the progress that has been made. The working tax credit is just one of several measures introduced by this Government to tackle the unemployment and poverty traps and to deliver our long-term goal on employment so that, by the end of the decade, there will be a higher proportion of people in work than ever before.

The Bill has to be seen in the context of the national minimum wage—a national minimum wage that was opposed by the Conservative party. We still have not heard any recognition in the remarks of the Opposition spokesmen who bothered to address the House how they view the national minimum wage. [Hon. Members: "What about the Bill?"] Opposition Members want to hear about the Bill. While we were discussing it, there were two of them in the Chamber. Two of them were sitting on the Front Bench, while the Back Benches were bare—denuded. Not one Conservative Back Bencher was prepared to engage in the debate or to suggest that they have learned the lessons that we have been teaching them these four and a half years about how to move people from poverty into work and how to begin to give people the sense that they can, through their own actions, reach a point where they benefit from what work has to offer.

These reforms are supported by the new deal, which provides tailored packages of help and support to enable people to make that transition back into work. It enables them, through contact with personal advisers, access to job search support and help in addressing basic skills gaps, to get into the world of work. In that way, they and their children will benefit from their activity.

During the debate, we heard from my hon. Friend the Member for Morley and Rothwell about the importance of ensuring that small businesses feel, as those responsible for the payroll, that their needs and concerns have been taken into account. That is why my hon. Friend the Paymaster General has introduced a measure that is structured in such a way as to reduce compliance costs. That is why the measure is friendly to small businesses.

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It would have been helpful if Conservative Members had given just a hint that they understood that the Government have listened to small businesses with regard to the structure of this measure. However, there did not come from them one spark of recognition that that was the case. That is recognised by employers' groups. The Confederation of British Industry says that it supports and welcomes

The Institute of Payroll and Pensions Management stated that it welcomed the beneficial changes from an employers' perspective. In its detailed response, it recognised

That is what business says. However, we must have balance, and the Institute of Directors remains, as one would expect, firmly opposed to the measure although, to be fair, it says that it warmly welcomes the ending of the requirement for certificates of payment and strongly supports automatic increases in funding when new employees become entitled to tax credits. Even in the heart of the Institute of Directors there is a beginning of an understanding that the measure has some positive benefits. If only that same warm glow of recognition had been present in the hearts and minds of Conservative Members, but look at them—not a sign. The milk of human kindness does not, I fear, flow in very many of those veins.

During the last Parliament, we embarked on a wide-ranging programme of reform of the tax and benefits system. The Bill sees us continue that to the point of success, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

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