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Mr. Swire: Following on from what my hon. Friend has just said, does he agree with the similar comments of Donald Martin, the UK policy chairman of the Federation of Small Businesses? Mr. Martin said:

Mr. Luff: My hon. Friend makes a very powerful point, but sadly, the scope of the new clauses and amendments under consideration does not allow us to debate—as I would like to do—invasion of privacy. We are focusing on the cost, and new clause 2, which I shall come to in a moment, focuses on the method of payment. I strongly agree with my hon. Friend, however, and those are issues that have to be taken seriously.

I urge the Paymaster General to recognise in her response that I am not trying to belittle the Government's attempts to reduce poverty. We all want to reduce poverty, but we must consider how to strike a balance and what mechanisms to use. It is probably asking too much for the Government to consider these new clauses and amendments sympathetically, but they should consider something similar in another place, or undertake to find another mechanism to reduce cost at a later stage, so that the CBI's long-term hope can come to fruition.

A year or so ago, something happened in my constituency. The complaints that we have always heard from the small business sector acquired a new urgency

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and fervour. There was a change of spirit—I do not know what caused it—and the sense that the burden had become too great was suddenly made very vocal.

In Standing Committee, the Paymaster General helpfully said that, in her view, the overall effect of the Bill might be to reduce the burdens on business. However, her confidence is not necessarily shared by the business sector itself, and experience certainly proves that that sector is right to be sceptical and cynical. It would help if she could explain why she is confident that, even at the margin, the proposals, without emendation, might reduce the burdens on business. That would be an encouraging message, if she can deliver on it.

I realise that new clause 2 represents an example of the law of unintended consequences. It deals with the payment mechanism and is primarily inspired, I expect, by a desire to help the claimant by offering choice. As the hon. Member for Somerton and Frome (Mr. Heath), who spoke so effectively at the beginning of this debate, made clear, the Government appear to be hostile to offering choice in almost anything. However, offering the option of the payment mechanism seems a prudent and sensible step, and I endorse all that the hon. Gentleman said about choice.

As I said, new clause 2 also illustrates the law of unintended consequences, because it would affect the post office network at the margin. You have rightly said, Madam Deputy Speaker, that we should not debate that issue and I shall not do so, but in answering the debate it is important for the Government to bear that helpful benefit in mind. The post office network is in crisis. Thousands of post offices are closing and anything that we can do to increase footfall in sub-post offices would be helpful. Although new clause 2 may be inspired by the desire to help the claimant, it would have a very useful side-effect that hon. Members must concentrate on and bear in mind when they vote. I hope that we will have the chance to vote on new clause 2, because I certainly wish to support it in the Lobby.

New clause 2 also goes a long way towards addressing the issue of stigma, which has been thrown around, and to which my hon. Friend the Member for East Devon (Mr. Swire) referred in his intervention. In 1998, Martin Taylor, author of the Government-commissioned report on work incentives, told the former Social Security Select Committee that there was no empirical evidence to suggest that the working families tax credit would have an effect on stigma. He said:

The Government would be ill-advised to hang too much of their case on that point.

The Government should also remember that a formidable alliance shares the view that we are right to be sceptical of the stigma claim. The National Council for One Parent Families, the CBI and the Institute for Fiscal Studies have all warned that the stigma attached to means-tested benefits could actually be increased by paying the credit through the payroll. In its document entitled "Credit Where it's Due", the Institute for Fiscal Studies says:

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It also suggests that

I know that the words of the Institute for Fiscal Studies are always taken very seriously in the House.

In his opening speech, my hon. Friend the Member for Arundel and South Downs referred to the National Association of Citizens Advice Bureaux. In February, it published a report affirming that claimants should be given a free choice between direct payment and payment through their employer. The Paymaster General should also be concerned by NACAB reports of staff being dismissed as a result of their employers being forced to administer their claim for tax credits. I do not condone that behaviour. It is often the case that when we consider legislation we have to consider the world as it is and not as we would like it to be. Behaviour of that kind by employers is wrong and against the spirit of legislation, let alone their broader social responsibilities, but it is the inevitable consequence of a system like this one. The NACAB report states:

New clause 2 and its grouped amendments deal with two separate issues, both of great importance. The next group of amendments concerns the other important issue of fraud, and the House will wish to explore that at some length.

The Minister must ask herself in all conscience whether she has got the balance of burdens on business and the social obligations of businesses in the wider community right. The amendments, which would relieve employers of some costs and exempt some employers from the provisions altogether, are the right measures because they will enhance employment and wealth throughout society. That is an issue with which she must always wrestle.

The hon. Lady must be careful about relying on some of her well-rehearsed arguments on stigma and so forth. She should also consider the wider benefits of new clause 2—not only the benefits of choice that have been mentioned, but the wider social benefits of protecting the network of post offices. The new clause and the amendments have a huge amount to recommend them to the Government. I urge her to consider them sympathetically. If she has to reject them now, please will she reconsider them in another place?

4 pm

Dawn Primarolo: This has been an interesting debate, although much of the ground was covered in Committee, and it has centred on two issues. First, the new clause and the amendments would impose restrictions on the Inland Revenue board's powers to make payments both direct to the claimant and through the employer—the new clause and the amendments cover a number of issues to which I will return. Secondly, the amendments try to deal with the burdens on the employer.

I share the enthusiasm of the hon. Member for Teignbridge (Richard Younger–Ross) for seeing small businesses thrive and grow. I remind him, however, that

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the working tax credit makes it possible for employers to draw on a wider pool of labour, as it enables more people to make the move into work and stay there. Employers also derive benefits from having employees in low-income households supported while they make that transition into work.

I also agree with the hon. Member for Mid-Worcestershire (Mr. Luff) that the road to hell is paved with good intentions. I will demonstrate that the amendments and new clauses tabled by the official Opposition today would restrict the choice of and increase the burdens on employers, which is the exact opposite of what they claimed they were trying to do.

New clause 2 and amendment No. 15 attempt to impose an obligation on the Board of the Inland Revenue to make all direct payments of the new tax credits by order book through the post office. The amendment would restrict the manner in which payments could be made to that set out in the new clause. The new clause goes on to allow the board to make payments by automated credit transfer, but only through a "basic account", accessible at the post office and then only if the claimant has chosen that payment method.

Let us be clear that the new clause would in effect offer the claimant no choice. Claimants would not have the choice of the payment going into their bank account, if they already had one. I am talking not about what the proposer of the amendment thinks he has done, but what he has done. The board cannot make emergency payments—

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