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Failure by employers to make correct payments

Amendment made: No. 23, in page 21, line 22, after "has" insert—

', by reason of his fraud or neglect,'.—[Mr. Boateng.]
Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, signified.]

7 Feb 2002 : Column 1114

6.12 pm

Dawn Primarolo: I beg to move, That the Bill be now read the Third time.

I am pleased to open this debate on the Bill. I am grateful to hon. Members on both sides of the House for the detailed and constructive debates that have taken place on Second Reading, in Committee and on Report. We have been able to discuss a wide range of matters of concern to hon. Members. My right hon. Friend the Financial Secretary and I have been happy to explain the Bill's provisions, and I believe that they address some of those concerns. I am extremely grateful to hon. Members for their assistance in these proceedings and for the very thoughtful way in which they have approached the Bill, not only in challenging the Government, but in genuinely helping us to consider the issues that it raises. I shall return to a few of those points briefly.

The Bill marks another important step towards achieving the Government's aims of providing employment opportunities for all and tackling poverty. The Bill will introduce two new tax credits—the child tax credit and the working tax credit—which will provide focused and flexible support to families. There will be a single credit to support families with children and a separate credit to provide a top-up for the low paid, providing inclusive support for those facing persistent in-work poverty.

The Bill will provide the framework for the credits, as well as a further streamlining in the way that support for families is administered, through the transfer to the Inland Revenue of responsibility for child benefit under part 2. By establishing a common framework for the credits, the Bill provides an opportunity to create an inclusive system of support in which families comply with a common set of rules regardless of their income or circumstances. The detailed rules for the credits will be brought out in regulations. I was grateful for the opportunity in Committee to provide more detail on those rules. I was also grateful for the challenge set by the Opposition to respond in varied and creative ways to their insistent and creative questions on whether I was able to share details on the rates and tapers, which as the House well knows are the subject of the Budget statement.

Hon. Members expressed a desire for more detail to be included in the Bill. It provides the framework for the credits and the regulations contain the technical detail. That is the right way to introduce the reforms and is the norm for such legislation. It allows us the flexibility to adjust the detailed rules over time as we have more experience of the pattern and changing lifestyles of the families that we want to support.

However, as the hon. Member for Mid–Worcestershire (Mr. Luff) and other Committee members explained, the powers to make regulations are subject to negative resolution procedure. There is nothing wrong with that approach. Like all Governments, we try to strike a balance between the appropriate use of parliamentary time to construct a framework and the way in which we deal with the mechanical issues, which in this case relate to how the credits work.

I have given the use of regulations careful consideration. Important regulations will need to be made and I accept that it will be helpful to reconsider whether we need to use negative resolutions for every set of regulations. When we introduced the child care tax credit

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as part of the working families tax credit, and the disabled person's tax credit, the first statutory instruments to contain the relevant legislation were subject to affirmative resolution procedure. I will consider how we can make some of the regulations subject to the affirmative resolution procedure in the first instance, although they would have to return to the negative procedure. That reflects further the co-operative and suitable way in which the Committee approached its work.

The new tax credits will be awarded for up to a year and are based on an annual income of the claimants for a tax year. They will make the process of claiming easier and will further integrate tax credits with the income tax system. The annual framework will allow the credits to be more flexible during the year. In Committee, we discussed at length how to provide the claimant with the certainty of having a stream of income for the year while ensuring that the system was flexible enough to adjust to changes in income that were dramatic for a family. At the same time, we did not want claimants to think that every penny of change would require a notification to the Inland Revenue. We had a helpful discussion on that in Committee. I hope that the draft regulations, on which we are consulting, will be available to Members of this House. They should also be available to Members of the other place when they consider the Bill and before it returns here.

Hon. Members were concerned about the potential for overpayments to be run up, and about the complexity of the system. The annual nature of the credits will simplify the income assessment process. We will aim to make sure that in any in-year reporting of changes our desire to avoid any overpayment at the end of the year is borne in mind. When hon. Members see the draft regulations, they will realise that progress has been made to deal with those details.

The Bill also provides for the credit to contain several elements so that the level of support is dependent on circumstances. I confirm that the working tax credit will contain elements focused on helping various groups who may face in-work poverty. In particular, elements in respect of disabled workers and severely disabled adults will be included, alongside extra recognition for couples, lone parents and those working full-time hours. The working tax credit will also build on the success of the child care tax credit in the working families tax credit by providing a child care element. The basic existing framework will be retained, but the payment will be made directly to the main carer.

In considering legislation in isolation, we often forget or are not able to bring into our debates the often complex reality of people's lives. Although the nature of legislation such as the Bill is simple, the legislative drafting of simple concepts sometimes demands further explanation. When considering the main principles of the Bill, hon. Members were anxious to ensure that persons or families claiming the credit were given a simple, direct and clear explanation of their entitlement, and that requests for advice or for help in making sure that they receive their full entitlement were responded to.

I am confident that the Bill provides that framework for entitlement and strikes the right balance in respect of the problems to which my right hon. Friend the Financial Secretary spoke in the important debate on how to deal

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with those who commit fraud against the system. The penalties, sanctions and effective deterrents we can use against those who seek to cheat the system enable us to strike the right balance between making sure that people receive their rightful entitlements and preventing those who seek to steal the money to which others are entitled from doing so. None the less, the regime is geared towards ensuring that everyone claims their rights. The Bill strikes the right balance in respect of compliance and the provision of support to genuine claimants.

The Government are resolute in our commitment to tackle child poverty and to ensure that work pays. We have already taken more than 1 million children out of poverty. The new credits build on the successful reforms of the last Parliament: the working families tax credit, the children's tax credit, the disabled person's tax credit, and the unprecedented real-terms increases in child benefit and out-of-work benefits. Those reforms have achieved a lot in a short time, but we now have the opportunity to introduce a modern system of support that can deliver even more.

I agree with the hon. Member for Northavon (Mr. Webb): we have the opportunity to change the system radically. That is precisely what the Bill is designed to do. We should not pass up this opportunity to make a huge difference to the lives of the poorest in our society, and to ensure that their children are not scarred by poverty, grow up in poverty, and inherit poverty in their working lives. I commend the Bill to the House.

6.24 pm

Mr. Flight: We have had a constructive debate on Report and in Committee. The only sadness is that we have not discussed or focused on many parts of the Bill. The Government should have delayed introducing it until they had resolved their policy and intentions, and decided how they wanted to implement them. There are no forecasts about costs, no indication of the size and nature of the benefits and no cost analysis. As the Institute for Fiscal Studies said, the consultation process was wholly inadequate. I understand that the original numbers in the consultation document were taken out before publication.

Parliament is being asked for a blank cheque. This is a framework Bill too far, and Opposition Members do not accept that that is a justifiable approach to legislation that is likely to result in £2.8 billion of expenditure of taxpayers' money. The Bill is not in a form for it to be practicable to make a proper assessment of its proposals, either to oppose them in aggregate or support them.

As I pointed out on Second Reading, the Bill's proposals are essentially similar to the negative income tax reforms proposed more than 25 years ago by the Heath Government. As the House will be aware, a Select Committee then reported on tax credits and there was an important minority report by Labour Committee members, some of whom still serve as MPs. The minority Committee was advised by Lord Kaldor and the Child Poverty Action Group, and led the incoming Labour Government in 1974 to decide against implementing tax credits. There were good reasons of principle for that. Those principles remain valid today and are the antithesis of the fine intentions that the Paymaster General has just expressed. The Committee felt that tax credits were insufficiently focused on those most in need, that the majority of the expenditure benefited people not in

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poverty, that the costs were too great in relation to the benefits paid to those who were in need and that the additional revenue would be better spent on more focused measures to help people in need.

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