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Roger Casale (Wimbledon): The hon. Gentleman is right to be concerned about the costs to business of operating the working tax credit scheme, but does he think that it might be possible to assess the benefits to business of that scheme? What does he think those benefits might be?

Mr. Webb: The hon. Gentleman may not recall this, but we voted for this legislation. We do not dispute the attractions of supporting the low paid. There is no difference between us on that. However, in all these things, there is a balance to be struck between the advantages to individuals and the burdens on business. In my view, delivering the tax credits through the pay packet creates a burden on business, with no advantage to the citizen, so updating information on the burden on business each year will help us to make the case that such things should be done differently. It would help us to keep an eye on the problem inherent in the scheme that has been adopted.

I shall not detain the House any longer. There are two differences between the Lords version of the report and the Commons version. The Lords version is superior because take-up and other information would be provided every year and because it would provide an up-to-date picture of the burden on business, which will change over time. For those reasons, we are disinclined to disagree with the Lords in the said amendment, and we hope to find out in due course whether the House agrees with us.

Hywel Williams (Caernarfon): I, too, am glad that the Government have given ground on the annual report issue, despite the arguments against taking the step proposed on their behalf in the other place by Baroness Hollis. Hon. Members will perhaps have noted that Baroness Hollis argued that the various statistics were available from a variety of sources and all that the curious needed to do was track them down. That may be so, but that does not detract from the value of publishing all the statistics annually and in a form that is easily accessible not only to hon. Members but to the public, in the fine tradition of open government.

Baroness Hollis also said that she was against what would be a cut-and-paste exercise, so I am glad that, despite her persuasions, we will now have an annual report. I am sure that the Government are poised, even now, with the scissors and glue. I congratulate the Government on changing their mind, and look forward to the result.

However, unlike the Lords amendment, under the Government amendment in lieu, the report would note only the number of child tax credit and working tax credit awards and the number of inquiries, penalties, prosecutions and convictions. It will not contain an estimate of the take-up rates. The Lords amendment would require

I am sure that the Government are always pleased to report positive figures to the House, such as the number of awards made. They are always pleased to report how often they have hit a particular barn door. In itself, that is interesting; it might lead to favourable headlines of the

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variety that say, "Barn door targeting—another Government success!" However, I am sure that that consideration could not be further from the Government's mind. Of equal interest is not only how often the Government have hit the barn door, but how often they have missed it. Indeed, such a comparison is essential for any serious assessment of the success or otherwise of the tax credit system.

The statistics are available on take-up, or they can be worked out. The noble Baroness noted that

I do not regard a difference of 5 per cent. as close, although, in terms of barn doors, I suppose that it might be.

The Government are, of course, reticent in talking about take-up rates, for good, if not laudable, reasons. Those who have a right to means-tested benefits but who do not claim them are a continuing demonstration of the inefficiency of means-tested benefits as a way of relieving poverty. Given the higher proportion of people in Scotland and Wales who are dependent on those means-tested benefits, drawing attention away from the deficiencies of the system is not a politically neutral step. Apart from our interest in promoting open government, that was one more reason why Plaid Cymru and the Scottish National party were very much in favour of the Lords amendment and why we are disappointed with this Government revision.

Mr. James Clappison (Hertsmere): With the leave of the House, I shall intervene briefly—as my hon. Friend the Member for Arundel and South Downs (Mr. Flight) suggested I would—on the subject of fraud, which has been of some interest to me and other Members during the passage of the Bill.

I congratulate the Paymaster General on the eloquence of her opening remarks, and the elegance with which she executed a strategic retreat from the position of the noble Baroness Hollis, who told the House of Lords that the amendment was wholly unnecessary, and that it amounted to a scissors-and-paste job. If I may say so, the right hon. Lady has carried out a scissors-and-paste job today with our hardly noticing. After my initial admiration for her elegance, however, I began to feel a sense of unease about the way in which she responded to the points made by my hon. Friend the Member for Arundel and South Downs and other hon. Members on eligibility as part of the information required to assess take-up, and on the question of burdens on business.

If one looks at the difference between the Lords amendment and the Government amendment, whether subsection (1) or subsection (2), it strikes one immediately that the Government have changed the wording from "estimate" to "number" and that the question of business costs is left out altogether. I feel a slight sense of concern about what the Paymaster General said about a figure for business costs being available later and being revised. First, in the regulatory impact assessment, the Government conceded that the impact of some of the proposed legislation could only be estimated once the system is up and running, and that there may be an additional cost to businesses as a result of the need to respond to in-year changes in recipients' circumstances.

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Secondly, if the right hon. Lady is right in her statement that it is inappropriate to include business costs in the annual report, and she is right that the cost will be fixed, what are the Government afraid of? Why are they shy about including that as part of the annual report? They will be able to say, "Look here, we were right. There was only this fixed cost for business. It isn't changing each year. The amount isn't increasing." Whether the arguments of the hon. Member for Northavon (Mr. Webb) are right or wrong, the Government will be able to say that there is not an increased cost to business every year. What would be the harm of including that in the annual report? Many businesses, especially small businesses, will feel some small sense of unease that that has been left out of the annual report.

On fraud, an important question arises from the Lords amendment. The right hon. Lady will recollect that concern has been expressed in many quarters. My hon. Friend the Member for Arundel and South Downs was absolutely right to talk about fraud and misdirection of public money in tax credits. He quoted the right hon. Member for Birkenhead (Mr. Field), who is in a good position to judge given his previous experience in the Department of Social Security, and whose contribution on Second Reading we all recollect. He said that

I know that Members on both sides of the House are concerned about fraud and Conservative Members are certainly keen to bear down on it. We recognise that fraud is a misuse of public funds and we recognise the affront that it causes to hard-working taxpayers and claimants alike.

5.15 pm

The vast majority of those in receipt of tax credits are, of course, decent and honest people who properly claim what they are entitled to and, when we talk about fraud, we are not talking about those who simply make a mistake and thereby receive more than their entitlement. The Paymaster General will recall that, throughout our proceedings, we have been at pains to draw a distinction between those who commit fraud and those who make a mistake. We have tried to argue that the Government should not bundle the two groups together. However, members of the public want those who set out to cheat the system and who sometimes obtain substantial sums of money to be brought to justice.

Under the amendment in lieu, the annual report will give details of the number of prosecutions and convictions for offences connected with tax credits. Members of the other place were right to press for that information to be made available in the annual report because, thus far, the record of prosecutions for tax credit fraud has been feeble. In the first two years of the working families tax credit, there were 22 prosecutions for false working families tax credit applications. That is for the whole two-year period up to September 2001, the first two years of the working families tax credit.

It is true that a little more vigour has been shown since then. In the six-month period since September 2001, 26 prosecutions were instigated for fraud, according to a written parliamentary answer that I received on 1 May this year. However, even if there has been that slight

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increase in the past six months, on any view of the potential scale of fraud in tax credit, it remains a low number of prosecutions. We note that there have been no prosecutions at all for fraud in the child care element of the tax credit, but stories abound of what members of the public regard as irregular practices in that area.

In a written answer, I was told:

All those staff for the annualised equivalent, on the latest figures, of 52 prosecutions a year! According to my simple maths, that means we employ 542 staff for 52 prosecutions, so there are 10 man-years for each prosecution that is brought by the Inland Revenue.

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