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Pensions Taxation

10. Mr. Andrew Robathan (Blaby): What assessment he has made of the impact of recent changes in pensions taxation. [78232]

The Financial Secretary to the Treasury (Ruth Kelly): From April 2002, as a result of the Government's personal tax and benefit changes, pensioner households are, on average, #840 a year better off than in 1997.

Mr. Robathan : But is it not the Chancellor's policies that have so badly harmed people's private pensions and indeed their future in retirement, especially the fact that

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more than #25 billion has been taken out of pension funds—#5 billion a year since the abolition of advance corporation tax relief?

Can the Minister confirm leaked reports from the Labour spin machine that the Chancellor plans further harm to people's pensions and futures by ending higher-rate tax relief on pension contributions and by taxing lump-sum payments on retirement, which are currently tax free?

Ruth Kelly: The hon. Gentleman wholly misrepresents the situation. As he knows, and as has often been pointed out to the House, the abolition of payable tax credit was an essential part of wider corporation tax reforms, which included cutting both main and small company corporation tax rates. Since 1997, cuts in corporation tax have been worth more than #3.5 billion a year to companies, and pension funds benefit from that as well.

In relation to some of the measures that the hon. Gentleman cites, about which there has also been much speculation in the press, the Treasury has said repeatedly on numerous occasions that no proposal for the abolition of higher-rate tax reliefs has even been considered by Treasury Ministers, never mind agreed.

John Robertson (Glasgow, Anniesland): My hon. Friend will be aware of the high number of pensioners in my constituency, where there are well over 13,500 pensioner households. I thank my right hon. Friend the Chancellor for the work that he has done to alleviate pensioner poverty, but will he reconsider the winter fuel allowance that people in my constituency receive in wintertime when it is needed the most? Will he consider upping it by #50 to #250 as soon as possible?

Ruth Kelly: I thank my hon. Friend for his support. Unlike the Conservatives, the Government have made tackling pensioner poverty a priority. We introduced not only the #200 winter fuel allowance, but also free eye tests for the over-65s. Furthermore, next year, we shall introduce the pension credit, which will reward the savings of low-income pensioners. I take my hon. Friend's question as a Budget representation and as my right hon. Friend the Chancellor is here, I am sure that he will have listened to it.

Mr. Stephen O'Brien (Eddisbury): How can the Minister claim that the pension dividend tax has nothing to do with pension scheme closures? When Labour came into office, no large company schemes were closed to new entrants, but only five years later—a short time in the long-term business of pension provision—we have moved to a situation where the main pension schemes of fewer than half our largest companies are open to new entrants. How can the Chancellor and the Minister claim that those two events—the Chancellor's largest-ever stealth tax and the rapid closure of schemes—are not related? Is he the only person in the country who does not understand that if one takes #25 billion from pension funds and continues to take money at the rate of #5 billion a year it will have an effect on pension funds and schemes?

Ruth Kelly: Let me take this opportunity to put the facts that the hon. Gentleman mentions in context. The

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abolition of payable tax credits, for example, was equivalent to the difference of a tenth between the best and worst pension fund providers. I hardly think that he can criticise that measure when he knows that it is also being offset by a huge package of corporation tax cuts. He points to the closure of final salary schemes. Clearly, changes are taking place right across the world, partly as a result of changing work patterns, which mean that the structure is changing, but what really matters to people is the level of pension contributions going into pension funds. That is why we are working in partnership with the industry, employers and individuals to ensure that people can have the security of knowing that they have secure income in retirement.

Tax Credits (Publicity)

11. Mr. Russell Brown (Dumfries): What steps he is taking to publicise the new tax credits. [78233]

The Paymaster General (Dawn Primarolo): We carried out a series of national road shows from 16 September to 11 October to highlight the launch of the tax credits campaign and to publicise the new tax credits. That includes the Inland Revenue sending out claim forms automatically to all existing claimants of working families tax credit and disabled person's tax credit. It also includes a national advertising campaign, which started on 16 September, including television, radio, press and online advertising and specific measures to ensure that minority groups are aware of the new tax credits. That involves planning publicity specifically for ethnic minority radio stations and publications.

Mr. Brown : I thank my right hon. Friend for what she has done until now and, obviously, for what she will do in the coming weeks and months, but may I draw her attention to the current tax credits? Undoubtedly, hundreds of thousands of families have benefited from the working families tax credit, but I have some concerns about the uptake of the child care tax credit. I feel that more families should have become involved in it because not only is it an opportunity to provide finance to assist with child care costs, but I firmly believe that it is an opportunity to develop child care services in many places, particularly rural areas. May I ask her to put more emphasis on developing child care services and the support that the Government offer for that?

Dawn Primarolo: I am sure that my hon. Friend is aware that about 170,000 families who currently receive working families tax credit are benefiting specifically from the support to assist in the payment of child care expenses, but I also know, because he has raised this before in the House, that he shares my concern about the inflexibility of the current arrangements. The new tax credits will ensure that we will be able to respond as child care needs and costs change, rather than fixing things for a specific period.

With regard to the supply of child care professionals, my hon. Friend will also have noted that, in this year's spending review, my right hon. Friends the Chancellor of the Exchequer and the Chief Secretary have allocated

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substantial funds for future expenditure on child care to train, employ and provide new child care centres for working parents.

Mr. David Laws (Yeovil): What action is the Minister taking to end the subtle pressure that seems to be being applied to many people to receive their tax credits through bank accounts, rather than over the counter at post offices?

Dawn Primarolo: There is no subtle pressure. The new tax credit legislation, supported by the Liberal Democrats, specifically included an arrangement whereby the new tax credits could be paid directly into families' bank accounts. That is a very useful way, first, to ensure that the right person gets the right amount of money and, secondly, to assist in reducing the fraud that, unfortunately, has been causing considerable difficulties with giros and order books. Having completed the entire legislation on tax credits, I am surprised to hear the hon. Gentleman now say that, apparently, the Liberal Democrats will change their minds on that principle.

Mr. Frank Roy (Motherwell and Wishaw): Is my right hon. Friend aware that the working families tax credit form is fundamentally flawed and therefore open to abuse? Is she aware, for example, that to receive money for a year, claimants need only insert the registration number of an after-school care project, often without the knowledge of that provider? Will she investigate that abuse before it spreads throughout the country?

Dawn Primarolo: I am grateful to my hon. Friend for his comments. I know that he is keenly aware of the difficulties in ensuring that payment of child care tax credits is made to the right people. I reassure him that applications for payment of child care expenses will be rigorously scrutinised to ensure that the expenditure has been incurred and that the payment goes to the child care providers.

Dr. Julian Lewis (New Forest, East): Will the statement on the pre-Budget report, which is eagerly anticipated, be an opportunity to clarify, if not modify, the situation on tax credits? Will the Minister therefore tell the House when the statement is finally to be made?

Dawn Primarolo: If the hon. Gentleman has seen the TV advertising campaign or taken the opportunity to read the pack that I sent him, he will be fully familiar with the tax credits, and he will be actively campaigning in his constituency to ensure that people receive those resources. As the advertising says, this is money with families' names on it, and I hope that the hon. Gentleman will help his constituents to get it.

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