Tax Credits Bill

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Dawn Primarolo: Stepping back from the design of the tax credits, the issue is the Government's policy objectives of eradicating poverty, making work pay, encouraging people to move into paid work and attempting to remove the barriers to returning to work. As we know, those barriers are greatest for lone parents, who still face significant obstacles to work. Although the child care tax credit provides generous help with child care, like everyone else a lone parent must find 30 per cent. of the costs. The facts show that lone parents are still much less likely to move into work. Although there have been considerable improvements, some 50 per cent. of lone parents are still out of work.

We want to combine the provision with a work incentive, but it is not our intention to discriminate between families. We are addressing the drain on the family income through the moneys that are going in. Experience of working families tax credit in particular shows that such a measure is necessary to bring everybody up to the starting point, so that they can

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move into work. Of course, the Government have other mechanisms for dealing with the barriers that lone parents face.

The question of how we will deal with the second adult is an important one, in that there must not be too great a distance between different household types. We must ensure that lone parents can move into work, but the distance must not be so great that the circumstances of two-parent households are worse. I hesitate to say it, but such factors must be taken into account in the final calculation, when all the thresholds, tapers and income disregards are put on the table, so that we can enter the income distributions and establish the effect on different household types.

I am afraid that I cannot give the hon. Member for Arundel and South Downs the confirmation that he seeks, but I see his point and it depends on settling the figures. We do not want inadvertently to increase the barriers to work for lone parents. The question of defining a household and recognising the number of adults therein is important.

I apologise to the hon. Member for Arundel and South Downs for not being able to be as clear and precise as he would have liked. However, it would have been easier for me to give any answer, knowing that it was not correct, and I have not done that. Rather, I have tried to be honest by saying that his point must be considered in the context of work incentives and of ensuring that we give help to lone parents, who suffer the greatest barriers to work and who, with their children, suffer the greatest concentration of poverty.

Mr. Webb: The Minister has been helpful in putting on record the Government approach, and I take her point on whether the issue should be dealt with under clause 11. Amendment No. 32 will take us on to that territory, so I will pursue it no longer.

The Minister described a neat separation between support for the child and for adults, but it is not that clear cut. There is also a family element—an amount per family. If that were not important, there would simply be an amount per child. The family element of the support for children attempts to reflect something—perhaps economies of scale—other than the number of children in the household. One could argue that economies of scale relate to multiple children and are nothing to do with adults, but it is not as clear cut as she suggests.

I accept the Minister's point about work incentives. It is true that lone parents have bigger barriers to work. It would be harder to argue a case for a lone parent with a 14-year-old, than for a lone parent with a one-year-old. For families with older children, a case for differentiating between one-parent and two-parent families is rather weaker. However, I take the point about finding the right place in the Bill so that we can address the issue in the context of the working tax credit. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Webb: I beg to move amendment No. 49, in page 7, line 7, at end insert—

    '(d) must include provision for the combined value of the child tax credit for a benefit unit in receipt of Income Support or Jobseeker's Allowance and the value of Child Benefit for

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    such a family to be greater than or equal to the value of support in respect of dependent children available to a family of the same composition receiving Working Families Tax Credit, Children's Tax Credit and Child Benefit immediately prior to the coming into force of this Act.'.

The amendment is related to levelling up or down and we may not have not got it right. At present, there are two forms of support for the children of families out of work. There is child benefit, but that is netted off income support. Essentially, there are family premiums, child personal allowances and income support, which are received per child when a person is not working. If working, a person receives child benefit, children's tax credit and, potentially, an amount per child or family through the working families tax credit. Those amounts are similar, but not the same. There is a difference between the two of roughly £4 for the first child, and £3.50 for subsequent children.

Given that the Government want to streamline the system and give an amount per child whether the parents are working or not, they must clearly pick a single figure. Many families in low-paid work will want to be reassured that the Government do not plan to level down their incomes so that they are given the same as that given for children whose parents are out of work. They will want to know that levelling up is planned. Rates and thresholds are issues for the Chancellor, but the principle is whether there will be real-terms losers among low-paid families. Many will wait for the Minister's response with bated breath.

Dawn Primarolo: I refer the hon. Gentleman to the remarks that I made previously. He wants me to state the absolute principle that there will be no losers or gainers. That principle is not linked to the Bill, but it is none the less a matter of great importance.

The amount of expenditure on the proposals relating to the new tax credit will depend on the overall policy package, the framework for which is provided in the Bill, and on the rates and thresholds of the tax credits, which will be based on the values for 2003.

On the hon. Gentleman's second point, the level of support that is available will be determined by the Chancellor when he makes his overall decisions in the course of the Budget process of 2002. The principle to which the hon. Gentleman referred is crucially linked to the rates and tapers, not to the framework of the Bill. The appropriate time to discuss the matter is therefore at the time of the 2002 Budget. I can see that he is revving up now, and I hope that he is not in overdrive by the time we reach that point. I understand the point that he is making, and I am not complaining about his continuing to raise it, but he knows in his heart of hearts that it goes beyond what I am able to say to the Committee, given that the Chancellor has not yet taken the necessary decisions.

If the hon. Gentleman really wants to press the amendment, I shall have to ask my hon. Friends to oppose it. I am gratified that Opposition Members feel that the Committee process is enabling them to understand much more clearly how the Bill will operate. That is how it should be. I am thankful for small mercies, although I am unable to respond to the hon. Gentleman's specific point.

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Mr. Webb: I take it that that is a no, then.

Dawn Primarolo: It is a nice no.

Mr. Webb: The serious point underlying the amendment is that more than 1 million, perhaps 1.5 million, families may feel some anxiety when they hear that everything is to be streamlined and that some people with similar family structures will get less than others.

It would have been welcome if the Paymaster General could have ended some of the uncertainty about whether the Government believe in taking money away from low-waged families. Given the spirit of their proposals, I hoped that that would require only a modest assurance from her, and it is alarming that she could not even go that far.

On reflection, this is a specific amendment about current rates and thresholds, so it probably does not belong in primary legislation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10


Mr. Flight: I beg to move amendment No. 78, in page 7, line 16, at end add

    'and having one or more children or qualifying young persons in their direct care, in the case of the basic element as defined in section 11(4)'.

The Chairman: With this it will be convenient to take the following amendments: No. 79, in page 7, line 24, leave out from 'persons' to ', or' in line 25 and insert

    'has one or more children or qualifying young persons in their direct care'.

No. 80, in clause 11, page 7, line 31, after 'persons', insert

    'having one or more children or qualifying young persons in their direct care'.

Mr. Flight: The amendment is a drafting amendment designed to help the Government. The clause uses the phrase:

    ''responsible for one or more children or qualifying young persons''.

We suggest a sharper definition. That relates back to the question of whether credits might be divided between two separated families who are responsible for more than one person in their direct care. However, that is not the main reason for the amendments, which deal primarily with one of the more important aspects of critiquing the Bill.

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The Government will be well aware of the arguments advanced by the Institute for Fiscal Studies against extending working tax credits to couples without children. There is no established evidence that such an incentive to work is needed for that group of the population. A considerable number of people will be brought into the net of tax credits, yet there is no logic in doing so. When various parties asked, ''Why are the Government are doing this?'', the

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only answer they received was, ''Well, the French do it.'' The Government have not in any way justified why they are extending the scope of tax credits to a component of the population for which the pricing people into work argument is not valid.

This is not a desirable measure. That goes right back to the main theoretical objections to tax credits that were raised 25 years ago, when I was standing as a candidate for Parliament. Help should be focused on those in need. Although it does not appear explicitly in the Bill, I understand that the Government do not intend to include parents under 25 in the working tax credit system, yet they are among the poorest, and perhaps the most deserving of help, in the population. What is the logic of adding to the benefits of those who do not really need them, while failing to address the situation of a group that does need assistance?

I hope that the Paymaster General will be able to respond to those points. We would need a great deal of persuasion as to the merits of supporting the principle of extending tax credits to couples without children.

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