Tax Credits Bill

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Mr. Luff: That is reciprocated.

Dawn Primarolo: None the less, he made an important point about how regulations are used. I have tried at every opportunity in Committee—as has my right hon. Friend the Financial Secretary—to spell out in great detail the Government's thinking in respect of the regulations. Those in the other place take great care in such matters and they will want to see the draft regulations. By the time the Bill returns to this House, members of the Committee will also have the opportunity to examine them.

I understand the hon. Gentleman's frustration. I assure him that I did not sit down and say, ''Goody, goody, let's have regulations four sentences long and, what is more, let's have them under the negative procedure''—much as I may have been tempted. These are procedural points, but the Bill will be doing nothing that does not follow a path well trodden by Conservative Governments. It is important that such points are on the record, and I am not complaining about them. I am grateful that he waited until clause 10 to advance such an argument and did not consider that he had to do so under each clause. I note the seriousness of the issue that he raised, which is that of enabling hon. Members to scrutinise proposed legislation properly.

Mr. Luff: I am grateful to the Minister, particularly for her expression of an affection that I reciprocate. She gave us an assurance on draft regulations. I do not imagine that she meant that that would apply to every regulation in the Bill before Report, but if she did mean that, it is welcome. Will she clarify her exact undertaking? That is not a criticism, but a request for information.

On her broader point, the Minister is correct that two wrongs do not make a right. I was uncomfortable about some things that happened in the past. Will she look back through all the regulations and consider whether any could be introduced under the affirmative rather than the negative procedure? One of my hon. Friends may wish to examine that on Report.

Dawn Primarolo: I hope that the hon. Gentleman will excuse me if I do not do that right now. After we have considered each clause and moved to the next, I have sighed with relief and tried to make my brain accelerate to the next points. It is difficult to go into reverse.

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The hon. Gentleman's point referred to detail. I will try to make as many of the draft regulations available as possible. However, it is clear from the Committee's discussions that there are key sets of regulations in which hon. Members are particularly interested. They happen to be the regulations on which we are still consulting.

I intend to get as much information as possible before Report but if I do not achieve that, I do not want the roof to come down. If I get all the information, that will be fine. The regulations must come in, but the key regulations will appear toward the end of the process because consultation is still occurring. However, I understand clearly that members of the Committee will want to see them.

I hesitate to make my next point. The hon. Member for Northavon is correct to identify the example of a woman in receipt of statutory maternity pay or extended maternity leave from her employer. The question centres on the ability of a person who is in work, or not, to access the working tax credit, and also crosses over to other programmes that support parents, such as the sure start grant. We must address the matter following further decisions by other parts of Government. I will examine carefully the issues—forgive me for saying this—when we draft the regulations. None the less, returning to the hon. Gentleman's point, it would be difficult to put a provision in the Bill while another Department is finalising exact points during consultation on maternity and paternity leave. The matter will be dealt with when we have the information that we need.

I have covered the major points that were addressed in the debate, and I hope that members of the Committee will support the clause. I understand the frustration of the hon. Member for Mid-Worcestershire (Mr. Luff) about regulations and details. I hope that he accepts that I am doing my best to give as much information as possible without misleading the Committee by implying that a decision has been taken, when the matter may still be open for discussion.

Mr. Flight: May I ask the Minister for clarification on the most important point under clause 10, which is the number of hours worked? As the explanatory notes point out, that will be the main definition of entitlement. The Institute for Fiscal Studies has raised questions about this matter. Given that we will be working on an annual—rather than six-monthly—basis, will we be dealing with the average for a year? As the mechanism of past year earnings will be used, how will that be interlaced with the future number of hours worked? I assume that the current number of hours worked will be the relevant criterion, but what is the principle behind the Government's approach with regard to the number of hours worked?

4.15 pm

Dawn Primarolo: The 16-hour rule will carry forward, with regard to the working families tax credit and disabled person's tax credit, and we are looking closely at how to measure that across the year,

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so that people do not fall in and out of categories, which might happen in some cases.

During the consultation process, we received representations in favour of varying the 16-hour rule, but we are not prepared to do that. However, the annual assessment could be tailored to give some latitude, with regard to the calculation of hours.

It is important to get that matter right. With regard to the current tax credits, the calculation of hours is rigidly fixed. We do not think that that is appropriate. We are examining ways in which the new tax credits might address that calculation more flexibly, because—for example—people's hours could fall and then rise during the course of a year, so that their annual average would be high enough to reach the 16-„hour rule, and it would be difficult to explain why they did not qualify. However, we also need to ensure that changes to the rule will not cut across any employment rights, such as contributions. We have nearly achieved our aims in that regard.

It is true that the introduction of the new tax credits gives us the opportunity to make matters smoother. We might be able to help certain groups, such as people who have a chronic disability, and whose health deteriorates, resulting in a reduction in their hours, but who subsequently return to the labour market; that variation will not be reflected in their hours across the year.

I cannot be more specific about such matters at the moment, but the new regulations will not be as rigid as they are in the current arrangement. The annual assessment gives us more room for manoeuvre, and it helps with administration, because it will be easier to understand.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11

Maximum rate

Mr. Flight: I beg to move amendment No. 32, in page 8, line 19, at end add—

    '(8) The prescribed manner of determination must take account of the needs of all the members of a married couple or an unmarried couple by comparison with those of a single person'.

The amendment would ensure that couples in which one partner or spouse does not work are not unfairly treated.

I referred to that issue earlier. The Minister pointed out that it was less suitable to raise it with regard to child tax credit than to working tax credit. With regard to the definitions of entitlement to working tax credit, do the Government intend to address the point that I and the hon. Member for Northavon made earlier about the difference between people who are a decent margin above the poverty line who are lone parents with two children, and people being below it when they are in partnerships in which one spouse is not working? The amendment would make provision for them to address that.

The Minister did not refer to the work of Martin Wolfe. That is a serious issue. We do not want a tax credit system that gives significant fiscal advantage to

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one person not to partner up or marry another when children are involved. It is ridiculous that there should be a disincentive to partner up until the partner has earnings that are 170 per cent. of average income. As she said, that needs to be dealt with. Her prior comments suggested that the Government did not feel like doing that. They may do so marginally, but not in a way that will truly level out the problem. She requested, however, that we focus on such issues now rather than when we discuss the child tax credits, so I look forward eagerly to her giving me comfort that such matters will be addressed adequately.

Mr. Webb: The Minister argued that there were two reasons not to give equivalent support to a two-parent family and a one-parent family. Work incentives were essentially the issues involved. If the working tax credit were not about children but about adults, such arguments would not be so strong. If there is a problem with child care incentives, we should deal with that under a child care tax credit and other mechanisms. However, if it concerns poverty, the argument about the inequality between a one-parent family and a two-parent family is much less acute in the case of childless families. The case for penalising a two-parent family, not a one-parent family, seems harder to make in light of childless families.

The Minister said that income support, housing benefit and working tax credit constituted one benefit, while measures for children were another benefit. Well, if housing benefit, income support and working tax credit are of a kind, and housing benefit and income support recognise second adults, why is working tax credit not included? If she is categorising such benefits as those that support adults and two out of three of them give something with which to feed the extra mouth, why should not the system under the Bill do the same? I cannot see the reason for such a distinction.

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