Tax Credits Bill

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Mr. Swire: What my hon. Friend says on that point is entirely true. He no doubt remembers the case of the lone mother with three children who lost her job when the tax credit was actually put in her pay.

Mr. Hoban: Yes. We must recognise that those incidences are regrettable, and that employers should not do such things. However, from time to time employers are in situations in which they do not wish to incur additional costs.

Dawn Primarolo: The hon. Gentleman is making a very important point. I am sure that he will agree with me that the overwhelming majority of employers fulfil their obligations, and the situations that he mentions do not arise. In the particular case raised by the hon. Member for East Devon, we keep asking for information to pursue the case to see whether an issue was not dealt with in legislation, but unfortunately we still do not have details from the organisation that reported it or the individual that would allow us to ascertain the facts. The legislation protects the employee in those circumstances, and we expect it to be used.

Mr. Hoban: The Minister is right to say that the vast majority of employers deal with such matters properly. However, we should not use that argument to ignore the fact that some employers do not, and we should consider ways of minimising the impact on claimants. That is why I believe that moving to direct payment by the Inland Revenue will not only reduce the cost for business, but remove stigmatisation and discrimination against employees who apply for tax credits.

So far, comments have primarily related to the annual running costs of the tax credit system. Additional costs will arise from the Bill. The move from six months to 12 months will require adjustments to the wages software used by companies. Even the regulatory impact assessment points out that, although the number of employers will remain unchanged, different employers will have to process

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tax credits under the new arrangements compared with previous arrangements. Rather than take another batch of employers up the learning curve of implementing and administrating the regime, and allay their anxieties about the incurred costs and the changes that all employers will have to understand are a consequence of the legislation, the Government should accept the merits of moving to direct payments from the Inland Revenue, as they have done for child tax credits. Once and for all, that would lift the burden from small businesses, which are often the motors of the economy in constituencies such as mine. Administrative burdens often needlessly distract them from their valuable job of wealth and job creation.

Mr. Luff: Following your response, Mr. Hood, to my point of order at the start of the sitting, I rise to make the obvious point that I do not believe that regulations are always wrong. Often, Government must rely on regulation to allow for the flexibility to interpret primary legislation. However, clauses 23 and 24 contain largely regulation-making powers, so I will ask what, from now on, may become the usual question to the Minister. Is she satisfied—she probably is, but I want to hear her say so—that she needs to rely on the regulatory powers of the two clauses? I anticipate, Mr. Hood, that you will probably not allow a separate clause 23 stand part debate. Is the Minister also satisfied that they should go through the negative, not the affirmative, procedure?

I will not debate post offices either because they can be debated under the Liberal Democrat amendment in the next but one group of amendments. However, I associate myself with what the hon. Member for Northavon said. My substantive point relates to poverty, how we fight it and the trade-offs that we engage in. Along with my hon. Friend the Member for East Devon, I was glad that a sense of the need to fight poverty is shared across the Committee. It was tremendous to hear the authentic voice of old Labour raised by the hon. Member for West Renfrewshire (Jim Sheridan). He used the phrase ''nostalgic rubbish'', which I throw back at him. We must engage in serious debate about trade-offs. If legislation and forcing employers to do things could end poverty, they would have ended it years ago. However, we must think carefully when the Government invite us to impose or change a burden on a group of people in society in the name of a good cause. Cliche after cliche comes to mind, but the road to hell being paved with good intentions is probably the most obvious. I have two more to offer before I sit down.

I remind the hon. Member for West Renfrewshire that the Conservative party needs no lectures on fighting poverty. The Conservative party began employment protection in the 19th century. [Interruption.] The Minister laughs, but she is showing a shameful ignorance of history, which is uncharacteristic. It is the Conservative party's proud record of industrial and social reform that led to me becoming a member.

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Dawn Primarolo: I was not laughing; I winced at the hon. Gentleman's suggestion that the Conservative party has a fine and long history in this area. I accept that Winston Churchill advocated a national minimum wage, which this Government introduced. However, if we examine the statistics for the growth in child poverty under the Conservative Government, I am sure that the hon. Gentleman would not suggest that the figures showed that they were tackling poverty. The reverse is true because they presided over a massive growth in poverty.

Mr. Luff: The Minister tempts me into avenues down which I would dearly like to go, but I suspect that you would become impatient, Mr. Hood. Suffice to say that names such as Wilberforce and Shaftesbury are written proud in the history of the Conservative party. Some of the work done on relative poverty under the previous Conservative Government was discredited afterwards because it ignored various issues, but I shall not go into that because I do not want to waste the Committee's time.

When we debate poverty, and the Tax Credits Bill's approach to fighting it—clauses 23 and 24 lie at the heart of the mechanism that the Government propose—we must ask whether the balance is being struck appropriately. I must say that this is the one issue in relation to the Bill on which I received lobbying from my constituency, which is why I am speaking. The Herefordshire and Worcestershire chamber of commerce shares many of the concerns that my hon. Friends raised in their earlier contributions. It reminded me that the problems of small businesses in Worcestershire must be addressed with particular rigour by the Government because 84 per cent. of them employ 10 people or less. It points out that the proposals in these two clauses will be easier for large companies with large human resources departments to cope with than for small businesses.

The CBI's briefing, which has been alluded to on several occasions in the debate, is interesting in that respect. The CBI reaffirms its principled support for what the Government are trying to do in the two clauses and the Bill, but it states:

    ''If there is no possibility of administering the tax credits system within the Inland Revenue, employers should be compensated for the administrative costs associated with running the scheme . . . Small employers, in particular, will welcome the support offered by paying administrative costs. These employers have reported to us that they are struggling under an increasingly heavy burden of payroll administration. The Better Regulation Task Force has also indicated their concern at the possible effect of the tax credits system on small employers.''

Ms Karen Buck (Regent's Park and Kensington, North): The hon. Gentleman is making a serious point, but those same organisations, the chambers of commerce and the CBI, also issued apocalyptic warnings about the impact of the minimum wage. Before its introduction his party told us that it would cost 1 million jobs, but the history of its implementation has been the reverse of those dire predictions.

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Mr. Luff: I shall not get on to the minimum wage because you would rule me out of order, Mr. Hood. Suffice to say that the level at which it was set meant that it did not have the apocalyptic consequences that it would have had if it had been set at the level preferred by some of the hon. Lady's colleagues in the trade union movement. I could have a longer debate about that issue, but you would rightly call me to order if I tried to do so, Mr. Hood.

Businesses in Worcestershire are concerned about the Bill in general and these two clauses in particular, and the Minister cannot dismiss their concerns lightly when she responds to the debate. The Herefordshire and Worcestershire chamber of commerce points out that smaller businesses are typically run by owner managers who are skilled in doing whatever that business does, but not skilled at being tax collectors for the Government. It says:

    ''Credits paid out are deducted from amounts the employer pays to the Revenue, where the employer is owed money then this could aggravate a weak cash flow position.''

She shakes her head, but I hope that she will address that point. I look forward to hearing what she has to say, because that is a real fear of businesses in Worcestershire.

I remind the Minister that when the Small Business Service was established it identified the fact that payroll management was a weakness in many small businesses. Many small businesses were worried because they thought that the Government were getting into the business of providing payroll services, but that was not the case. The Government were trying to encourage small businesses to examine solutions to payroll problems, such as better use of modern software. The fact that they recognised through the Small Business Service that small businesses needed practical help with their payroll should make us think carefully about these clauses.

The chamber of commerce says:

    ''Administering certain benefit credits through the payroll means that some employers may know more (perhaps only in general terms) about the family circumstances of employees than either would wish. The business will often be a small group of three or four people working very closely together. It may be the case that they do talk about family matters and are aware of each other's circumstances. However that is different to having to make one's employer aware of personal circumstances. It is also one of the differences between the large and the small employer. In the large employer there is often more ''distance'' between the individual concerned and the payroll administrator who may not know all the individuals concerned anyway.''

11.30 am

The Government must address the issue of privacy and intrusion. The suggestion to delete clause 24 is welcome for the sake of the individuals whose privacy is threatened. The Government often think in terms of big business. They talk to big business but they do not understand the dynamics. It is not a criticism but an observation. They have not been involved in small business and do not understand the difficulties that this well-meaning legislation causes these companies.

 
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