Tax Credits Bill

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Mr. Flight: The point is consequential on amendment No. 94, and if that were carried there would be no need for amendment No.35.

Dawn Primarolo: That is very interesting. Usually when hon. Gentlemen do not like a clause, they simply propose its deletion. It is quite unusual to table six amendments when one would have sufficed.

We have had an interesting, long and important debate this morning, from which I am sure we will all benefit in terms of ensuring that the issues are on the record.

I have dealt with all the points that have been raised, although not always specifically referring to the hon. Gentlemen who have raised them. Finally, I return to the point about regulation as I know that the hon. Member for Mid-Worcestershire will not let me conclude without referring to the issue. Matters relating to payments being made through the employer and the ability to adjust those payments are exactly the type of issues that it is sensible to have in the regulations. They are subject to negative resolution. It is right that the fine detail should be set out in regulations.

Regulations under clause 23(8) are specifically about payments to accounts—we are rolling forward what had been done in previous years, although payment through the payroll is a new arrangement. This morning I listened to what the hon. Member for Mid-Worcestershire had to say, and I need to reflect on whether the Government can accommodate him in terms of how we process the regulations. If the hon. Gentleman gives me a little longer to consider how that might be done, I can assure him that by the time the Bill is considered on Report I will have come back with a suggestion on dealing specifically with his point of negative regulations.

On that basis I hope that I have responded to all the questions that have been raised although I do not suppose I have convinced Opposition Members of some of the principles. If they are unable to withdraw their amendments I will ask my hon. Friends to vote against them.

Mr. Flight: I thank the Minister for her responses. On this occasion I was a little disappointed that she did not address a number of fundamental issues.

First, it is one thing, where there is broad consensus, to argue that there is sense in paying people benefits in work in order to deal with the poverty trap. We started the process, the present Government have continued it and provided that it does not get out of hand there is consensus that it prices people into work. Making that payment, however, is quite another issue.

If I were the Minister, I would be suspicious of the fact that, as she rightly quoted from the CBI paper, many businesses like the payments going through the payroll, even though they would like to be remunerated for the costs. When not talking with Government, the Minister will find that many

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businesses, particularly those in the low-paid service sector, like it because it represents a pay subsidy. As they see it, it saves them having to pay their employees more, which was one of our main worries about payments going through the payroll. The Minister will be aware of past examples in which wages were driven down by that attitude, with dire economic consequences. Let us not muddle the principle of pricing people into work to avoid poverty traps and the side effects of how to make such payments.

12.30 pm

The several amendments were designed to make different points. After the Government's response to the Carter review, pointing to costs and implicitly suggested some help for small businesses, and the Chancellor's comment that the Government would examine the issue, I took the Minister's earlier comments as saying that they would not provide any financial help and that they were looking for some trade-offs.

Dawn Primarolo: The Carter report is not within the remit of this Committee, but if the hon. Gentleman examines its main thrust, he will see that in electronic transactions, the use of e-commerce was of huge benefit, not only in terms of communication between small and large businesses and the Revenue, but in terms of conducting business. It is necessary to take business forward, and Carter proposed that the Government should consider compulsion in respect of electronic communication with the Revenue, as well as ways to incentivise small employers to do that, perhaps initially by using of an intermediary.

In the pre-Budget report, the Government said that all the recommendations should be out in the open. We saw the strength of the report's argument because it was about productivity. We asked people to comment on the issues by the end of this month. The proposed measure is much wider, encompassing productivity and interaction with the tax system as whole, but it could be of huge benefit. If accepted, it would require Government action.

Mr. Flight: I thank the Minister for her comments. I am aware of the nature of the Carter report. She will be aware that the CBI and other business organisations pointed to the Carter report's coverage of this issue. The Chancellor's response in the pre-Budget statement was understood by commerce to mean that the Government would give it consideration, along with the other important matters that have been raised. However, I repeat that when asked whether the Government would consider it, the Minister's response was basically, ''No. No financial help; hoping to find some trade-offs''.

Interestingly, although cash flow is important, it has not often been raised by business. The ''putting businesses in money'' arrangements have generally worked. The Minister did not respond to my questions about coding. She likes to quote the CBI, whose brief ends:

    ''Over the long term, the CBI remains convinced that a technical solution''—

that is, tax codes—

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    ''is required, which will allow payments via the pay packet to administered by the Inland Revenue and bypass the need for employer intervention.''

It would be useful, not just to this debate but to the CBI, if the Government made it clear whether they have ruled that out for ever, and if so, why.

The amendment tabled by the hon. Member for Northavon raises a point that I also raised but to which the Minister did not respond. The evidence shows that individuals would prefer to be paid directly and have their tax credits sent to their bank account or the post office. That fact seems to be of no interest to the Government. They have made up their mind: whatever the worker wants, their position is, ''Hard luck, mate''. I cannot understand the reasons for their stance.

The Minister asked how I equate pay and productivity growth. That is simple: as night follows day, an economy will not get better productivity growth without getting more skilled workers. The question is how we get people to enhance their skills. Obviously, all sorts of training courses and improvements in education are needed, but at the end of the day, people must be motivated to want them. The strongest motivation is blindingly obvious: if people think that their pay packet will increase if they have more valuable skills to sell, they will work to enhance their skills. That fact is as old as the hills and, as I pointed out, it is recognised strongly and happily by most of this country's immigrant community from south-east Asia. The argument, which I thought that I had put clearly, is that a social wage will blur the message about what an individual's skills are worth in the current market. Whether that is deemed fair is another issue, but that is what will happen.

We will say much more about this subject on Report. There are many different issues involved—issues of principle as well as what is fair to business. In that context, we will not now press the amendment to a Division. The Government must properly make the case as to why they will not allow individuals choice, and state what economic and other advantages they perceive will be gained by their insisting on a mechanism that pays everything via the employer. There are widely acknowledged and powerful arguments against that in principle, aside from the issue of the burdens that are placed on small business. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Flight: I beg to move amendment No. 103, in page 16, line 19, at end insert

    'except for recipients of the child care elements of income support and income based jobseeker's allowance, which shall continue to be paid by the Department of Work and Pensions.'.

Amendment No. 103 relates back to the debate that we had on clause 1(3)(d). Some points have been dealt with, but the overall position is not entirely clear. Clause 1(3)(d) removes the child care elements of income support and income-based jobseeker's allowance. As the Minister explained, those will be wrapped into the child credit element of the new working tax credit. We suggested that it would have

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been better to leave them as the responsibility of the Department for Work and Pensions, and this amendment repeats that in the context of payment.

Of the issues that need clarification, the first is that many people who are entitled to the current child care elements of income support and jobseeker's allowance may not be in work. We must be clear about how they will qualify to pick up the equivalent as a work-related tax credit. Another issue is that many people in work are likely to work relatively few hours, so they might fall outside the hours requirement. Even if they are in work, they may not be entitled to any working tax credit either.

I am sure the Government do not intend the people most in need to be disadvantaged by the Bill, but I am not clear how someone will qualify for the replacement under the new arrangements when they are disqualified from working tax credit. Clearly something else will be needed to replace that, and I want to know what that will be. The amendment would have gone with amendment No. 94, which would leave the benefits, which are not work related, within the purview of the Department of Work and Pensions.

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Prepared 22 January 2002