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Lord Swinfen: I did not say that I would pursue the amendment this afternoon, but I may do so later. The noble Baroness has obviously taken a lot of trouble with her reply, which took a long time to give. It will take me some time to digest it. I shall read her reply carefully. It is possible that I may feel it necessary to come back to the matter at a later stage--whether in the same form or

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a different form I do not know. I can then have the pleasure of hearing another long peroration from the noble Baroness! In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Swinfen moved Amendment No. 5:


Page 1, line 10, at beginning insert ("Subject to subsection (1B) below")

The noble Lord said: Amendment No. 5 is another probing amendment and is a paving amendment to Amendment No. 10, to which I also speak. The purpose of the amendment is to seek an explanation of the differences between the levels of credit for the working families' tax credit and the disabled person's tax credit.

The two credits have different origins, in family credit and disability working allowance respectively. These benefits were introduced at different times and for different purposes and it is not surprising, therefore, that there are differences between them. However, now that they are being improved and brought together as tax credits, it is possible to compare and contrast them.

While one might reasonably expect the levels of DPTC to be higher than those for WFTC, it is difficult to see any logical explanation for the wide variety of differences. For example, the proposed level of the basic tax credit for a single person for DPTC is £54.30, only £2 more than for WFTC. There is an argument for saying that the credit should be at the same level in each case and that a disabled person should have a significantly higher credit than someone who is not disabled. But it is not easy to see the argument for having a very small difference between the two credits, particularly since, by contrast, at £16,000 the savings disregard under the disabled person's tax credit is double, or very significantly higher than, that under the working families' tax credit.

However, it is in the treatment of a couple that the two credits are particularly different. The second purpose of the new subsection therefore seeks an explanation of the treatment of couples under the working families' tax credit. This question was raised but not answered in the debate in the other place on Third Reading. It was raised by the noble Lord, Lord McNair, and also by myself at Second Reading, but again was not answered. Under both the working families' tax credit and the disabled person's tax credit, in the case of a couple the income of the parents is aggregated in determining the net income to be deducted from the total credit otherwise payable. Equally, the savings of the parents are aggregated in determining whether the credits fall to be abated or not paid at all. The DPTC then continues to take account of the second adult in the family by giving a couple a higher basic tax credit at a proposed rate of £84.55 as compared with £54.30 for a single person, but there is no similar higher basic tax credit proposed for a couple under WFTC. In other words, WFTC takes account of both parents where it is to their disadvantage but ignores the second adult where to take both parents into account would be to their advantage. This illogicality of the treatment of couples under WFTC is clearly unfair. Yet the Chancellor claims that one of his major aims in taxation is fairness.

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Moreover, it also works against one of the Government's main purposes in introducing WFTC which is to reduce the number of children living in poverty. At any given level of net income, a family of four (two adults and two children) will be poorer than a family of three (one adult and two children). Yet under WFTC the credit available to the former will certainly be no greater than that available to the latter and may well be less, without taking account of the treatment of maintenance payments which is also advantageous for a lone parent, as I mentioned when dealing with the previous amendment.

The other major difference between the two credits, which I also raised at Second Reading, is in the treatment of a disabled child. Under the disabled person's tax credit a credit of £21.90 is to be given in respect of a disabled child in addition to the normal age-related child credit. There is no such disabled child credit under the working families' tax credit. Surely, the additional cost that parents may incur in looking after a disabled child will be just as great if they are not themselves disabled as if one of them is disabled. The entitlement to the disabled child's credit should turn on the disability of the child alone, not that of his parents. The logic of this argument is accepted in the childcare tax credit which, in the case of both WFTC and DPTC, is given for a disabled child up to a higher age than in the case of other children. Why not, therefore, in the case of the disabled child's credit? I beg to move.

6.15 p.m.

Lord Rix: Before this amendment is supported by the noble Lord, Lord Astor of Hever, for the first time since I entered your Lordships' House I find myself in the unique position of putting a question to the noble Lord, Lord Swinfen, in regard to Amendment No.10. Does the noble Lord agree that there is a longstanding tradition of recognising the special needs of disabled people by giving preferential treatment in all possible circumstances? Does it not seem inappropriate to rule that out in the context of tax credits as appears to be the case in Amendment No. 10?

Lord Swinfen: I ask the Government: what is the logicality of either not making the two credits similar or making a very much greater difference?

Lord Astor of Hever: I support these amendments. With regard to the difference in the level of WFTC and DPTC, it is reasonable to expect the level of DPTC to be higher than that for WFTC, but the discrepancy in the rules governing the treatment of couples within both credits requires explanation. The failure of WFTC to take any account of the cost that results from the second adult in the household means that married couples end up poorer than single-parent households with the same gross income. This does not happen where the DPTC rules apply. Surely, second adults should be treated in the same way for both credits, particularly as we are told repeatedly that the Government support marriage and want to reduce the number of children in poverty. As my noble friend said, under DPTC the credit is given

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for a disabled child in addition to the normal child credit. No such disabled child's credit is available under WFTC when the extra cost involved will be the same. Can the Minister explain these differences between WFTC and DPTC?

Lord Desai: Before my noble friend replies, perhaps I may make one point in response to the noble Lord, Lord Swinfen. The noble Lord spoke about fairness. I am puzzled. I would have thought that parents, one of whom was disabled, who raised a disabled child, would have much higher cost than two able-bodied parents (if I may use that incorrect term) who raised a disabled child. It seems to me fairer to recognise that extra cost. I do not see how that is unfair.

Lord Swinfen: One is concerned with the cost of the disability which will remain the same whether or not the parents are disabled. One is talking about the cost of the disability in the form of aids, equipment, possible adaptations to the house, and matters of that kind.

Baroness Hollis of Heigham: Perhaps I may respond to Amendment No. 5 and with it Amendment No. 10. The amendments seek to ensure that a working family receiving WFTC is never worse off than a comparable family receiving DPTC. It appears that the amendments are intended to probe the reasons for the differences between the two tax credits. These differences are not new; they exist between family credit and DWA in the same way. Given that we are building on the two existing benefits as we move into tax credits, the differences lie in the basic tax credit, the disabled child's tax credit and the amount of savings that a family can have. In all other respects families will be treated the same.

The main differences is in the generosity of the basic tax credit which is higher for DPTC, as it was for DWA, to reflect, as the noble Lord, Lord Rix, said, the additional support that disabled people need and the lower wages that they are likely to be able to command. I am disappointed that the noble Lord, Lord Swinfen, who has fought so gallantly in this Chamber on behalf of disabled people, should seek to challenge the fact that disabled people need greater support through DWA, which is being carried through into the tax credit, than non-disabled people. He knows better than anyone in this Chamber that on average the income of disabled people is only about 70 per cent that of non-disabled people and that they also have higher living costs. The last research I saw several years ago indicated a figure of about £60 a week for diet, transport, laundry and so on.

Lord Swinfen: Why, therefore, is the basic tax credit for a disabled person under DPTC £54.30 for a single person as opposed to £52.30 for a single person under WFTC? Two pounds is not a great deal to pay for the additional costs of disability.


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