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Baroness Hollis of Heigham: The point is that for the single allowance the lower level of a DPTC could be for a single individual; it does not have to include

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being married or having children. Like DWA, it relates to the disability rather than the family circumstances. The clearer analogy is with DPTC where there is a couple with children on WFTC. That is the direct analogy. In that situation a couple earning £200 a week, working over 30 hours, with two children under eleven, would on average be £29 better off by virtue of the tax credit system than the couple on WFTC. That is a contribution towards the cost of their disability.

The noble Lord, Lord Swinfen, has previously quite properly argued--and I have been happy to join him in that--disabled people should have that recognition of the extra costs of their disability. We know that DLA covers certain costs of disabled persons who need care, attendance and supervision, but many other disabled people have lower levels of costs related to diet, transport or laundry, but which are not related to the existing DLA tests. The DWA recognised that distinction and that is why it is carried forward into these proposals.

The second point on which I have been pressed is the additional credit for the costs of caring for a disabled child. That is the result of lobbying, particularly by the disability organisations, in the run-up to its introduction in 1991 by the previous Government, which conceded its propriety. Under family credit arrangements no such distinction is made. Again, we are building on the two existing benefits, into tax credits which run in parallel. It is a proper point for us to reflect upon.

The higher savings limit was introduced following pressure from the Social Security Advisory Committee and criticisms made by noble Lords during debates on the Bill to introduce DWA. I recall that the noble Lord, Lord Swinfen, joined my noble friend Lord Carter and myself in arguing the same point.

The concern was that disabled people may need to have extra savings to pay for adaptations to the home and special equipment and services, and therefore they needed a higher savings limit of £16,000 rather than the £8,000 which would normally apply to couples.

We believe that disabled people should have extra support of this kind. Is the noble Lord, Lord Swinfen, arguing that we should deliberately cut the standard of living for disabled people by reducing the tax credit down to the level of WFTC, which would mean that they would be £30 worse off as a result of the amendment; or is he arguing the reverse, that WFTC should float up to DPTC? Does he have Front Bench support, as he appears to have, for the additional expenditure of a further £1.5 billion on public expenditure over and above what DPTC already costs? Which of those paths is the noble Lord, Lord Swinfen, asking noble Lords to follow?

I hope that following this explanation the noble Lord will be able to withdraw his amendment.

Lord Swinfen: I hope that the noble Baroness knows me well enough to know that I am not arguing for a reduction for disabled people. She joined me, when the last administration was in power, in defeating that administration and improving the position of disabled people over a number of years, and that is now my aim.

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I am delighted that the noble Baroness will reflect on the position of the disabled child, and I look forward to her bringing forward an amendment to improve the position at the next stage of the Bill.

I will read what the noble Baroness has said.

Baroness Hollis of Heigham: I made no such commitment; I said that I would simply reflect on those points. The noble Lord should not infer anything beyond that.

Lord Swinfen: I am making no inference, I am looking forward. One can always indulge in wishful thinking. I am sure that the noble Baroness has done that; it may have been for just a slightly larger Easter egg next year, but it is wishful thinking. One can look forward where there is no guarantee.

It may be that I shall bring forward an amendment to address the point. I will read what the noble Baroness has said, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The noble Lord, Lord Swinfen, moved Amendment No. 6:

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

The noble Lord said: This is another probing amendment and is a paving amendment to Amendment No. 11.

The aim of the amendment is to seek an explanation from the Government as to how the WFTC and the DPTC will apply to families with comparatively small amounts of capital, perhaps as a result of receiving a redundancy payment.

Ministers have stated unequivocally on a number of occasions that when WFTC comes into operation every working family will have a guaranteed income of £200 a week, and that no income tax will be paid until earnings reach £235 a week.

In his Budget speech the Chancellor stated that every family would be guaranteed a minimum income. That provision will be introduced in October, not at the previously announced rate of £190 but at £200 a week--more than £10,000 a year--and no income tax will be paid until earnings reach £235. That statement was repeated at paragraph 4.48 in the Budget Red Book, which spoke not of "more than £10,000 a year" but of earnings of less than £235 a week--over £12,000 a year--saying that no income tax would be paid from October this year. That was repeated in the Treasury Budget day press release, which referred to a minimum income guarantee of £200 a week for every family with a full-time earner. It was further repeated by the Paymaster General in her speech on the Third Reading of the Bill in the other place.

I wonder whether those promises will be kept, as it seems unlikely that these figures will become a reality for families because, using the powers being transferred to the Treasury by Clause 2, the Treasury will have the power to introduce WFTC by way of amendments to the Family Credit Regulations. Under these regulations a

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family would receive no family credit if it had savings of £8,000, and family credit is progressively reduced if those savings are £3,000 or more. I beg to move.

Lord Astor of Hever: I rise to support the amendments. With regard to clarifying how WFTC and DPTC will apply to families with small amounts of capital, the Revenue states that the credit will be progressively withdrawn if savings, including those of a parent and children, are between £3,000 and £8,000. The DPTC position is similar except for the "couple" point, where it is £16,000.

As my noble friend stated, if that is the case, it will not be correct therefore that every family with a full-time earner will have a minimum income of £200 per week or that no income tax will be paid until earnings exceed £235.

If it is the intention that every family should have a minimum income of £200, WFTC will have to be paid in full, whether or not the family has savings. If that is not the Government's intention, Ministers should retract what they have said about every family having a minimum income, as some families may already be making plans based on the Minister's statement in another place. Can the Minister please clarify the position in her reply?

Baroness Hollis of Heigham: I was a little baffled by the amendment in the first place, but I am now entirely baffled because, if I may gently say so, the points made bear no relation to the amendment.

Amendments Nos. 6 and 11 seek to ensure that tax credits do not begin to be restricted, that is withdrawn on the taper, until the applicant has gross taxable income of £235 per week. Currently, the threshold for withdrawal is set at a net weekly income of £90. There is no mention of savings. This would be a massive increase in the generosity of the tax credit system--it is hard to estimate--possibly in the region of a further £1 billion. Perhaps there is some misunderstanding. The two speeches by the noble Lords bore no relationship to the purport of the amendment tabled. Perhaps the amendment is based on a misunderstanding of the figure of £235 per week cited by the Chancellor in his Budget Statement and in the Red Book, and the aim of the amendment was to probe the figures.

The Chancellor announced in his Budget Statement that the minimum income guarantee under the WFTC for every family with children and with full time earnings would increase from October 1999 to £200 per week. He also said--as Members of the Committee quoted--that no such family earning less than £235 per week would pay any net income tax from October 1999. In both cases the numbers refer to a family and not to an individual in these specific circumstances.

These are the reference points for the Chancellor's package of measures to make work pay and reduce the burden of taxation on low paid families. They illustrate, for a typical family, how Budget measures might change their minimum income and the point at which net tax would be payable. They allow the comparison to be

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made from year to year. The minimum income guarantee for October 1999 has gone up from £190 last year to £200 this year as a result of the measures in this year's Budget. Similarly, the balance point at which tax credits match tax due for the typical reference family has gone up from £220 cited in last year's Budget to £235 in this.

The reference family is not special. It is a family with a full time earner, working more than 30 hours a week, and with a child under 11. The minimum income guarantee assumes that the earner works full time at the minimum wage and includes child benefit. The balance point for tax and tax credit is based on the details of this family, giving the appropriate reliefs and applying the appropriate tax rates.

If that is what noble Lords sought to find out, as opposed to what the amendment provides, I hope that I have answered the question. In that case I hope the noble Lord will agree that there is no point in building such reference points into the legislation. Even if they could be made to work. the amendments would apply those reference points indiscriminately--for example, to families who work less than full time hours. That would give a perverse incentive to people to reduce their hours knowing that the tax credits would take the strain.

The amendment is rather a mess. It is an expensive mess as it stands because the taper would not kick in until the income of £235 as opposed to the £90, depending on the assumptions being made. The noble Lord says that it is a probing amendment. If his concerns were about the connections with the Red Book, I hope that I have also addressed those.

6.30 p.m.

Lord Swinfen: The noble Baroness has probably addressed the points I sought to elucidate. I shall read what she said and reserve my right, if necessary, to return to the subject at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 7 to 11 not moved.]

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