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Lord Skelmersdale: I was rather surprised to note on the Marshalled List Amendment No. 16 in the name of my noble friend as I thought we had all agreed on Second Reading the first part of the amendment in the name of the noble Lord, Lord Goodhart; namely, that,
"I understand that if there is a disagreement between husband and wife, the wife will receive the benefit".--[Official Report, 12/4/99; col. 536.] She was not disabused by the Minister. Therefore I assume that that is the correct position.
Baroness Hollis of Heigham: Perhaps I may respond to Amendment No. 14, which has been moved by the noble Lord, Lord Goodhart, and deal with it last, as well as to Amendments Nos. 16, 17 and 18 which have been spoken to by the noble Lord, Lord Astor, and supported by noble Lords on his Benches.
I start by repeating what my noble friend Lady Lockwood rightly said and what the noble Lord, Lord Skelmersdale, suspected I would say. The tax credit is not about support for children as such. Support for children is highly desirable--child benefit does that; child maintenance may do so--but this is about a credit paid essentially through the wage packet to the main earner, if that is his choice, such that we increase work incentives while, at the same time, because it reflects family shape, size and necessities, supporting families. In other words, it is not a benefit in the traditional sense, whether income support or whatever, which is automatically paid to the carer for the support of children. That is not the purpose of this tax credit. Its purpose is to produce an incentive to work, as my noble friend rightly said, and to top up an entry wage to make it a more attractive return for moving into work; a more attractive return for working for longer hours and higher pay. That is its purpose. I hope that all the rest of what I shall say will be understood in that context.
I do not disagree with the points made by the noble Baroness, Lady Fookes, about, for example, the need to look after children or, as my noble friend said, the need to protect women in situations of domestic violence. I share all of those concerns. That is not the purpose of this measure. I certainly join other noble Lords in seeking, as my noble friend said, to avoid any situation in which there is domestic violence, emotional pressure or emotional blackmail in such a way that women within marriage cannot exercise their appropriate rights. I assure my noble friend that the Government have an "across the waterfront" concern about domestic violence. We shall continue to keep the matter under review through the "Ministry for Women", which is located in the Cabinet Office, and we work with the DoH and within my own department to this end. Obviously a good deal of domestic violence is by definition invisible and therefore is not easy to track. I can assure my noble friend that the Government treat domestic violence with zero tolerance.
I shall deal, first, with Amendments Nos. 16, 17 and 18, spoken to by the noble Lord, Lord Astor, which do away with choice in various circumstances, and then, in responding to the amendment of the noble Lord, Lord Goodhart, I shall expand on the disputes procedure. I shall try to address his real concerns on that point.
Amendments Nos. 16 and 17 seem to disregard the differences between the two tax credits. They suggest that we should treat WFTC and DPTC in similar ways. They propose that the money should go to the carer of the child even if, for example, the earner has qualified by virtue of his disability, is receiving DPTC and there are no children involved. Your Lordships would be wise to keep those two benefits uncoupled because they have different pedigrees and functions. Those differences are not new. They exist currently with family credit and disability working allowance. Working families' tax credit, like family credit, is help for a family whereas disabled person's tax credit, like DWA, is help for an individual who may or may not be married, may or may not have children. They are very different benefit structures in that respect.
In DPTC, an application could come from an individual who is not responsible for any children, so there has to be a special lower basic tax credit. As with DWA, lone parents are eligible for the higher basic tax credit, which puts them on the same basis as lone parents claiming WFTC, which was one of the misconceptions that crept into the Second Reading debate.
DPTC, as with DWA, goes to the disabled individual and is payable to the working individual even where there is a couple. It contains elements to help support children in the relationship and money to help with childcare costs. DWA is not paid to the woman, nor to the caring partner, but to the disabled worker. Disabled person's tax credit will follow that tried, tested and accepted practice--as recognition of the degree to which disability hampers or caps earning potential. It is effectively a partial incapacity benefit, so it would be absurd to talk about paying it to carers or the non-working partner. It is for a disabled person.
The first two amendments would change that by forcing DPTC payments to be given to the woman or partner who stays at home, even where there are no children. That would be wrong. DPTC provides disabled workers with additional money that allows them to take work or continue in work at lower wages or, more realistically, for shorter hours by virtue of their fatigue or disability. It has always been accepted that that is the right way to handle those payments, even though, as with WFTC, there may be embedded support for children.
If they do not share household expenses but have a series of relationships of the sort described by the noble Lord, I suspect that in some cases the woman would be a lone parent with a live-out boy friend. That would not be a household in DSS terms. A household is where a couple live together, married or not, as though they were husband and wife. As to a man who might be having a relationship simultaneously with his marriage, the presumption there is that the other woman is a lone parent with a live-out boy friend. I hope that makes the situation clear. That is precisely why so much income support fraud occurs. A lone parent continues to claim as such but actually has a live-in boy friend helping to support her. All that is well established in law and we know what makes for cohabitation and what counts as a couple.
If a lone parent cohabits, she loses her benefit and is treated as a dependent on his benefit because they form a household. If we did not treat them that way, a lone parent who cohabited would be privileged over a lone parent who remarried. I am sure that the noble Lord, Lord Swinfen, would not want that to happen. Marriage is not as prevalent as it was. Even where children are involved, one third are now born outside marriage. Therefore, it is necessary for tax credits to look at the world as it is--of unmarried partners or of couples--when considering the money coming into the family. The noble Lord's distinction would be to the disadvantage of formally married couples.
If the amendment were pressed, there would be first and second class families. Unmarried couples would have free choice of who should receive the tax credit because, in the noble Lord's view, they would not count as a family. Married couples would always have it paid to the woman or in the case of the second, more PC amendment, to a non-earner. That would disadvantage marriage still further. Neither amendment is acceptable in the present day. The thrust of the amendments, taken together--even if noble Lords do not accept my argument that this provision is about producing a work incentive but wish to apply it to the carer--suggests that it is the woman who always cares for the children and the carer is the non-earner. We can no longer assume that that is always the case.
These amendments are simply anachronistic. They belong to a different generation. Some women both work and care for the children. Nowadays, 71 per cent. of married women work. In some couples, it will be the man who cares for the children while the woman works. In a quarter of couple families on family credit, a woman is the main wage earner. Often, the man may be disabled and she is his carer, but he may appropriately supervise the children. He may be self-employed, working from home and also caring for the children while the woman works outside. The amendments impose on the wide patterns that now exist, of sharing
Amendment No. 18 would require WFTC to be paid to the carer when the application is from a family comprising a couple. In that situation, the couple's choice as to whom the credit should be paid would be replaced by a rule that the payment must go to the principal carer, whether they wished it or not. Couples would have to decide who was the principal carer. Yet, as I have argued, increasingly both partners work and share responsibility for the children. There would need, quite unnecessarily, to be detailed rules to cover all possible circumstances. If the money had to go to the principal carer, who would make that decision? If the Inland Revenue decided who was the principal carer, would the decision be based on pay, hours worked, detailed questioning as to who does the school run? It would be highly intrusive. But if the couple were to decide who was the principal carer to whom the money should be paid, that would be no different from the present situation; namely, the couple can make a choice as to whom it is paid. The amendment either denies the couple choice or requires the Inland Revenue to be intrusive; and it is redundant, because the couple already have a choice as to whom the money is paid. So the main objection to these amendments is that they replace choice with rules.
At the same time as your Lordships wish to offer lone parents a choice as to how they are paid, that is to be denied to couples and the credit paid to the mother whether the couple wish that or not. It is not even clear whether the mother is the main carer; nonetheless, it would be the mother. The whole bundle of amendments is inappropriate in this day and age.
I appreciate that noble Lords aim to ensure that there can be no dispute in the relatively rare cases where the couple cannot decide who should receive the tax credit. But surely it is right that, as far as possible, the couple should make that choice for themselves. I appreciate that there may be concern in some families that the earner may treat the tax credit as his or her own--the example of drunkenness has been given--the extra money in the wage packet being reflected in extra housekeeping for the partner. But that will happen with all the moneys going into that household, including his wage. At the end of the day it is a decision for the couple how they apportion their moneys.
If the concern is mainly about how the tax credit is used by families, we must examine carefully the wording of the amendments. Accepting them would mean that the help given to families by the WFTC is presumed to be supporting the children and payment with better wages cannot achieve that. That is not entirely so for WFTC, and it has not been so for family credit. I repeat. The introduction of WFTC is a work incentive measure to make work pay. While it is focused on families with children who need the help most and who may need higher wages so that their wages are enough for them to live on, the specific help for children is through child benefit, which the Government have
The key principle is that WFTC is money for the family, and we expect there to be no difficulty. There could be a number of factors that may be taken into consideration. One or both partners could be working, either employed or self-employed. For those who are employed, the frequency with which the employer pays wages may be a factor. We believe that they should decide for themselves. But in cases, however rare, when families cannot reach an agreement as to which partner is to receive the tax credit, we decided early on how best to respond. As the parliamentary Answer given by my honourable friend the Paymaster General made clear, in cases of dispute of this kind, the tax credit will be paid to the partner who mainly cares for the children.
Copies of the latest draft of the application form have been seen by Members of the Committee and have been quoted tonight. They show that the way in which couples will exercise their choice of which one of them is to receive the tax credit is to decide at the very outset which one of them is to complete the form as applicant (filling in the left-hand column). Drafts of the form and the guidance notes have been sent to a wide range of interested organisations. The approach has been broadly welcomed and comments have focused on making the implications clearer so that the family's choice is better informed. The comments have been reflected in the latest version of the form and the accompanying notes.
I am happy to say that we shall continue to review the form to make clearer what happens in a situation of dispute or default. It is not likely that that will be done by October. In any case, in October payment will continue to be made in the same way as family credit and so the situation will not arise. It will certainly be done by next April.
I hope that the noble Lord will accept that, in terms of the information accompanying the form, we shall take on board the comments about making clear what happens should there be a dispute and what the default procedure should be. That information will be built, as far as possible, into forms and guidance. We shall have to consult on this matter, but I listened to the Committee about the need to make that information clearer.
I now turn to Amendment No. 14. The new clause seeks to require regulations to provide that a couple claiming WFTC should be able to choose which of them should apply for and receive the tax credit but that where there is no agreement it should be paid to the carer. I am delighted to say that, as we made clear at Second Reading, the amendment of the noble Lord, Lord Goodhart, is redundant because that is what we shall be doing.
While the regulations cover the choice, they do not include the procedure for resolving disputes where partners do not agree who should claim--and therefore receive--the credit. The reason for that is simple. We believe that they will sort it out by themselves. If they cannot, we expect the Inland Revenue to exercise its
The noble Lord, Lord Goodhart, pressed me as to the standing of the care and management vis-a-vis regulations which appear to push to the contrary. He was concerned as to whether the care and management responsibility could legally and legitimately override regulations which indicated, to the contrary, that to be valid the form had to be signed by both partners.
The dispute procedure is an exception to the normal rules, which require that both partners sign to say that the information on the application form is complete and correct. An administrative practice is the most efficient way to handle the exception. A more formal approach, by setting down rules in legislation, would be very complex. It would be difficult to cover all the relevant circumstances without leaving the rules open to abuse, and we do not think that that is appropriate.
A formal legislative approach would have to provide a way for the family's income to be reported by only one partner. Clearly one partner is unlikely to know all the necessary details, and even in family credit, which is portrayed as the woman's benefit--or the mother's benefit--the man still needs to help complete and to sign the claim form.
The administrative procedure copes with this by acknowledging that, quite exceptionally, the Inland Revenue gives up some of its ability to investigate errors properly by allowing only one partner to be involved in the application. That is why it needs to be handled under "care and management". This overruling by "care and management" is not a unique position. For example, the Inland Revenue can and does decide not to collect £10 of tax because it costs £200 to collect it. That is done in terms of "care and management".
The Inland Revenue needs information about the earnings and savings of both partners in a couple because working families' tax credit is based on family income. There may be situations when an application is sent in, signed by the applicant alone, but which shows that there is a partner in the household whose circumstances need to be taken into account for the correct award to be calculated.
WFTC rules require the forms to be signed by both partners, just as with family credit. We anticipate that, as with family credit, this should not cause any problems in the majority of cases and that, as currently, the majority of applications--of which there is a tiny percentage--from couples with only a single signature will be because there has been a simple oversight, in which case the form will normally be returned.
Where an application is received from a couple but signed by only one partner and there is some indication that the reason for its being completed in this way is because there is a dispute between the partners, the form will be followed up rather than returned. We expect this to be very rare. Officials cannot remember half a dozen cases in family credit over the years.
In cases where the Inland Revenue may consider accepting a defective application--one with only a single signature--it will ask the partner to confirm that all the relevant information known to the applicant about the applicant's own and the partner's circumstances has been declared. The application will be subject to a detailed check and risk assessment before a decision is made whether or not to accept it. Where the Inland Revenue finds no evidence to suggest that the application is materially incorrect or incomplete, it will be processed as if it had been signed by both partners. The award will be determined and paid to the applicant. Where the Inland Revenue considers that the application is materially incorrect, the procedure will not be applied. The form will be returned on the ground that it has not been fully completed because it lacks the partner's signature.
As consultees have suggested, the form and guidance notes set out what needs to be considered by a couple when making the choice. More recent comments have suggested further changes which refer specifically to what happens in the case of a dispute or tell applicants where to go for help. We are looking at these. We very much hope that we shall be able to embody them to the satisfaction of all concerned in the forms that go out as of next April. In addition, the working families' tax credit helpline is always available and our guidance will be made public.
We believe that the procedure that we have developed correctly addresses the need to deal with cases where families cannot agree on which partner should receive the tax credit. We think that it is right that it should be handled administratively. It will enable the Revenue to cut to the heart of the problem and resolve it efficiently and effectively, and it has been generally welcomed.
To conclude, it will be paid through the wage packet if both agree; it will be paid to her if both agree. A form which lacks his signature may be taken as valid, but a form which lacks the woman's signature cannot be. If there is only one signature and it is his it will be investigated. If it is a simple mistake which is corrected it will be paid in the normal way, if they agree; but if there is a dispute, ultimately it will be paid to her. If there is only one signature on the form--hers--and it reflects a dispute as opposed to an error, it will also be paid to her.
I hope it is clear that there is a choice for it to be paid to the woman as opposed to the working partner or carer. If he wishes it to be paid to him but she wishes it to be paid to her and the form is signed by only one of them, but it is clear that it is not an oversight and it is by
I apologise to the Committee for giving a rather long explanation but it appears to me to be important given that this is perhaps one of the two big issues at the centre of the Bill. I felt that I should spell it out in some detail at this stage so that noble Lords can reflect on it and decide whether they wish to return to other issues at Report stage.
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