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Lord Higgins: My Lords, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No. 25:

Page 4, line 29, after ("which") insert ("shall in the case of the first regulations made under any subsections of this section be made only if a draft of the regulations has been laid before, and approved by a resolution of, each House of Parliament and in the case of subsequent regulations")

The noble Lord said: My Lords, this is one of two amendments; similar amendments were discussed in Committee. This amendment concerns the approval of regulations to be made under Clause 6, while the other amendment relates to the approval of regulations to be made under Clause 15. Clause 6 will be implemented through regulations. The Government have produced draft regulations and that is helpful; but it is not yet enough. Those regulations are still open to change. I believe that the principle should be that the final regulations should be approved by Parliament, rather than Parliament relying on drafts which are not finalised at the date of the relevant debates.

Of course, these are very important regulations which are central to the whole operation of the tax credits system; for example, Regulation 5 of the draft regulations contains the employer's obligation to pay tax credits through the pay packet. Regulation 6 provides for the employer to fund the tax credits by what can be described as "deductions from deductions". Regulation 7 provides for the funding of the employer by the Inland

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Revenue where the employer cannot cover the tax credits by deductions from PAYE or NICs. Therefore, the regulations are plainly at the heart of the Bill.

It seems reasonable, therefore, that on the first occasion when the regulations are made, if not subsequently, the affirmative resolution procedure should be used so that Parliament has an opportunity to debate and confirm them without having to rely on a Prayer against the regulations under the negative procedure. That is what the Select Committee on Delegated Powers and Deregulation recommended. I am a member of that committee, and we said:

    "This is a wide-ranging power with considerable administrative and financial implications for employers, including small employers. The House may wish to consider whether the Bill should be amended to provide for the affirmative procedure to apply on the first occasion that the power is exercised". That proposal was rejected by the Inland Revenue. Indeed, the Revenue did so in a letter which I shall paraphrase, although I shall paraphrase only slightly because the following is pretty much what it said. The recommendation was rejected on the basis that the Inland Revenue did not think it was appropriate for its regulations to be subjected to the affirmative resolution procedure. I must say that I do not believe that that is an acceptable response. I am not blaming the noble Baroness because it is not her department. She has no responsibility for what the Inland Revenue says. However, whether or not those arguments are correct, I repeat that I do not think that is an acceptable response.

The Inland Revenue argued that the PAYE regulations involve the negative resolution procedure. But, of course, PAYE was introduced in wartime and I think that it is at least possible that people were not thinking in as much detail in 1943 as they do now about whether the affirmative or negative resolution procedure is more appropriate.

The attitude of the Inland Revenue is all the more surprising because the Government have accepted that the affirmative procedure should be used for the first regulations to be made under Clause 15 on childcare. Those regulations will also be important. However, I believe that they are no more important to this Bill than are those which are to be made under Clause 6. The difference is that it is the Department for Education and Employment and not the Inland Revenue which is responsible for the regulations under Clause 15.

The latter increases our concern that the Inland Revenue culture is inappropriate for the payment of tax credits. Whether or not you call tax credits a "benefit", they are clearly a distribution of money which is contrary to the Inland Revenue's basic purpose, which is to collect money. The Inland Revenue is not used to making payments out. Indeed, it is not used to the rather different emphasis which applies to the making of regulations which are involved in the distribution of money--whether called "benefits" or "tax credits"--in a similar form to benefits Therefore, I ask the Government whether they are prepared to reconsider the method by which the first regulations to be made under Clause 6 will be approved. I beg to move.

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9.45 p.m.

Lord Higgins: My Lords, I rise to support the noble Lord, Lord Goodhart, in his amendment. He specifically refers to the recommendations of the committee. I must say that the response which we have received from the Inland Revenue--namely, that this is not something the Inland Revenue is concerned with--does not seem to me a reasonable response. After all, we are concerned with ministerial responsibility, not that of officials. One presumes that the Revenue's response was endorsed by Ministers. But certainly a doctrine that no Inland Revenue order could be subject to scrutiny and voted upon in the way that the noble Lord, Lord Goodhart, described does not seem to me to be acceptable, whatever the precedents may be.

As regards this Bill, the idea that we are switching from a situation where the affirmative resolution procedure is permitted to a situation where it is not permitted because the Inland Revenue is involved does not seem to me to be acceptable. As the noble Lord rightly stressed, that underlines our concern that the attitude, regime, ethos--call it what you will--of the Inland Revenue may pervade what has previously been that of a government department with a rather different approach to these problems.

On the first occasion the regulations come before the House we should be able to consider them. However, they are still not amendable. We have already expressed appreciation of the fact that the Government have published the draft regulations, but that does not resolve the problem of their not being amendable. I have much sympathy with what the noble Lord has said. If he felt inclined to register a protest by calling a Division, I would be inclined to support him. But be that as it may, we look forward to hearing what the Minister has to say. I hope very much that he can accept the amendment.

Lord McIntosh of Haringey: My Lords, the last thing I wish to do is to seek to hide behind departmental differences, or indeed seek to hide behind the view of the Inland Revenue as opposed to the view of Ministers. As the noble Lord, Lord Higgins, rightly says, the response of the Inland Revenue to the Delegated Powers and Deregulation Committee was given on ministerial authority. I speak on behalf of the Government and not on behalf of any particular department.

Therefore it is with great sadness that I have to tell the House that our response has not changed since the lengthy debate we had on this subject at Committee stage. Before I repeat the reasons which I gave on that occasion I must tell the noble Lord, Lord Higgins, that the issue here is not one of scrutiny, voting or amending; we are talking about the difference between negative and affirmative resolutions. Both of them are forms of scrutiny. It is perfectly possible for negative resolutions to be prayed against in this House or in the other place. They have to be scrutinised by Parliament in exactly the same way as affirmative resolutions.

Similarly, although this House passed on the Motion of the noble and learned Lord, Lord Simon of Glaisdale, a resolution that this House has an unfettered right to

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vote on secondary legislation, it has been the convention of this House for many years--both on affirmative and negative resolution procedures--that we do not vote against these orders for the very straightforward reason that a vote against them would require the order to be relaid because there is no opportunity for the other place to reconsider the matter. An order falls if it fails to be passed by both Houses.

I shall repeat my explanation of why we provide for the negative resolution procedure through both Houses. That is the usual process in the tax system and it is more usual for tax regulations to be laid only before another place because of the limitations on this Chamber's powers in respect of money matters.

Lord Higgins: My Lords, I was slightly surprised to hear the comment of the noble Lord, Lord Goodhart. Is it the case that Inland Revenue resolutions are never by affirmative resolution?

Lord McIntosh of Haringey: My Lords, I believe that to be the case. It is the case also that they are not even subject to the negative resolution procedure before this House. I may be able to expand on that point in a minute.

Lord Swinfen: My Lords, I am a little concerned that in future, because this could be construed as a money matter, a negative resolution will not come before this House.

Lord McIntosh of Haringey: My Lords, that is entirely possible. It is for Madam Speaker to rule whether it is a money matter. If the noble Lord will hear me out, it would be better if I pursue my arguments without interventions that try to anticipate what I am going to say.

These regulations for payment through the pay packet are setting up a similar administrative structure to that for PAYE currently in the tax system. Therefore, we take the view that it is appropriate for the regulations also to use the negative procedure. As I said in Committee, the powers in social security legislation frequently provide for regulations to be made by the negative procedure.

I am sure that noble Lords are motivated by concerns that there will not be proper scrutiny of the regulations. Your Lordships and Members of another place will be able to study the draft--as the noble Lord, Lord Higgins, fairly acknowledged. In addition, the Inland Revenue intends shortly to publish formally the draft regulations which will give many interested parties the opportunity to comment. The Inland Revenue has spent considerable time over the past year consulting representative groups on details of the scheme. The document published in December and the draft regulations were developed as a result. The Inland Revenue will continue to consult on the draft regulations.

I hope that noble Lords accept that it is with no sense of defiance towards the Delegated Powers and Deregulation Committee--for which we have

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individually and collectively the highest respect--that we suggest on this occasion that it may have got it wrong and that it would be better to stick with procedures that have worked well in the past.

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