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Lord Goodhart: My Lords, I am grateful to the Minister for giving way. Am I right in assuming that the figure of 250,000 is the total of those likely to be persuaded into work by the working families' tax credit and not the difference between the figures of those who would be in and those who would be out merely because small employers were not part of the scheme?

8 p.m.

Baroness Hollis of Heigham: My Lords, that is true. We are talking about the total figure and not the specific tranche. As I said, it included WFTC, NICs and the temporary starting rate. It did not include the national minimum wage. But we expect the result to be an increase of something like 47,000 people in employment over a one-year period; up to 290,000 (I said 250,000) in the long run. This is the work of the Institute for Fiscal Studies.

The noble Lord is absolutely right. But the point remains--the institute established it--that the entry wage is what determines people's perception of whether or not it is worth while returning to work, particularly for lone parents. They come into work from a position of being in benefit whereas many of the couple families will already be in work and will need to acquire this benefit because, perhaps, temporarily their income has dropped, whether through shorter hours or because the partner has dropped out of work or whatever. So for lone parents in particular, the entry wage is important. This is a qualitative improvement and that is the philosophy behind the tax credits system; that is, that work pays and is seen to pay.

Lord Swinfen: My Lords, before the noble Baroness leaves that point, perhaps I may ask a question. The person seeking work will know what the employer is prepared to pay as a straightforward wage. But it is the Inland Revenue which will decide what the tax credit is to be. Before the individual takes a job, how will he know what tax credit he will receive? That is what will determine whether or not he takes a job. Will there be somewhere he can go for advice?

Baroness Hollis of Heigham: My Lords, there is a short answer and a long answer. The short answer is that he can certainly obtain advice as to what the implications will be. The noble Lord will also remember that lone parents on income support will be enjoying a four-week rollover for their first month of work. At the

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end of that time, they will receive their pay packet. At that point, they will have an option to continue to stay in work. If their entry wage is not high enough--they will have been buffered for the first four weeks by a rollover of income support--they will be able to go back on to benefit. That is why we want to see the world of work being a qualitative improvement from the world of income support, together with all the related benefits that they hitherto received. I repeat, most lone parents going on to WFTC will have come off income support. Income support will carry them for the first month. If the entry wage that they receive in their pay packet is insufficient, they will retreat back into the world of economic inactivity, and I am sure that the House does not want that.

We firmly believe that this is not an unreasonable responsibility for employers. I have to repeat this because we said this both in debate and in letters, but it is worth reaffirming. The average cost to the small employer will be £37, six minutes a week or 70p per week per employer. We believe that this is not an unreasonable burden.

Where it becomes difficult is for the small employers who have manual payroll systems. There the burden is not so much WFTC, but the existing burden of PAYE and NICs. Therefore the Business Advice Centre--I was asked what its role was--and the vouchers are part of an effort to help small businesses to move out of manual systems and into the software packages which will allow them not only to deal straightforwardly with WFTC, but also with the other more onerous burdens (no one suggests that they should not pay them) of NICs and PAYE. That is the point.

I go further than that. We believe that WFTC is not a burden on employers; and we believe that it will not only attract lone parents particularly into the labour market, but also that it will be to the benefit of employers because it will widen the labour pool from which they can draw their staff. As a result, we believe it to be in the best interests of business, of staff and of lone parents. I hope therefore that your Lordships will not press the amendment.

Lord Astor of Hever: My Lords, before the Minister sits down, I specifically asked about the vouchers. Does she feel that the amounts offered are sufficient to alleviate the costs of administering the tax credits?

Baroness Hollis of Heigham: My Lords, I should say first that the income support rollover is two weeks rather than four. Housing benefit is the longer one.

The documents that were sent out for consultation suggest that we are thinking of vouchers in the region of £50 to £200 which can be redeemed against a registered list of suppliers. From my modest knowledge of IT systems, that would make a substantial contribution to a modest software package. But it is a consultation document, and if it needs to be tweaked, the Government will listen very seriously. This is part of a wider effort to ensure that small businesses come

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into the 21st century in terms of their support systems, not just for WFTC, but also for the far more difficult responsibilities of NICs and PAYE.

Lord Astor of Hever: My Lords, does the Minister expect the Government to review the tax credits after a year?

Baroness Hollis of Heigham: My Lords, after six months we shall be moving from the current system of paying family credit into payment through the employer. At that stage we shall be reviewing how we are doing and shall continue to monitor the situation. If the Government's policies are not delivering the responses we want to see, obviously it would be foolish of the Government not to take that into account. But all the research, all the evidence and all the public responses--the reviews have been very good indeed--indicate that this is the way forward for the future of the tax and benefit system. As a result, we shall be able to help more people into work and to stop the poverty of unemployment being transferred to the children.

On Question, Motion agreed to.



Clause 6, page 3, line 35, at end insert--

("( ) The Board shall ensure that any single parent can decide to receive payment of any tax credit direct from the Board rather than from the employer.")
The Commons disagreed to this amendment for the following reason:
2ABecause it is appropriate for tax credit paid to employees to be paid by their employers.

Baroness Hollis of Heigham: My Lords, I beg to move that the House do not insist on their Amendment No. 2 to which the Commons have disagreed for the reason numbered 2A.

The amendment, which would have given lone parents a choice not available to other applicants, is not about putting lone parents in the same position as couples; it would allow lone parents to choose whether to receive tax credits in their pay packet or direct from the Revenue. That is not a choice open to couples.

Insisting on this amendment would mean a major policy change, not just a minor shift at the margins. The matter was fully discussed here, where it was decided that it would be better to give this choice, and in another place where it was decided that it would not. We should not insist on the amendment.

Before putting the point formally, it may be helpful if I recap the arguments. I have already alluded to one; that is, that it gives lone parents the same choice as is open to couples, where it clearly does not. The other two major arguments were that it would allow lone parents to preserve anonymity; and, thirdly, that it secures lone parents against being pressurised, discriminated against or victimised by their employer. I shall take each of those three arguments in turn.

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The argument in relation to choice and the analogy with couples is that in practice couples have a choice because they can choose which one of them is to receive WFTC. In the main, they will be families where the man works and the woman stays at home to care for the children. But I dispute that it concerns choice as to how the tax credit can be paid and that it can be paid at home.

If both partners in a couple are in work, they can choose for the tax credit to be paid to her; but in that case, it can be paid to her only through the wage packet. If he is in work and she is at home, they can choose for it to be paid to her, in which case it will be paid to her at home because she does not have a wage packet through which it is paid. If she is in work and he is at home and they choose for the tax credit to go to her, again it can be paid only through her wage packet because she is in work and not at home. Therefore, the analogy with lone parents is simply not valid. Lone parents are not being denied something that couples are being given. Lone parents are in work and therefore they will be paid through the wage packet in exactly the same way as though the choice in a couple was to pay to the mother and she was in work, in that she too could only be paid through the pay packet. That is the analogy.

The second argument concerns fears that tax credit payments will breach confidentiality. Lone parents will be treated no differently from anyone else. Employers will simply be told, as with other recipients, of the amount to pay. They will not be involved in any way in gathering personal information or determining the award themselves. Debates here and in the other place revealed concerns that employees' circumstances could perhaps be inferred from the amount they receive from the employer. We sought to allay those fears whenever they surfaced, either during debates or in writing to noble Lords. Perhaps I may assure the House yet again that because of the number of separate elements--the effect of the taper and the childcare tax credit--it will not be possible to work out what someone is being paid. No doubt payment through the wage packet will mean that the employee is eligible to one of the two tax credits, either WFTC or DPTC, but that will be the extent of the employer's certain knowledge.

Your Lordships' third concern was that employers would be able to discriminate against, or apply pressure to, groups of employees who might cause them administrative hassle by claiming tax credits. Employers are unlikely to know enough about a person when they take them on to make an accurate judgment about whether or not they are likely to qualify for tax credits. The evidence of research done for the DSS into family credit says that employers did not have enough information about potential recruits to adopt such tactics. There will be no more opportunity at that stage of recruitment than there would have been under family credit. Research carried out for the Joseph Rowntree Foundation has also shown that employers are increasingly seeking the least possible information at the time of recruitment to avoid possible charges of discrimination.

Once the credit has been claimed and awarded, it will become clear to any employers administering payment through the wage packet that the employee is getting a

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credit. It was because of the possibility of discrimination at that point that the anti-discrimination provisions at Clause 7 were included.

There is a danger in what was proposed in the amendment. Giving single parents alone a choice of payment method could say to employers--albeit the small number of bad ones who might wish to avoid their responsibilities--that searching out lone parents in their workforce might be a productive strategy. It would give them information about which employees they could approach to persuade or pressure them into asking to receive the tax credit directly. That is an uncomfortable thought and one that weighs against the amendment.

Given those explanations, and in the knowledge that Amendment No. 2 was rejected by an overwhelming majority after careful appraisal in the other place, I ask your Lordships not to insist upon it.

Moved, That the House do not insist on their Amendment No. 2 to which the Commons have disagreed for the reason numbered 2A.--(Baroness Hollis of Heigham.)

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