MEANS OF PAYMENT OF TAX CREDITS TO RECIPIENTS

HC Deb 07 February 2002 vol 379 cc1067-92

1. ?(1) Subject to subsection (2), a person to whom an award of tax credit has been made shall be entitled to receive it by means of a book of serial orders at a post office.
2. (2)Regulations may provide that the entitlement in subsection (1) shall end when arrangements are in place for any recipient who so wishes to receive payment into a basic account accessible at a Post Office in which case that entitlement shall be replaced by an entitlement to payment into such an account.
3. (3)This section applies to payments—
1. (a)of child tax credit and any payments of working tax credit being made directly by the Board under section 23, and
2. (b)of working tax credit being paid by employers by virtue of section 24.'. —[Mr. Heath.]

Brought up, and read the First time.

Mr. David Heath (Somerton and Frome)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to take the following amendments: No. 15, in page 16, line 20, at beginning insert— ?Subject to section (Means of payment of tax credits to recipients)'. No. 13, in page 16, line 30, at end insert— ?subject to employers consulting with their employees as to whether they would prefer working tax credit payments to be made by the Board directly.'. No. 16, in page 16, line 30, at end insert— '(1A) Regulations under this section shall not apply to an employer with fewer than 15 employees'. No. 14, in page 17, line 42, at end insert— '(8) The Board will refund to employers their costs incurred in making payments of working tax credit to employees. (9) No employer with 20 or fewer employees will be bound by the regulations set out in this section.'.

Mr. Heath

Amendments Nos. 15 and 16 were tabled by the Liberal Democrats. Should my hon. Friend the Member for Teignbridge (Richard Younger-Ross) catch your eye later in the debate, Mr. Deputy Speaker, he will speak to amendment No. 16. Amendment No. 15 is simply a paving amendment for new clause 2.

The new clause deals with the payment of tax credits through the sub-post office system. It is a great delight to engage the attention of yet another Department on the matter of sub-post offices, as we are already talking simultaneously to two Departments. Nothing would please me more than if the new clause were to be unnecessary when events reach their conclusion next year.

We greatly welcomed the performance and innovation unit report and its comments on the universal banking service. We hope that it will be put in place satisfactorily, but we do not share the Government's confidence that that will necessarily be the case. In that view, we have allies, not least the National Federation of Sub-Postmasters, which has serious concerns about the readiness of the Government systems to implement what the NFSP sees as an important part of the strategy for the future survival and development of the sub-post office system. As we know—I will not go into a long history of sub-post offices, as that would be unnecessary to the prosecution of the argument for the new clause—

Mr. Deputy Speaker

Order. That would not only be unnecessary, but it might take us outside the scope of the discussion that we should be having.

Mr. Heath

Absolutely right, Mr. Deputy Speaker. I obviously phrased my comment badly. I meant to say that to widen the scope to include the history of sub-post offices would be inappropriate to the debate. However, to deal specifically with the payment systems within sub-post offices, which is the substance of the new clause, is necessary.

As we know, three forms of bank account are to be offered by sub-post offices. I need to deal with only two: the basic bank account, which will provide basic banking services through the clearing banks but situated in the sub-post offices, and the Post Office card account. That baseline provision is the most critical element. It is designed for those who have not had or do not want a bank account, but still need to receive their benefits through the sub-post office system, and for whom we would suggest that the tax credit is also a relevant factor.

The Government were tardy in getting arrangements under way for that basic payment system. There seems to have been almost no progress under the aegis of the Department of Trade and Industry. Perhaps for that reason some rattling of the cages was necessary in autumn last year, when the Secretary of State for Work and Pensions was appointed as a sort of universal bank tsar. We know that, last October, the contracts had not been placed with the companies that were to put in the infrastructure.

In a letter to Mr. Colin Baker, the general secretary of the NFSP, on 19 October, the director of postal services—network and markets—in the DTI commented: There is a lot to do to put in place these sophisticated, if commonplace, banking arrangements". That is a masterpiece of understatement. The IT project in question is massive, if not revolutionary. It involves a great deal of development work, provision of infrastructure and training. None of those were in place in October. The contracts were not let until November, when a decision was taken to split the contracts between the basic bank account, which was to be provided by LINK Interchange Network Ltd., and the Post Office bank account, to be provided by EDS/Citibank.

Since then, I have had a number of meetings with representatives of those companies and with representatives of IT companies on a wider front. The one word that keeps coming back to me about the project is "challenging". We can assume that that means well nigh impossible to deliver on the date on which Ministers still assure us it will happen. One of the leading IT manufacturers told me that the industry norm for such a project would be to have it developed and operational at least 12 months before it was to go live. That time would be needed to identify difficulties, to train the personnel who were to install the system and use it and to ensure that it was working to everyone's satisfaction.

Twelve months before the new payment system is to go live is the beginning of April this year, yet we know that the contracts have only just been let and that progress on development is limited. We are at a loss to know how personnel are to be trained, as the Government tell us nothing about that. We are at a loss to know what the migration policy is—what its objectives are, let alone how it is to be implemented. Again, the Government will not tell us. They will not tell us anything at all about the project. They merely repeat that it will be all right on the night and that the system will be ready in April.

Nothing would delight me more than if that were the case, but if not, there is an argument that for other benefits, there is a period of migration which allows for flexibility, but the child tax credit is not a mobile target. It is to come into effect in April 2003, so there is a fixed deadline for that element of tax credit. There are serious fears that the system will not be ready. The new clause would provide a plan B for the Government. They may well need such a plan to allow people to receive their payments through the Post Office on the specified date if they do not have a bank account.

3 pm

What is the argument against such an alternative? The only argument against the ability to make such arrangements if the Post Office card account is not ready is that the Government want to move people towards basic bank accounts instead of towards the Post Office card account. That is what the clearing banks think. They feel that they have been sold a pup and coerced into providing the services, while the Government do not intend the card account to be ready on the day. If it is not ready, people will be pushed into basic bank accounts, irrespective of their wishes. The post offices share that suspicion and see such a move as very retrograde, as people who have bank accounts may well opt for the bank rather than the Post Office. All the benefits that would accrue to the Post Office system would then be nugatory. Clearly, the Government have an argument in terms of reducing costs, but not in terms of providing the choice that they have always maintained to be the basis of their proposals. That is why the new clause would provide an appropriate safety belt for the Government and for the system.

The new clause has another separate purpose. Subsection (3) would extend the payment system for working tax credit into the same payment framework as the other payments. That is another very important aspect of the new clause. I understand that the Government's argument against the proposal is that they want to preserve the linkage of working tax credit with work, but they take the deeply patronising view that recipients can make the connection only if two lines to that effect are written on their pay cheque, rather than on their bank statement. That view is wrong.

The arguments for providing the option proposed in the new clause—it is not a compulsory course of action—are threefold. First, it would reduce costs for employers. That is a valuable objective and I know that my hon. Friend the Member for Teignbridge will amplify that point in terms of small employers if he can catch your eye, Mr. Deputy Speaker. Secondly, it would extend control to the recipient, which is right in itself. Thirdly, it would help to safeguard our post office network—something that hon. Members in all parts of the House would see as a key objective.

David Cairns (Greenock and Inverclyde)

Surely the proposal would achieve a significant reduction in an employer's costs only if all the employees in a company opted to take their payment through their payment book at the Post Office. If one employee did not take the option—the hon. Gentleman said that it is an option and is not compulsory—the employer would still have to set up the system, fill in the forms and cross a certain cost threshold. A significant saving will be secured only if all the employees of a firm opt to go to the Post Office. How will he make that happen?

Mr. Heath

I gently suggest to the hon. Gentleman that he is perhaps talking about big business and has never had experience of a small business with a small number of employees. It is perfectly possible that all the employees in such a business might opt for the proposal, not least because there might be only one employee who is receiving the relevant payment.

Mr. Hugo Swire (East Devon)

Does the hon. Gentleman agree that the point of the proposal is to give people a choice? It is important that people should have such an option.

Mr. Heath

The hon. Gentleman is absolutely right. Typically, the Government want to extend not choice, but compulsion, because there is only one way of delivering the objectives that they have in mind. We reject that position and I think that he probably rejects it as well.

Mr. Mark Hoban (Fareham)

The hon. Member for Greenock and Inverclyde (David Cairns) mentioned set-up costs. The other costs that are borne by employers—the £90 million a year that the package will cost—are related to individual transactions. Although the set-up costs will be lost if all employees opt out, costs will still be reduced even if some of them remain in the system and are paid as before through their payroll, because there is a transaction cost as well as a set-up cost.

Mr. Heath

The hon. Gentleman is, of course, absolutely and transparently correct. The matter involves not all employees, but those who are receiving working tax credit. Often, only relatively small numbers of employees would be involved, so it is not unrealistic to assume that the new clause would have tangible benefits for employers.

I know that other hon. Members wish to speak to the new clause, so I shall conclude my remarks. I repeat that this is a win-win situation for the Government. No additional cost would accrue to them and the new clause would provide real benefits for individuals. It would safeguard our post offices at a time when many people are yet to be convinced that the Government's proposals, however creditable, will be in place when they are needed to safeguard the system. I commend it to the House.

Mr. Flight

The first part of the new clause deals with an issue that was extensively discussed in Committee. I put it to the House that there is not only a likelihood but an extremely strong probability that the arrangements that the Government envisage for delivering the new tax credits in April 2003, essentially through the universal bank, will not be in place. When the subject was discussed in Committee, after we had asked a number of questions, the Paymaster General effectively said that the Government accepted that that could happen and that standby arrangements were in place to deliver payment—it certainly included the child tax credit—by coupons or order books at post offices. I looked through the Bill, but could not find where it provides for such arrangements, so in principle, the new clause seems to be necessary to ensure that they are covered.

Rather than commenting on the proposed arrangements for the option on payment of working tax credit, however, I should like to focus on amendment No. 13. The Government are well aware that the Opposition believe in principle that the arguments stack up in favour of paying working tax credit not through employers but directly to recipients. One of the main arguments that they have put forward for paying it through employers is that of stigma. Amendment No. 13 is designed to test that argument. Rather like the second part of the new clause, it seeks to offer an appropriate option on a collective basis. Therefore, it requires a consultation process between employers and employees to take place before the obligation for employers to pay the credit through the pay packet takes effect. Implicit in the proposal is the idea that, if a majority of employees prefer to be paid directly by the board, that is the arrangement into which the company would enter.

We are extremely surprised that the Government have paid no heed to the arguments against paying working tax credit directly to beneficiaries. The evidence—in so far as it exists—is indeed that more stigma is attached to payment through the pay packet, as people's personal backgrounds will implicitly be known by their employers and often, as a result, by their work colleagues. The National Association of Citizens Advice Bureaux has made the point that, notwithstanding the provisions of the Bill, employers in smaller businesses could be discouraged from employing people if that entailed the hassle of administering working tax credit. There is strong evidence that the stigma element would be greater as a result of payment through the pay packet than as a result of direct payment.

David Cairns

This is one of the issues that I hope to raise later. The hon. Gentleman has twice referred to extensive evidence that greater stigma attaches to payment through the pay packet than to payment through the order book. Other than the anecdotal evidence that he has given, can he outline exactly what that extensive evidence is?

Mr. Flight

I refer the hon. Gentleman to the studies, which I have already mentioned, undertaken by the National Association of Citizens Advice Bureaux and by the Institute for Fiscal Studies.

Have the Government taken into consideration the fact that people in marriages and partnerships frequently hold joint bank accounts, and that those accounts might sometimes come under pressure from the more powerful character in the partnership? Going back to the child tax credit, one of the results of paying everything automatically through a bank account, as the Government wish to do, is that that might undermine their correct intention that the money should go to the carer.

The Government suggested, somewhat unenthusiastically, in Committee that if the recipients of child tax credit really wanted to go on receiving their payment through vouchers that were cashable at post offices, they would be able to do so. It is still not clear whether that is a realistic option. If there is a genuine intent that child tax credit should go to the carer, I suggest that that is more likely to be achieved by permitting those at the poorer end of society, in particular, to receive it through vouchers, rather than by forcing them down the bank payment route.

I return to the question whether working tax credit should be paid directly, which we believe remains the better option, or by employers. The Government have refused to accept that the result of what they are seeking to achieve will be to produce a social wage. People will take home a certain amount of money, but they will not understand the details in terms of whether they have paid tax, or of how much of the new negative tax rate income they have got back. They will simply have a sum of money. In many cases, their take-home pay will bear no relation to the economic market value of the job that they are doing.

We remain concerned that that will act as a disincentive to people to up-skill themselves and to improve the amount that they earn, and as an overall disincentive to productivity improvements in the economy. I urge the Government to be a little suspicious of the CBI's support for payment via the payroll. It is clear that that is attractive, and I recollect the Paymaster General making certain references to that effect. There are attractions to employers in having pay subsidies, because they reduce the pressure to pay a proper rate for the job and exert downward pressures on rates of pay. If the Government ignore that important aspect of the question, they do so at their peril and in the face of what is already happening.

3.15 pm

Amendment No. 14 is a probing amendment, and we discussed some of the issues involved in Committee. The proposal is a response to the issues raised by the Government's better regulation task force and by the Carter report. The burdens of administration transferred on to businesses by the Government have fallen particularly on small companies with fewer than four employees. That represents something like £25 million out of their total costs. Worse than that, of that £25 million, small companies spend some £15 million not on payments but merely on keeping on top of the regulations and the requirement to know what they are supposed to be doing.

We have argued consistently that it is undesirable for small businesses to be burdened with such administrative costs and focuses, when their main task is simply to keep their business alive. The Liberal Democrat amendment has proposed a slightly smaller minimum floor at which businesses would be exempt than the one that we have proposed, but it deals with the same issue of principle. Will the Government consider the points made by Lord Haskins and his taskforce in relation to small businesses?

Mr. Mark Field (Cities of London and Westminster)

Prior to entering this place, I ran a small business that would have come within the scope of the Liberal Democrat amendment and our own, in terms of the number of employees. My concern is that whatever level is set, when a company gets near to that level it will provide a big disincentive to taking on any more employees. I am sure that that point will be addressed by the Minister later. What thoughts does my hon. Friend have on the matter?

Mr. Flight

I thank my hon. Friend for his comments. I was about to come to the other part of our amendment, which proposes that the Government should consider measures for the Board of the Inland Revenue to refund to companies the cost of administering working tax credit, if they remain charged with that burden. Again, this is a probing amendment, and we have touched on this subject before.

After consulting widely with businesses, it is clear that they understood that the relevant territory covered by the Carter review and the comments of the Chancellor of the Exchequer were not just concerned with technical arrangements for payroll—which, I grant, is most of Carter's territory, as the Paymaster General has pointed out. Businesses also understood that the Chancellor had indicated in the pre-Budget report that the Government would consider some refunding of costs for administration carried out on behalf of the Government in relation to working tax credit. That is particularly relevant to small businesses, if they are not to be exempt.

The total administrative costs for businesses is now of the order of £250 million a year, which covers tax credits, student loan repayments and the administration of stakeholder pensions. The Government will be turning a blind eye if they do not appreciate that business perceives them to have recognised those costs and to be thinking of doing something about them. In Committee, it was clear that the Government were not interested in so doing, and that they felt that businesses should be very pleased with the working tax credit because it would subsidise employment for them. However, I wish to give the Paymaster General a further opportunity to consider the matter, because that is certainly what business expects.

The amendments grouped with new clause 2 interact and relate to each other, but there are separate issues to consider. First, will the Government even be able to deliver the child tax credit, given the running-down of post offices, the likely failure of the universal bank and the lack of provision in the Bill for an alternative? Secondly, will they reconsider giving employees at least the option to receive working tax credit payments directly, whether on a corporate basis or as specified in new clause 2(2), when they express a wish to do so? Thirdly, it is necessary to tease out of the Government yet again whether they are willing to compensate business for the costs of administering their programmes.

Richard Younger-Ross (Teignbridge)

I support the new clause and the amendments grouped with it and want particularly to discuss further the effects on employers. As the hon. Member for Arundel and South Downs (Mr. Flight) said, the Liberal Democrat and Conservative amendments differ only in detail rather than principle. The principles are one and the same.

I have looked up some figures on small businesses. Although I do not have a figure for the number of businesses that employ 15 or 20 people, 83 per cent. of companies employ 10 people or fewer. It might be argued that if 83 per cent. of businesses were exempted from the proposal it would have a dramatic effect, but it would not, because only about 20 per cent. of employees would be affected. Therefore, it is possible, and with minimal effect, to encourage enterprise and remove a burden from a very large number of businesses.

Let us consider the overall cost of the burden on small businesses, which is constantly growing and never seems to diminish. The British Chambers of Commerce has compiled figures from the regulatory impact assessment prepared by the Government. The total updated cost, until May 2002, now runs to £15.6 billion. The working tax credit will cost some £262 million and the student repayment loan—another burden on small businesses£255 million. Businesses, especially small businesses, are bearing heavy burdens that have an effect on the ability to grow and progress.

Without wanting to put words in its mouth, I am sure that the British Chambers of Commerce would support the Conservative amendment as much as ours. I have a note from it: The British Chambers of Commerce very much welcomes this amendment. In the week it published its own Regulatory Reform Action Plan. It shows Government how to seriously go about cutting the burdens on business. Government will no doubt spout out figures about only 1 in 8 businesses being affected by tax credits, but that 1 in 8 equates to 175,000 small businesses. That is a heavy burden.

Let us consider what other employer organisations say about tax credits. The CBI has spoken in favour and its parliamentary brief says: The CBI supported the introduction of the tax credits system … as a valuable way of incentivising work. However, it warns: The CBI believes that, if there is no possibility of administering the tax credits system within the Inland Revenue, employers should be compensated for the administrative costs associated with running the scheme. That proposal is included in one of the amendments. Other amendments might also reduce the burden and cost by exempting a large number of businesses from having to administer the scheme.

The Bath report considered tax credits and concluded that the pattern of compliance costs discriminates against small employers in that the bottom thirty per cent of employers bear seventy five per cent of the compliance costs. That cannot be right. New Labour wants "New Britain" to have an enterprise culture and, if we are to have an enterprise culture, encouraging small businesses to thrive is vital.

Some 90 per cent. of Government revenue is collected by businesses. Employers are responsible for statutory sick pay and maternity pay administration. Family-friendly schemes introduced in the past two years such as the Employment Relations Act 1999, the working time directive, the Data Protection Act 1998 and the national minimum wage, which I support in principle, are all burdens on businesses, and on small businesses in particular.

Mr. Webb

Lest my hon. Friend be misunderstood or misquoted, I presume that he is drawing a distinction between measures such as the minimum wage, which we supported and which are beneficial, and tax credits, which can be delivered other than through the pay packet. Whereas the minimum wage can be delivered only in that way, tax credits need not be a burden on business.

Richard Younger-Ross

I am grateful to my hon. Friend for drawing that distinction. I am not saying that we do not support some of those measures, the burden of which must be borne by business, but we must consider the overall burden; if it is not necessary for business to bear a particular burden, it should not have to do so. Small businesses can therefore be exempted and encouraged. We must look at the total picture and not consider such matters in isolation.

America has, in principle, exempted businesses by using the standard of turnover of less than $500,000. Alternatively, companies that employ fewer than 15 people or fewer than 20 people are exempt from certain legislation. That proves that such measures can be achieved in an enterprise culture.

In France, small businesses hold a nominal percentage of the tax collected to help them with the tax collection burden. The cost of tax and national insurance collection for large UK companies with more than 5,000 employees is about £5 per employee. The cost for companies employing between 1,000 and 5,000 people is about £30 per employee. For companies with between 500 and 999 employees, the cost is about £29 per employee. However, the cost for very small companies with between one and four employees is an astronomical £288 per employee.

I know that the Government are minded to help small businesses and are aware of the burdens of regulation. The Prime Minister commented on the working time directive in November 1999: I can see myself how some of the regulation is over the top. The problem is being recognised but more needs to be done. If the burden has been recognised and more needs to be done, we have an opportunity to relieve the burden through the Bill.

The Minister responsible for small businesses was quoted in The Sunday Times on 30 January 2000: It is about balancing the right of individual employees to fair treatment against demands on the employer. Once you get to 20 people it is very different from running a tiny company. That is one reason why the figure I quoted is slightly lower—the differences are in that band.

Devon has many small businesses—about 37,000. More than three quarters of employers throughout Devon have fewer than 10 employees. I want those businesses to thrive, prosper and grow, but they will not do so if we increase the burden on very small businesses. Instead of being able to climb the mountain of success, they will come across a rock face that they find hard to scale. Progressing from being self-employed to employing others should be made as easy possible, so I ask the Government to consider their response to the amendments carefully.

3.30 pm

Mr. Hoban

I welcome the grouping of the new clause and the amendments, because together they point up one of the issues at the heart of the Bill: the obligation on businesses to pay working tax credit, leading to a high burden on employers. Employers have to bear the cost of administration of working tax credit only because they are required to pay that credit to their employees.

Let me remind the House of the burdens that the Government have placed on businesses. The cost of the Bill, as set out in the regulatory impact assessment, is about £90 million. I welcome the reduction compared with the previous regime, but it is still a significant cost on business. Employers face a problem. In a survey conducted by the Association of Chartered Certified Accountants in July 2001, 97 per cent. of respondents felt that the burden of payroll compliance had increased since April 1997, and 78 per cent. referred specifically to the administration costs of the working families tax credit.

The real cost falls on smaller businesses. The average payroll cost per head for a business with between one and five employees is £288. That is a terrific cost when compared with the cost for businesses employing more than 5,000 employees, which averages at about £5 a head.

I am especially interested in amendment No. 16, which has the deficiencies that my hon. Friend the Member for Cities of London and Westminster (Mr. Field) highlighted earlier. By setting a limit of 15 employees, it would create an artificial barrier to taking on additional employees. That stands in contrast to amendment No. 14, under which the Board of Inland Revenue would refund employers' costs but which has an opt-out provision for companies with fewer than 20 employees, whose tax credits would be paid directly by the Inland Revenue.

It is a shame that amendment No. 14 is needed at all, because I would much rather the Government did not impose this burden on businesses, but by requiring the Inland Revenue to reimburse the costs it would demonstrate to the Government once and for all the true cost of compliance. Far too often, the Government impose burdens on business without understanding the true cost. Estimates are published in regulatory impact assessments that are riddled with caveats and assumptions. The amendment would lift part of the £90 million burden from business, and the other part of the burden would disappear for businesses with fewer than 20 employees.

My hon. Friend the Member for Arundel and South Downs (Mr. Flight) referred to the consultations between employers and employees concerning whether benefits should be paid directly to employees by the Inland Revenue, rather than by the employers. Some people have a problem with tax credits being paid through payroll services, because they want to separate clearly their personal lives and domestic finances from their lives at work. They do not want their employers to know about changes in personal circumstances, such as divorce or-a term that was used in Committee-partnering up, which affect the payment of tax credits. I suspect that many employees, following consultations with employers, will opt for direct payment. Many will prefer that, and it will remove some of the perceived stigma attaching to the credits.

The hon. Member for Somerton and Frome (Mr. Heath) referred to post offices. Too often in debates on post offices, people refer solely to the rural post office network and the sub-post offices there. Those of us who represent urban areas also have a network of sub-post offices that we wish to sustain. That is an important factor to be borne in mind. The option to enable payment through post offices, either through the order book system, which will act as a failsafe in case the universal bank does not come into effect—as seems increasingly likely—or through such a bank account, will generate the traffic that sub-post offices in urban and rural areas need to sustain their business.

Quite often, the shops are not just a post office counter but provide a wide range of services and are a valuable local amenity. Any measure that will improve the traffic flowing through the sub-post offices is valuable.

Mr. Heath

I am extremely grateful to the hon. Gentleman for drawing the important distinction between urban and rural post offices and explaining the fact that this applies to both. I was at pains to mention the sub-post office network rather than just rural post offices, because the impact of the loss of benefit traffic is often greater on the urban sub-post offices, which rely on it more heavily.

Mr. Hoban

The hon. Gentleman makes a valid point. Often, urban sub-post offices rely on the trade from benefit, as it were, to keep them afloat. They also often exist in some of the most deprived areas of our constituencies, where people are least likely to be able to travel from their homes to a main post office in the town centre. In our consideration of the hon. Gentleman's proposals, the importance of sub-post offices to elderly people and young mothers should not be underestimated.

The new clause and the amendments are designed to preserve some of the social fabric of our rural and urban communities and would help to reduce the costs imposed on businesses. We should not be too churlish about the actions that the Government have taken to reduce those costs through their reform of the tax credits system—in Committee, the Paymaster General referred to some of the representations that she had received from business organisations welcoming the changes—but I hope that the House will take advantage of the opportunity that we now have to reduce those burdens once and for all by enabling employers with fewer than 20 employees to have the tax credits paid directly to those employees, and by ensuring that other businesses have their costs reimbursed by those who impose them—in this case, Her Majesty's Government.

Mr. Swire

I am particularly interested in this group of amendments, tabled by ourselves and the Liberal Democrats, because I represent a constituency that, like that of the hon. Member for Teignbridge (Richard Younger-Ross), has a lot of small businesses. My local businesses employ an average of between three and five people. We are a diverse community, largely rural but with some urban areas—and, if I may do so without straying too far from the new clause, Madam Deputy Speaker, I want to talk about post offices and how they fit into that pattern.

Having sat through the Standing Committee stage—that was a steep learning curve for me—I believe that when the Government introduce new legislation they have an opportunity that they do not always get: the opportunity to get things right. Our amendments will steer them in that direction.

In Committee, my hon. Friend the Member for Arundel and South Downs (Mr. Fligh0t) spoke lucidly about post offices and the role that the universal bank will play. It is true—although I must not go over old ground—that many of the neediest people, to whom the Bill will be of most benefit, do not have bank accounts. As my hon. Friend the Member for Fareham (Mr. Hoban) said, those people—such as the elderly and single mothers—would usually find it easier to go to their local post office, whether they live in a rural or an urban area.

New clause 2 says that anyone who so wishes should be able to receive payment into a basic account accessible at a Post Office". That raises the question of what an accessible post office is, and what is accessible once people get there. One of the problems in rural areas is the number of post offices that are closing. There is some evidence that the rate at which—

Madam Deputy Speaker (Sylvia Heal)

Order. I must bring the hon. Gentleman to order. We are talking about tax credits, not the future of the post office network.

Mr. Swire

Thank you, Madam Deputy Speaker. I was trying not to stray too far from the new clause, but obviously I failed.

When we think about how we want people to receive their benefits, we must recognise the role of post offices. At this stage I shall make only a few comments about the burden on business, because we shall be debating that subject all afternoon. We have heard comments from the CBI, the Institute of Directors and others, but we should also listen to the Federation of Small Businesses and the British Chambers of Commerce.

As I have said, most of my local businesses in East Devon employ very few people. Small businesses represent the engine room of the economy, and any Government who want that engine room to grow should aspire to enable those companies to employ more people. Yet the Bill as it stands acts as a disincentive to employing 15 or 20 people. What on earth is the incentive to expand a business if that merely invites extra costs and red tape?

I fully agree with the comments that have been made about stigma; indeed, the stigma may apply more in small businesses, where people are more likely to know each other socially than people in larger businesses. The fact that people's pay packets may not be a true reflection of the job that they do could cause dissent, and will be bad for morale.

I urge the Government to take on board what the Opposition are saying, and especially to recognise that post offices will have a problem, particularly between now and when the universal bank is set up. Our suggestions would give the Government a real opportunity to do what they claim they wish to do, and help those hard-pressed sub-post offices. They have the opportunity at least to nod towards the concerns expressed by the various bodies that represent small businesses, such as the British Chambers of Commerce and the Federation of Small Businesses, which are worried about ever-increasing regulation and red tape, and the interference in the lives of people employed by small businesses. I hope that the Government will take our amendments in good part, and respond to them later.

3.45 pm

Mr. Peter Luff (Mid-Worcestershire)

I think that all those who served on the Standing Committee would admit that it was good natured throughout its proceedings. Whatever differences there might have been between the two sides of the Committee on some issues, there was a common desire to improve the lot of the poorer people who will benefit from this Bill. That spirit characterised our debates.

The Committee was intimidating, too, because it included not only the Financial Secretary to the Treasury, who is a distinguished lawyer, but the Paymaster General, who is one of the most talented Ministers in Her Majesty's Government, a professor of social policy representing the Liberal Democrats, and one of the most distinguished understanders of the City of London, my hon. Friend the Member for Arundel and South Downs (Mr. Flight). Those of us with no such qualifications—apart from a dim memory of an economics degree—felt inhibited from speaking.

On the issues relating to new clause 2 and the amendments that have been grouped with it, however, passions began to be aroused. Uniquely, we got the hon. Member for West Renfrewshire (Jim Sheridan) to intervene on that subject; it was his only contribution. The hon. Gentleman made the traditional old Labour case. I shall not quote his contribution in full, but he said: I thank the hon. Gentleman"— I think that that was my hon. Friend the Member for Fareham (Mr. Hoban)— for this nostalgic trip back to the dark days of his Government, whereby any legislation enhancing the life of people"—

Madam Deputy Speaker

Order. I hope that the hon. Gentleman's remarks will now be germane to the amendments that we are discussing.

Mr. Luff

They will be strictly germane, Madam Deputy Speaker. I am sorry for my rather lengthy introduction—hat was always a fault with my university essays, and I was regularly marked down for it.[Interruption.] I did not hear what the Paymaster General said then, but I hope that Hansardhas recorded it, because it is always worth listening to what she has to say.

The hon. Member for West Renfrewshire continued by saying that in times like the dark days of the Conservative Government: any legislation enhancing the life of people in the lower quartile of our society suddenly becomes a burden on businesses…It is ridiculous in this day and age to say that about legislation that allows workers to work for less than 48 hours a week or sets a minimum wage, which takes people off benefits so that they do not need tax credits. It is nostalgic rubbish. I understand the sentiments that the hon. Gentleman was expressing, but if he were here I would invite him to reflect on exactly what our amendments would do. In Committee I talked about the road to hell being paved with good intentions—and to use another cliché this is the straw that breaks the camel's back. We all share a desire to enhance the lives of our poorer constituents, but we must look at the consequences of the mechanisms that we choose.

If we put unacceptable burdens on the businesses that support those people, we risk destroying the mechanism that creates the jobs, which lies at the heart of any Government's ability—and the private sector's ability—to remove them from poverty. That is the crucial point.

Ultimately, this is not a matter of great principle, but a matter of balance. We all accept that from time to time Governments must intervene in the affairs of the private sector to enhance some greater social good. As I made clear in Committee, that is a principle to which Conservative Governments have adhered down the centuries. The question is: when has that process gone too far? At what stage do we start putting that process at risk? Our amendments present the Government with a real case to be answered. They should say to themselves, "This may be the moment when the process has begun to go too far."

I have already said that I have a high regard for the Paymaster General—but she was a bit naughty when she quoted so selectively from the words of the brief that the CBI sent to members of the Standing Committee. She described the CBI's position as follows: She said that the CBI brief stated: The CBI supported the introduction of the tax credit system, including paying via the pay packet, as a valuable way of incentivising work. In that context, it also supports the extension of the principle of tax credits to employees without children."—[Official Report, Standing Committee A, 22 January 2002; c. 143, 153.] All well and good. That is indeed what the CBI said in its briefing note, but sadly for the Paymaster General, who quoted only the first two sentences, that same paragraph continues: Nevertheless, employers are concerned at the rising burden of payroll administration and their growing role as paymasters of the benefit system. When the government originally suggested payment via the pay packet it indicated that the system should be paid via tax codes, but this now appears impractical. The CBI believes that, if there is no possibility of administering the tax credits system within the Inland Revenue, employers should he compensated for the administrative costs associated with running the scheme. That is the full and complete CBI position, according to a paragraph from the briefing entitled "CBI position." With respect to the Paymaster General, that is what our new clauses seek to deliver: the CBI's position as fully expressed, and not as selectively quoted.

I shall not trouble the House by quoting the briefing at length, because to do so would be tedious, but I shall read out its final paragraph, which is just one sentence long: Over the longer term, the CBI remains convinced that a technical solution is required which will allow payment via the pay packet to be administered by the Inland Revenue and bypass need for employer intervention completely. The CBI is advocating an interim solution, and the Paymaster General must address this issue when she winds up this debate rather more convincingly than she did in Committee.

Historically, the CBI has not been particularly good at speaking up for the interests of smaller businesses, but I am glad that, under Digby Jones, it at last seems to be doing so. That is the spirit and rationale that underlies the CBI's position. I am pleased to say that, typically, local chambers of commerce are rather better at standing up for smaller businesses, which would be affected by the amendments and new clauses tabled by the Liberal Democrats and by my hon. Friends.

The Herefordshire and Worcestershire chamber of commerce pointed out to me that a huge proportion of businesses in Worcestershire are smaller businesses. It said that 84 per cent. of businesses in Worcestershire employ 10 people or fewer, and that payroll costs create a real problem for such businesses. I shall read a paragraph from a letter from the chamber of commerce that I quoted in Standing Committee, because it is of huge importance and the whole House has a right to hear it: Each of the tax credit or collection items adds an amount of administration and therefore cost to the job of operating the payroll. It must be remembered that the person doing the payroll is often the owner manager, their expertise is probably in the field in which they started the business and they will have varying degrees of expertise. People running small businesses already need to be multi skilled and able to turn their hands to many tasks, however there is a danger in increasing the non-core workload, that is not income generating, too much.

Mr. Swire

Following on from what my hon. Friend has just said, does he agree with the similar comments of Donald Martin, the UK policy chairman of the Federation of Small Businesses? Mr. Martin said: Businesses should not be treated as a social welfare arm of government. It is an invasion of employee privacy and a major distraction from the business of wealth creating activity.

Mr. Luff

My hon. Friend makes a very powerful point, but sadly, the scope of the new clauses and amendments under consideration does not allow us to debate—as I would like to do—invasion of privacy. We are focusing on the cost, and new clause 2, which I shall come to in a moment, focuses on the method of payment. I strongly agree with my hon. Friend, however, and those are issues that have to be taken seriously.

I urge the Paymaster General to recognise in her response that I am not trying to belittle the Government's attempts to reduce poverty. We all want to reduce poverty, but we must consider how to strike a balance and what mechanisms to use. It is probably asking too much for the Government to consider these new clauses and amendments sympathetically, but they should consider something similar in another place, or undertake to find another mechanism to reduce cost at a later stage, so that the CBI's long-term hope can come to fruition.

A year or so ago, something happened in my constituency. The complaints that we have always heard from the small business sector acquired a new urgency and fervour. There was a change of spirit—I do not know what caused it—and the sense that the burden had become too great was suddenly made very vocal.

In Standing Committee, the Paymaster General helpfully said that, in her view, the overall effect of the Bill might be to reduce the burdens on business. However, her confidence is not necessarily shared by the business sector itself, and experience certainly proves that that sector is right to be sceptical and cynical. It would help if she could explain why she is confident that, even at the margin, the proposals, without emendation, might reduce the burdens on business. That would be an encouraging message, if she can deliver on it.

I realise that new clause 2 represents an example of the law of unintended consequences. It deals with the payment mechanism and is primarily inspired, I expect, by a desire to help the claimant by offering choice. As the hon. Member for Somerton and Frome (Mr. Heath), who spoke so effectively at the beginning of this debate, made clear, the Government appear to be hostile to offering choice in almost anything. However, offering the option of the payment mechanism seems a prudent and sensible step, and I endorse all that the hon. Gentleman said about choice.

As I said, new clause 2 also illustrates the law of unintended consequences, because it would affect the post office network at the margin. You have rightly said, Madam Deputy Speaker, that we should not debate that issue and I shall not do so, but in answering the debate it is important for the Government to bear that helpful benefit in mind. The post office network is in crisis. Thousands of post offices are closing and anything that we can do to increase footfall in sub-post offices would be helpful. Although new clause 2 may be inspired by the desire to help the claimant, it would have a very useful side-effect that hon. Members must concentrate on and bear in mind when they vote. I hope that we will have the chance to vote on new clause 2, because I certainly wish to support it in the Lobby.

New clause 2 also goes a long way towards addressing the issue of stigma, which has been thrown around, and to which my hon. Friend the Member for East Devon (Mr. Swire) referred in his intervention. In 1998, Martin Taylor, author of the Government-commissioned report on work incentives, told the former Social Security Select Committee that there was no empirical evidence to suggest that the working families tax credit would have an effect on stigma. He said: As far as stigma goes, the hard and fast evidence in all these non-financial and psychological matters is difficult to come by. The Government would be ill-advised to hang too much of their case on that point.

The Government should also remember that a formidable alliance shares the view that we are right to be sceptical of the stigma claim. The National Council for One Parent Families, the CBI and the Institute for Fiscal Studies have all warned that the stigma attached to means-tested benefits could actually be increased by paying the credit through the payroll. In its document entitled "Credit Where it's Due", the Institute for Fiscal Studies says: There is no evidence, though, that payment in this way improves work incentives or reduces stigma: the WFTC evaluation programme has not yet produced estimates of WFTC take-up or the impact on employment. It also suggests that for some, payment through the wage packet has been perhaps more stigmatising and certainly more hassle than direct payment. I know that the words of the Institute for Fiscal Studies are always taken very seriously in the House.

In his opening speech, my hon. Friend the Member for Arundel and South Downs referred to the National Association of Citizens Advice Bureaux. In February, it published a report affirming that claimants should be given a free choice between direct payment and payment through their employer. The Paymaster General should also be concerned by NACAB reports of staff being dismissed as a result of their employers being forced to administer their claim for tax credits. I do not condone that behaviour. It is often the case that when we consider legislation we have to consider the world as it is and not as we would like it to be. Behaviour of that kind by employers is wrong and against the spirit of legislation, let alone their broader social responsibilities, but it is the inevitable consequence of a system like this one. The NACAB report states: For many people, getting paid tax credit by their employer is simply not worth the trouble it can cause. Some employers consider the administrative burden too great for them to manage. In a small number of cases people have been sacked just for claiming tax credits. Other staff have pressure put on them to reduce their hours so they don't qualify, or are threatened with the sack. New clause 2 and its grouped amendments deal with two separate issues, both of great importance. The next group of amendments concerns the other important issue of fraud, and the House will wish to explore that at some length.

The Minister must ask herself in all conscience whether she has got the balance of burdens on business and the social obligations of businesses in the wider community right. The amendments, which would relieve employers of some costs and exempt some employers from the provisions altogether, are the right measures because they will enhance employment and wealth throughout society. That is an issue with which she must always wrestle.

The hon. Lady must be careful about relying on some of her well-rehearsed arguments on stigma and so forth. She should also consider the wider benefits of new clause 2—not only the benefits of choice that have been mentioned, but the wider social benefits of protecting the network of post offices. The new clause and the amendments have a huge amount to recommend them to the Government. I urge her to consider them sympathetically. If she has to reject them now, please will she reconsider them in another place?

4 pm

Dawn Primarolo

This has been an interesting debate, although much of the ground was covered in Committee, and it has centred on two issues. First, the new clause and the amendments would impose restrictions on the Inland Revenue board's powers to make payments both direct to the claimant and through the employer—the new clause and the amendments cover a number of issues to which I will return. Secondly, the amendments try to deal with the burdens on the employer.

I share the enthusiasm of the hon. Member for Teignbridge (Richard Younger-Ross) for seeing small businesses thrive and grow. I remind him, however, that the working tax credit makes it possible for employers to draw on a wider pool of labour, as it enables more people to make the move into work and stay there. Employers also derive benefits from having employees in low-income households supported while they make that transition into work.

I also agree with the hon. Member for Mid-Worcestershire (Mr. Luff) that the road to hell is paved with good intentions. I will demonstrate that the amendments and new clauses tabled by the official Opposition today would restrict the choice of and increase the burdens on employers, which is the exact opposite of what they claimed they were trying to do.

New clause 2 and amendment No. 15 attempt to impose an obligation on the Board of the Inland Revenue to make all direct payments of the new tax credits by order book through the post office. The amendment would restrict the manner in which payments could be made to that set out in the new clause. The new clause goes on to allow the board to make payments by automated credit transfer, but only through a "basic account", accessible at the post office and then only if the claimant has chosen that payment method.

Let us be clear that the new clause would in effect offer the claimant no choice. Claimants would not have the choice of the payment going into their bank account, if they already had one. I am talking not about what the proposer of the amendment thinks he has done, but what he has done. The board cannot make emergency payments—

Mr. Heath

rose—

Dawn Primarolo

The debate started at 2.50 pm and has been long. Many issues have been covered. I will be more than happy to give way to the hon. Gentleman when I have made some progress.

The new clause would allow the board to make payments by automated credit transfer, but only through the basic account accessible at the post office and then only if the claimant had chosen that method of payment.

There was much discussion of the Post Office. Here, we are concerned only with the payment made. I remind hon. Members that the powers in the Bill are permissive powers for the Inland Revenue to determine how claimants will be paid and what choices they will have. I will be happy to deal with that subject after I have given way to the hon. Member for Somerton and Frome (Mr. Heath), but first I must inform the hon. Member for Teignbridge that the classic problem for some Liberal Democrat Members seems to be accepting a principle, but not accepting the consequences of implementing it. I also remind him that the Liberal Democrats opposed the working families tax credit. While we are more than happy that they now think that the child tax credit is the way forward, they need to be careful as they venture into that territory.

Mr. Heath

I do not understand the basis for the start of the Paymaster General's speech on this subject. She is claiming that the new clause and amendments would leave out the parts of the Bill that deal with alternative methods of payment, which they clearly would not. Furthermore, she interprets the word "entitlement" to mean a requirement on the Board of the Inland Revenue.

I know of no construction that enables the word "entitlement" to be termed an instruction to the board, allowing no other means of payment. Perhaps the hon. Lady will elucidate.

Dawn Primarolo

Indeed I will. The Bill gives authority to the board of the Inland Revenue to administer the new tax credits under its care and management functions. If the hon. Gentleman had been able to attend the Standing Committee—he was not a member—he would have heard some discussion of how those obligations interact with the Bill.

With the exception of transfer into bank accounts, there is no statement in the Bill to list the precise ways in which the credit can be paid. As I said in Committee, the preferred option would be a direct transfer to a bank account—both individual's bank accounts and through the universal bank at the post office. I said that we needed to ensure that that payment was made. I understand why the hon. Gentleman is frustrated, but as he well knows, when one drafts an amendment one needs to know what is already in the Bill and where it cross-references.

There is a second issue. The new clause would impose an obligation on employers to use the same payment methods as the board. I am sure that those who drafted it did not intend it to do that either. I understand the concern that the new clause is intended to deal with. Hon. Members are trying to ensure that claimants can collect their money from the post office, as they do now, and that they are not forced to use bank accounts if no suitable accounts are available. I explained in Committee that the amendments tabled there would not have delivered that end. I am now explaining that these amendments will not do so either.

Hon. Members talked a lot about burdens on the employer. The new clause would impose an obligation on employers to make all working tax credit payments payable by them by order book or through suitable post office accounts. The working tax credit is paid by the employer. The payment goes from the board to the employer and then from the employer to the employee. The new clause would have that effect despite the fact that the employer would normally pay the employee's wages either in cash or into a bank account and that is what the employee expects. I find it hard to believe that the intention was to impose such a restriction, although the hon. Gentleman has confirmed that that is the case. I can assure him that the new clause would have such an effect.

The main thrust of the new clause is to enable claimants to continue to receive payments by order book. That would limit the choice of payment methods already available to and used by benefits and tax credit claimants alike.

My key objection to the new clause is that it would prevent claimants from receiving their payments by any method other than order book or through an account at the post office, even if they chose another payment method. It must be remembered that tax credits are paid to a broad range of families, many of whom already have bank accounts, are accustomed to using them and would expect to be able to continue to do so. Many other families will want to receive payments in that way. The new clause would prevent them from doing so.

I made it clear in Committee that a move away from familiar payment methods must be accompanied by suitable alternative methods of payment for the most vulnerable members of society. As I said, the regulations to determine payment methods will deal with exactly that point. I was asked by the hon. Member for Northavon (Mr. Webb) whether the Prime Minister's commitment that people would still be able to collect cash from a post office via the universal bank would be an option. I confirmed that it would. Not only is the new clause unnecessary because the assurances have been given but should it be carried it would narrow choice and increase the burdens on employers, which hon. Members say they wish to reduce.

Mr. Swire

Will the hon. Lady give way?

Dawn Primarolo

I am happy to give way to the hon. Gentleman but hon. Members have already said that they want to discuss at length other new clauses. I will give way but out of respect to the House I need to try to put on the record the answers to the questions that so many hon. Members have asked.

Mr. Swire

It is true that many of the recipients of credits and benefits already have a bank account, but according to the Institute for Fiscal Studies extending the principle of tax credits to couples and individuals without children will bring an extra 250,000 single mothers and 170,000 working couples into the regulations. The IFS believes that in total almost 6 million households will receive some form of support. The number of people entitled to the benefits will rise by a large amount. Does the hon. Lady not concede that many of those people will not have, and will never have had, a bank account?

Dawn Primarolo

I am not sure whether the hon. Gentleman was listening. I said that we needed to provide choice and to ensure that other payment methods were available for those who had no access to bank accounts. Indeed when we discussed fraud in Committee, every Committee member accepted that the best way to minimise fraud and to ensure that the money went to the family or individual who was entitled to it was to have a secure payment method. We need to balance a secure payment method with ensuring access. That is what the regulations will provide for.

As part of that—I said it in Committee—we are working closely with the Post Office and the Department for Work and Pensions to ensure that a suitable alternative will be available. The powers in the regulations are permissive ones designed to deliver that. The Bill provides the power to make the regulations on the manner of direct payment—that is all.

If new clause 2 were part of the Bill, it would restrict entitlement. The new clause and amendment No. 15 would reduce freedom of choice at the same time as putting more burdens on businesses by requiring them to have two methods of payment: they will have to issue an order book, or pay into the post office account. That is clearly daft. I hope that the hon. Member for Somerton and Frome will agree to withdraw the new clause as it is fatally flawed.

4.15 pm

Amendment No. 13 attempts to impose a duty on employers to consult with employees to see whether they would prefer to receive their working tax credit directly from the board rather than through the payroll. It is supported by hon. Members who just a few minutes ago were complaining about burdens. Now they are saying that employers must consult their employees.

What is interesting about the amendment is that it does not say what employers would have to do once they had consulted. Presumably, they would have to start printing order books, if it is linked to new clause 2.

Amendments Nos. 14 and 16 are another attempt to raise the issue of burdens on employers, which we discussed at length in Committee and during debates on the Bill that preceded the Tax Credits Bill. Amendment No. 14 has the dual purpose of requiring the board to reimburse employers for the costs they incur in paying working tax credit to employees, and of exempting employers with 20 or fewer employees from paying the tax credit, whereas amendment No. 16 aims to exempt employers with fewer than 15 employees.

As I pointed out in Committee, the Government are not attracted to that idea at all. The tax system does not provide for a direct subsidy or compensation to employers to fulfil their obligations in relation to tax. However, as I said at length in Committee—I will spare the House the long list—in a number of areas the Government have introduced reforms to reduce burdens, to simplify the operation of PAYE and to assist small businesses in particular. All that has been accepted and welcomed but ironically the amendments put more burdens on employers.

Let us consider the proposal to reimburse employers. What do we reimburse them for? An employer may have 20 employees with only one receiving a tax credit. How do we calculate exactly how much compensation should be paid? What information would we have to ask the employer to give us, so that we could calculate the compensation?

One amendment seeks to exempt employers with 20 or fewer employees and another those with 15 or fewer employees. I think that about 85 per cent. of employers are in businesses with 15 or fewer employees and 95 per cent. are in businesses with 20 or fewer employees. What would happen if a business had 16 employees and the exemption was for businesses with 15? Would it be asked to fill in loads of forms and send in loads of returns? Would it be sent loads more forms back? That would increase the burdens on that business. It has been demonstrated that paying the working tax credit through the wage packet will be simple. It supports the transition into work and assists employees and employers.

The hon. Member for Mid—Worcestershire said that the road to hell is paved with good intentions. The Opposition may have been full of good intentions but their amendments are a disaster. They are a disaster for claimants because they would restrict their choice and remove our ability to respond in an emergency by, for example, paying a claimant by giro. They would be an utter disaster for employers, who would have to consult, decide what to do, print order books, make arrangements with the Post Office in case that is where the claimant wanted the money to go, and let us know whether they had 14, 15, 16, 20 or 21 employees, depending on which bit of the system they came under.

These are totally disruptive amendments, and I am happy to send a much longer explanation to the hon. Member for Somerton and Frome of why his good intentions do not work. I urge my hon. Friends to oppose the new clause and amendments because they are simply daft.

Mr. Heath

Until latterly, we had rather a good debate. [HON. MEMBERS: "Hear, hear."] Any debate which has the spokesman for the Conservative Opposition standing at the Dispatch Box and supporting collectivism and workplace ballots and expressing suspicion of the CBI shows that we live in a topsy-turvy world.

I am grateful to all those who expressed opinions in the debate, particularly my hon. Friend the Member for Teignbridge (Richard Younger—Ross) who did a good job describing the difficulties that small businesses will experience. The hon. Member for Mid—Worcestershire (Mr. Luff) talked about the law of unintended consequences and my new clause assisting post offices, but that was certainly not an unintended consequence. It was absolutely the intention of my new clause not only to extend choice but to protect the sub-post office system.

What are we to make of the Minister's response? She said as her parting shot that she would write to me at length and I look forward to the letter with great expectations. Other than that, her argument seems to be a simple assertion: she does not like our amendments, so they are daft. She says that with all the authority of the Treasury Bench, and we know how desperately clever the Treasury is at producing briefings on these amendments. She says ex cathedra that because she does not like the new clause, she does not believe it to be sensible or that it will work.

The Minister adduces an argument that the new clause would restrict payments only to those that could be made through a sub-post office and that it would restrict choice. I have looked again at the Bill. I see no change to clause 23 other than the paving amendment which we propose to allow for new clause 2. I see no change to clause 24 which provides the powers that she says are now curtailed. The new clause provides only an entitlement to receive the cash over the counter in a post office. That seems a perfectly sensible and proper proposal.

The Minister asserts, secondly, that the universal bank will be in operation in April 2003. I desperately hope she is right, but I am sick and tired of hearing Ministers assert with no evidence that the development of the universal bank is anything like at the stage it should be if it is go live in April 2003. If it is not, the mechanisms in the Bill will be inadequate and the Minister has no plan B. That may be of no great concern to the Government or the Inland Revenue, but it is of enormous concern to people who need that facility through their post office and to those who are trying to make their businesses in those post offices work, but who will not have the income they desperately need to maintain the network.

For those reasons I reject the Government's simple assertions and seek the advice of the House on the merits of new clause 2.

Question put, That the clause be read a Second time: —

The House divided: Ayes 170, Noes 252.

Division No. 164]	[4.23 pm
AYES
Allan, Richard	Hayes, John
Amess, David	Heald, Oliver
Ancram, Rt Hon Michael	Heath, David
Arbuthnot, Rt Hon James	Hendry, Charles
Atkinson, David (Bour'mth E)	Hermon, Lady
Atkinson, Peter (Hexham)	Hoban, Mark
Bacon, Richard	Holmes, Paul
Baldry, Tony	Horam, John
Barker, Gregory	Jenkin, Bernard
Baron, John	Key, Robert
Barrett, John	Kirkbride, Miss Julie
Beggs, Roy	Knight, Rt Hon Greg (E Yorkshire)
Beith, Rt Hon A J	Laing, Mrs Eleanor
Bellingham, Henry	Lansley, Andrew
Bercow, John	Laws, David
Beresford, Sir Paul	Letwin, Oliver
Blunt, Crispin	Lewis, Dr Julian (New Forest E)
Boswell, Tim	Liddell-Grainger, Ian
Brady, Graham	Lidington, David
Brake, Tom	Lilley, Rt Hon Peter
Brazier, Julian	Loughton, Tim
Brooke, Mrs Annette L	Luff, Peter
Browning, Mrs Angela	McIntosh, Miss Anne
Burnside, David	MacKay, Rt Hon Andrew
Burt, Alistair	Maclean, Rt Hon David
Butterfill, John	McLoughlin, Patrick
Cable, Dr Vincent	Malins, Humfrey
Calton, Mrs Patsy	Maples, John
Cameron, David	Mates, Michael
Campbell, Gregory (E Lond'y)	Mawhinney, Rt Hon Sir Brian
Campbell, Rt Hon Menzies (NE Fife)	May, Mrs Theresa
	Mercer, Patrick
Carmichael, Alistair	Moss, Malcolm
Cash, William	Murrison, Dr Andrew
Chapman, Sir Sydney (Chipping Barnet)	Oaten, Mark
	O'Brien, Stephen (Eddisbury)
Chidgey, David	Öpik, Lembit
Chope, Christopher	Osborne, George (Tatton)
Clappison, James	Ottaway, Richard
Collins, Tim	Page, Richard
Conway, Derek	Paice, James
Cotter, Brian	Paterson, Owen
Cran, James	Pickles, Eric
Davey, Edward (Kingston)	Price, Adam
Davies, Quentin (Grantham)	Prisk, Mark
Djanogly, Jonathan	Pugh, Dr John
Doughty, Sue	Randall, John
Duncan, Peter (Galloway)	Reid, Alan (Argyll & Bute)
Duncan Smith, Rt Hon Iain	Robathan, Andrew
Ewing, Annabelle	Robertson, Angus (Moray)
Fabricant, Michael	Robertson, Hugh (Faversham)
Field, Mark (Cities of London)	Robertson, Laurence (Tewk'b'ry)
Flight, Howard	Robinson, Peter (Belfast E)
Flook, Adrian	Roe, Mrs Marion
Forth, Rt Hon Eric	Rosindell, Andrew
Francois, Mark	Ruffley, David
Gale, Roger	Russell, Bob (Colchester)
Garnier, Edward	Salmond, Alex
George, Andrew (St Ives)	Sanders, Adrian
Gibb, Nick	Simmonds, Mark
Gidley, Sandra	Smith, Sir Robert (W Ab'd'ns)
Gillan, Mrs Cheryl	Smyth, Rev Martin (Belfast S)
Goodman, Paul	Soames, Nicholas
Gray, James	Spelman, Mrs Caroline
Grayling, Chris	Spicer, Sir Michael
Green, Damian (Ashford)	Spink, Bob
Green, Matthew (Ludlow)	Spring, Richard
Greenway, John	Steen, Anthony
Grieve, Dominic	Streeter, Gary
Hague, Rt Hon William	Swayne, Desmond
Hammond, Philip	Swire, Hugo
Harvey, Nick	Syms, Robert
Hawkins, Nick	Tapsell, Sir Peter

Taylor, Ian (Esher & Walton)	Widdecombe, Rt Hon Miss Ann
Taylor, Matthew (Truro)	Wiggin, Bill
Taylor, Dr Richard (Wyre F)	Wilkinson, John
Taylor, Sir Teddy	Willetts, David
Thomas, Simon (Ceredigion)	Williams, Hywel (Caernarfon)
Trend, Michael	Williams, Roger (Brecon)
Turner, Andrew (Isle of Wight)	Willis, Phil
Tyler, Paul	Winterton, Nicholas (Macclesfield)
Tyrie, Andrew	Wishart, Pete
Walter, Robert	Yeo, Tim
Waterson, Nigel	Young, Rt Hon Sir George
Watkinson, Angela
Webb, Steve	Tellers for the Ayes:
Weir, Michael	John Thurso and
Whittingdale, John	Richard Younger-Ross.

NOES
Ainger, Nick	Cummings, John
Anderson, Rt Hon Donald (Swansea E)	Cunningham, Jim (Cov'try S)
	Dalyell, Tam
Anderson, Janet (Rossendale)	Darling, Rt Hon Alistair
Armstrong, Rt Hon Ms Hilary	Davey, Valerie (Bristol W)
Atherton, Ms Candy	David, Wayne
Atkins, Charlotte	Davies, Rt Hon Denzil (Llanelli)
Austin, John	Dawson, Hilton
Bailey, Adrian	Dean, Mrs Janet
Baird, Vera	Dhanda, Parmjit
Barnes, Harry	Dobbin, Jim
Barron, Kevin	Donohoe, Brian H
Battle, John	Doran, Frank
Bell, Stuart	Drown, Ms Julia
Benn, Hilary	Eagle, Angela (Wallasey)
Bennett, Andrew	Eagle, Maria (L 'pool Garston)
Benton, Joe	Edwards, Huw
Berry, Roger	Efford, Clive
Best, Harold	Ennis, Jeff
Blackman, Liz	Etherington, Bill
Blizzard, Bob	Farrelly, Paul
Boateng, Rt Hon Paul	Field, Rt Hon Frank (Birkenhead)
Borrow, David	Fitzpatrick, Jim
Bradley, Peter (The Wrekin)	Fitzsimons, Mrs Lorna
Bradshaw, Ben	Flint, Caroline
Brennan, Kevin	Foster, Rt Hon Derek
Brown, Rt Hon Nicholas (Newcastle E & Wallsend)	Foster, Michael (Worcester)
	Foster, Michael Jabez (Hastings)
Brown, Russell (Dumfries)	Galloway, George
Browne, Desmond	Gapes, Mike
Burgon, Colin	Gardiner, Barry
Cairns, David	Gerrard, Neil
Campbell, Alan (Tynemouth)	Gibson, Dr Ian
Campbell, Mrs Anne (C'bridge)	Gilroy, Linda
Campbell, Ronnie (Blyth V)	Godsiff, Roger
Caplin, Ivor	Griffiths, Jane (Reading E)
Casale, Roger	Grogan, John
Cawsey, Ian	Hall, Mike (Weaver Vale)
Challen, Colin	Hall, Patrick (Bedford)
Chapman, Ben (Wirral S)	Hamilton, David (Midlothian)
Chaytor, David	Hamilton, Fabian (Leeds NE)
Clapham, Michael	Hanson, David
Clark, Dr Lynda (Edinburgh Pentlands)	Harris, Tom (Glasgow Cathcart)
	Healey, John
Clark, Paul (Gillingham)	Henderson, Doug (Newcastle N)
Clarke, Rt Hon Charles (Norwich S)	Henderson, Ivan (Harwich)
	Hendrick, Mark
Clarke, Rt Hon Tom (Coatbridge)	Hepburn, Stephen
Clarke, Tony (Northampton S)	Heppell, John
Clelland, David	Hesford, Stephen
Clwyd, Ann	Heyes, David
Coffey, Ms Ann	Hill, Keith
Coleman, Iain	Hinchliffe, David
Connarty, Michael	Hodge, Margaret
Cook, Rt Hon Robin (Livingston)	Hope, Phil
Cooper, Yvette	Hopkins, Kelvin
Cruddas, Jon	Howarth, Rt Hon Alan (Newport E)
Cryer, Mrs Ann (Keighley)	Howarth, George (Knowsley N)
Cryer, John (Hornchurch)	Hoyle, Lindsay

Hughes, Kevin (Doncaster N)	Plaskitt, James
Hurst, Alan	Pollard, Kerry
Illsley, Eric	Pond, Chris
Jackson, Glenda (Hampstead)	Pound, Stephen
Jackson, Helen (Hillsborough)	Prentice, Ms Bridget (Lewisham E)
Johnson, Alan (Hull W & Hessle)	Prentice, Gordon (Pendle)
Johnson, Miss Melanie (Welwyn Hatfield)	Primarolo, Dawn
	Quin, Rt Hon Joyce
Jones, Helen (Warrington N)	Quinn, Lawrie
Jones, Jon Owen (Cardiff C)	Rammell, Bill
Jones, Lynne (Selly Oak)	Reed, Andy (Loughborough)
Jones, Martyn (Clwyd S)	Roche, Mrs Barbara
Joyce, Eric	Rooney, Terry
Kaufman, Rt Hon Gerald	Ruddock, Joan
Keeble, Ms Sally	Russell, Ms Christine (Chester)
Keen, Alan (Feltham & Heston)	Ryan, Joan
Keen, Ann (Brentford & Isleworth)	Sarwar, Mohammad
Kemp, Fraser	Savidge, Malcolm
Khabra, Piara S	Sawford, Phil
Kilfoyle, Peter	Shaw, Jonathan
King, Ms Oona (Bethnal Green)	Sheerman, Barry
Kumar, Dr Ashok	Shipley, Ms Debra
Ladyman, Dr Stephen	Skinner, Dennis
Lammy, David,	Smith, Rt Hon Andrew (Oxford E)
Laxton, Bob	Smith, Angela (Basildon)
Lazarowicz, Mark	Smith, Rt Hon Chris (Islington S)
Lepper, David	Smith, Geraldine (Morecambe)
Leslie, Christopher	Smith, Jacqui (Redditch)
Levitt, Tom	Soley, Clive
Lewis, Ivan (Bury S)	Southworth, Helen
Lloyd, Tony	Starkey, Dr Phyllis
Love, Andrew	Steinberg, Gerry
Luke, Iain	Stewart, Ian (Eccles)
Lyons, John	Stinchcombe, Paul
McAvoy, Thomas	Strang, Rt Hon Dr Gavin
McCabe, Stephen	Stringer, Graham
McCafferty, Chris	Stuart, Ms Gisela
McCartney, Rt Hon Ian	Sutcliffe, Gerry
McDonagh, Siobhain	Taylor, Rt Hon Ann (Dewsbury)
MacDonald, Calum	Taylor, Ms Dari (Stockton S)
McDonnell, John	Thomas, Gareth (Clwyd W)
MacDougall, John	Thomas, Gareth R (Harrow W)
McIsaac, Shona	Timms, Stephen
McKechin, Ann	Todd, Mark
Mackinlay, Andrew	Turner, Dennis (Wolverh'ton SE)
McNulty, Tony	Turner, Dr Desmond (Kemptown)
McWilliam, John	Turner, Neil (Wigan)
Mahon, Mrs Alice	Twigg, Derek (Halton)
Mallaber, Judy	Tynan, Bill
Marsden, Gordon (Blackpool S)	Vis, Dr Rudi
Martlew, Eric	Walley, Ms Joan
Meacher, Rt Hon Michael	Ward, Ms Claire
Meale, Alan	Wareing, Robert N
Merron, Gillian	Watts, David
Miliband, David	White, Brian
Miller, Andrew	Wicks, Malcolm
Mitchell, Austin (Gt Grimsby)	Williams, Rt Hon Alan (Swansea W)
Moffatt, Laura
Mole, Chris	Williams, Mrs Betty (Conwy)
Moonie, Dr Lewis	Wills, Michael
Moran, Margaret	Winnick, David
Mullin, Chris	Wood, Mike
Murphy, Jim (Eastwood)	Woolas, Phil
Naysmith, Dr Doug	Worthington, Tony
Norris, Dan	Wright, Anthony D (Gt Yarmouth)
O'Brien, Bill (Normanton)	Wright, David (Telford)
O'Hara, Edward	Wright, Tony (Cannock)
O'Neill, Martin	Wyatt, Derek
Osborne, Sandra (Ayr)
Perham, Linda	Tellers for the Noes:
Pickthall, Colin	Mrs. Anne McGuire and
Pike, Peter	Mr. Ian Pearson.

Question accordingly negatived.

Tom Brake (Carshalton and Wallington)

On a point of order, Madam Deputy Speaker. I understand that at 3.30 pm today a press release was issued, announcing that the Government were to proceed with the public-private partnership for the London underground. Is that not a contempt of the House, given that the Secretary of State for Transport, Local Government and the Regions is due to make a statement at 7 o'clock this evening?

Madam Deputy Speaker

I remind the hon. Gentleman that what he says is correct: Mr. Speaker has agreed to a statement by the Secretary of State for Transport, Local Government and the Regions at 7 pm this evening.