Tax Credits Bill

HL Deb 04 May 1999 vol 600 cc633-72

8.30 p.m.

House again in Committee.

Lord Higgins

The House is once again in Committee on the Bill. It seems to me that the expression "once again" sounds as if we have been going for a long time.

Lord McIntosh of Haringey

We were just congratulating ourselves on our amiable progress.

Lord Higgins

Whether or not it is progress is debatable; and whether or not it is amiable depends on whether we win the battle! However, be that as it may, with great respect to the noble Lord and the noble Baroness, I must admit that they have been extremely helpful on this Bill. Our anxiety overall is to—

Lord McIntosh of Haringey

Perhaps I may return to our previous discussions and say: Perhaps [you were] right to dissemble your love, But—why did you kick me downstairs"?

Lord Higgins

I started off this whole series of debates with extracts from Lewis Carroll, but they seemed to go down badly. I am tempted to reminisce, but I shall not do so. I shall leave the matter there.

Clause 9 [Penalties for fraud etc. and failures to comply]:

Lord Higgins moved Amendment No.48:

Page 5, line 3, leave out ("the amount") and insert ("30 per cent)

The noble Lord said: I should stress at the outset that Amendment No.48 is a probing amendment. It is not surprising to note that noble Lords on all sides of the Committee are against fraud in all its shapes and forms. Nevertheless, if one refers to the particular part of the Bill involved here, it will be seen that subsection (1) states: Where a person fraudulently or negligently makes any incorrect statement or declaration … he shall he liable to a penalty not exceeding the amount of the difference specified in subsection (2) below".

In simple terms, I believe I am right in saying that "the difference" is that between the amount that the person was actually entitled to and the amount which he wrongly claimed. Although I may be mistaken. I believe that that means the whole difference between the two. My amendment seeks to make it 30 per cent of that difference.

When one is dealing with people who are obviously, by definition, on low incomes, there is a very real prospect that one will impose yet further penalties on them. Some of the representations which have been made by the Low Pay Unit, and so on, suggest that, as the effect of the Bill is to try to guarantee something like an income of £10,000 a year, if someone, were to make a fraudulent claim for that amount he would be liable to a fine of, say, £3,000. Indeed, even on a basis of £10 per week, it would not seem likely that such a person would be able to repay the amount; indeed, he may be consigned for many years to living with far below the income which the Government feel should be the minimum. However, I do not in any way condone any such fraudulent or negligent claims.

There are other matters relating to the penalties, and so on, to which we can return in a short while. However, despite the fact that the offence itself is very serious, I should like to ask the Government whether they consider that what seems to be a very harsh penalty in some respects is a practicable sort of limit which might reasonably be imposed on people who perhaps negligently, rather than fraudulently, make such a claim. I beg to move.

Lord McIntosh of Haringey

The key to this issue lies in the last few words of the noble Lord; namely, "negligently" or "fraudulently". What the noble Lord is trying to do in subsequent amendments to Clause 9, and not so much in this one, is to make a distinction between the words "negligent" and "fraudulent". There is a distinction but to separate such words absolutely could be very dangerous and might lead to "sub-optimising", if I may put it that way, and producing paradoxically damaging results.

This amendment seeks to change the penalty imposed for making a fraudulent or negligent claim to a tax credit. The clause currently provides that the penalty shall be an amount up to the full amount falsely claimed. I should make it clear that that is in addition to the payment of the amount itself, which has been falsely claimed; in other words, the person has to pay back the amount falsely claimed before paying the penalty.

Within that maximum the appropriate level of penalty would be set by the Inland Revenue in accordance with published guidelines, to reflect the seriousness of the false claim and the co-operation given by the applicant to the Revenue's inquiries. The level of penalty can be changed on appeal to an independent tribunal. This provision reflects the penalties that have applied for many years to the submission of false tax returns.

A robust regime to counter fraud is needed for two reasons. Family credit has been vulnerable to fraud in the past; working families' tax credit will be based on broadly similar rules, but it will be more generous than family credit and will be available to a wider variety of applicants. Instead, however, this amendment proposes that the penalty should be a maximum of 30 per cent of the amount falsely claimed. This echoes the level of financial penalty chargeable in the benefit system, but the circumstances are rather different. The benefits penalty is fixed at 30 per cent.

This Bill seeks to introduce a more flexible system of civil penalties which can apply across the whole range of offences. The new tax credits are now part of the tax system and, as such, we feel that the penalty regime should as far as possible mirror that for the rest of the tax system. As for many other parts of the tax system, the Revenue will be issuing a code of practice which will make it clear how the Revenue intends to carry out any inquiries and what the rights and responsibilities of applicants are.

Given the fact that the Select Committee on Social Security and many noble Lords opposite have expressed concerns about fraud—indeed, some Members opposite have expressed much more than concern about fraud—I should have expected them to support this provision. The amendment would clearly dilute the deterrence factor in the penalty provision; indeed, there is much less to lose from "trying it on". This is not the kind of signal that we want to send out about the new tax credits system. Therefore, I must ask the noble Lord not to press the amendment.

Lord Higgins

Perhaps I may delay Members of the Committee for just a little longer. It may have been a slip of the tongue, but I believe that the Minister said that before paying back the amount which had been fraudulently claimed, there was a penalty on top of that amount. I presume, although I may be wrong, that it would be simultaneous; that is to say, the person concerned would be required both to pay back that which he had received, which he ought not to have had, plus a penalty on top. With respect, I do not believe that that is what the noble Lord said.

Lord McIntosh of Haringey

I am sorry that I was not clear. The noble Lord is right. The penalties are in addition to the recovery of any amounts falsely claimed which have already been paid out. Mere recovery would provide no deterrent at all.

Lord Higgins

I fully understand that full recovery would provide no deterrent at all. That would be too much of a good thing from the fraudster's point of view. At any given moment, the individual concerned is presumably liable for the two amounts. The question is to what extent in practice it would be possible for the person concerned to pay back the amount within any reasonable time-scale. I believe that I am right in saying that in some other cases it is about £10 per week or something of that kind, from an individual who is likely to be pretty low in resources.

The other point which the noble Lord made is the extent to which we are changing the positions of the Benefits Agency and the Inland Revenue. If I understand him correctly, the Government are saying that quite apart from changing the department responsible, they are also taking the opportunity, if I can put it that way, to tighten the penalties. I am not saying in any sense that we should condone fraud. However, we need to be clear whether the effect of transferring the matter from one department to another is to increase the penalties at any given time. Perhaps the noble Lord can confirm that that is what they are doing.

Lord McIntosh of Haringey

The effect is to increase the possible penalties. I believe that that is the right answer. The clause refers to negligence and/or fraud. The difficulty that one always has is distinguishing between those two aspects. What might appear to be negligence in one case could easily be fraud in the case of the next-door neighbour. We want a degree of flexibility between negligence and fraud. We certainly want the regulations to provide for a penalty suitable for fraud. In extreme cases, there will be criminal prosecutions, but we are anxious not to force them on the Inland Revenue when civil action, recovery and penalties would be a better solution.

Lord Higgins

Am I right in thinking, therefore, that this is an extra-statutory arrangement by the Inland Revenue?

Lord McIntosh of Haringey

The Inland Revenue will have regulations and guidelines to determine how its internal procedures will work in a particular case. I do not believe that some of them will be subject to parliamentary procedures.

Lord Higgins

In the light of the Minister's reply, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.45 p.m.

Lord Higgins moved Amendment No.49:

Page 5. line 11. after ("fails") insert ("without reasonable excuse")

The noble Lord said: In moving this amendment, it may be convenient to speak also to Amendments Nos.50 and 51. The purpose of this amendment is apparent; namely, that one should insert the words "without reasonable excuse" as regards a failure to comply with the law which the Government propose to introduce. It may well be that there is an argument as regards reasonableness in this context. I beg to move.

Lord Goodhart

I support the noble Lord, Lord Higgins. It would be inappropriate to make the civil offences under Clause 9(3) absolute. This very simple and straightforward amendment provides that a reasonable excuse is an excuse. It is a wholly appropriate amendment.

Lord Swinfen

I am sure that this amendment is appropriate because similar wording is included in many other Acts.

Lord McIntosh of Haringey

These amendments are mercifully simply and straightforward. There is a mercifully simple answer as well. The amendments seek to prevent a penalty being charged for failing to obtain information where there is a reasonable excuse for the failure. The penalties that noble Lords opposite and the noble Lord, Lord Higgins, are concerned about in this amendment are those imposed in Clause 9(3). The clause provides for a penalty to be imposed for failure to provide information or produce or deliver documents. It applies to powers to seek information from applicants and employers.

In fact, I am pleased to inform the Committee that the Bill already makes such provision. Clause 10(3) provides that Section 118(2) of the Taxes Management Act 1970 shall apply for the purposes of Clause 9(3). Section 118(2) of that Act states that, For the purposes of this Act, a person shall be deemed not to have failed to do anything required of him to be done within a limited time if he did it within such further time, if any, as the Board or the Commissioners or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to he done he shall he deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased". I believe that the wording of this Bill is rather better than that of the 1970 legislation. That may have been before the noble Lord assumed office in the Heath government. Since the reference in Clause 10 to the Taxes Management Act covers exactly the point that the noble Lord has made, I hope that he feels it appropriate to withdraw the amendment.

Lord Higgins

I am not clear whether the noble Lord is accepting the amendment. In the circumstances of a switch from one department to another, why cannot we accept the amendment? I understood the noble Lord to be saying that. Rather than referring the matter back, is it not simpler to put the matter on the face of the Bill? As the noble Lord rightly said, it is a great deal clearer than the legislation still in force. Those reading this Bill will have some difficulty in remembering the previous legislation.

Lord McIntosh of Haringey

There is a perfectly adequate cross-reference between Clauses 9 and 10. I shall certainly ask the parliamentary draftsman to look at the matter again to see whether it can be simplified as long as we are agreed that the purpose the noble Lord seeks is achieved by the Bill and the issue is only whether it is done in a roundabout way

Lord Higgins

We can certainly think about it between now and Report stage. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos.50 and 51 not moved.]

Lord Higgins moved Amendment No.52:

Page 5, leave out line 28 and insert ("Where the Board is satisfied beyond a reasonable doubt that a person fraudulently—')

The noble Lord said: As the noble Lord, Lord McIntosh of Haringey, rightly said a moment or two ago, these amendments are related. I refer also to Amendments Nos.53 and 54. The question is whether one should distinguish rather more clearly than does the Bill between "negligence" on the one hand and "fraud" on the other. Although I understand that it may be a rather subtle distinction in certain cases, it seems that there is a case for distinguishing between the two. As regards fraud, there is a case for prosecution.

That being so, we need to consider to what extent we should allow flexibility in these matters. As the matter stands, it appears to put negligence on the one hand and fraud on the other in the same package without making an important distinction, albeit one which it is not always easy to ascertain in practice. I beg to move.

Lord McIntosh of Haringey

I addressed the fundamental issue behind these amendments when speaking to Amendment No.48. I have some much more objectionable points up my sleeve which I did not believe it appropriate to raise before in case I deterred the noble Lord from moving the amendment.

This amendment seeks to make changes to the provisions for charging a financial penalty on someone who fraudulently or negligently provides incorrect information in response to a formal notice. The penalty provision, as drafted, is a backstop to powers which themselves will be used only when informal methods have failed. It is unlikely to be used much in practice. Therefore in that sense the amendment is far more limited in effect than the noble Lord would. have wished.

Amendment No.52 appears to be in conflict with. Amendment No.53. In order that the Inland Revenue may check the accuracy and honesty of applications for tax credit and ensure that payments are being made correctly by employers, the Bill contains a number of provisions requiring applicants and third parties to supply certain information when asked to do so by the Inland Revenue. To ensure that these powers are effective, there must be sanctions against the provision of incorrect information. Those sanctions are at Clause 9(5) which as drafted provides for a penalty of up to £3,000 where a person provides false information fraudulently or negligently. This is intended largely as a deterrent. It closely reflects similar provisions in the tax code, which in practice rarely need to be used.

It may be helpful if I explain what the amendments as drafted would actually do. Amendment No.53 would apply the financial penalty only to cases where the information was supplied negligently. Amendment No.54 would provide that fraudulent cases should be prosecuted. Amendment No.52 appears to be in conflict with Amendment No.53 since it would provide that this Clause 9(5) should apply only where the board was satisfied beyond reasonable doubt that incorrect information had been provided fraudulently. That would appear to leave no room for the operation of Amendment No.53, which applies in relation to negligence.

The amendments, taken together, would be contradictory, and taken separately—this is a much more important point—they are undesirable. Amendment No.52 would place an unnecessarily high hurdle of proof in front of a civil penalty that is intended to apply to cases of negligence as well as to fraud. Amendments Nos.53 and 54 would prevent the financial penalty being used in cases of fraud and would create a distinction between negligence and fraud which is really not needed and actually would be rather difficult to sustain in practice. This financial penalty is intended to be a short and simple deterrent to the provision of false information during the course of an Inland Revenue inquiry.

Amendment No.54 is also unnecessary since a prosecution could be brought by the Inland Revenue where the provision of false information amounts to a criminal offence without the need for specific statutory authority. I hope that the noble Lord will not press the amendments.

Lord Higgins

As the parliamentary draftsman is undoubtedly paid a great deal more than I am, I am quite prepared to accept his interpretation of the amendments. I have just one further point to raise. As is now fashionable—indeed, I think it is now obligatory—when we first discussed the Bill the noble Baroness said that the Bill is in conformity with the European Convention on Human Rights. Am I right in thinking that the related schedule to the clause we are now debating conforms fully with that convention? Will the Minister confirm that?

Lord McIntosh of Haringey

Yes.

Lord Higgins

On that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos.53 and 54 not moved.]

Clause 9 agreed to.

Clauses 10 to 13 agreed to.

Lord Higgins moved Amendment No.55:

Before Clause 14, insert the following new clause—

REMISSION OF PAYMENT OF NHS CHARGES ETC (". No regulations made under this Act shall reduce the entitlement to travelling expenses or remission of charges under section 83A of the National Health Service Act 1977 of a person in receipt of disabled person's tax credit, who would also have been so entitled had he been entitled to disability working allowance.

The noble Lord said: The new clause I propose in this amendment states, No regulations made under this Act shall reduce the entitlement to travelling expenses or remission of charges under section 83A of the National Health Service Act 1977 of a person in receipt of disabled person's tax credit, who would also have been so entitled had he been entitled to disability working allowance".

In earlier debates we discussed the relationship between the disability working allowance and the disabled person's tax credit. I believe there is general agreement that the move from one to the other is probably advantageous. Nonetheless it is important that the benefits in the widest sense which accrued under the previous provisions—even though I hope that the new provisions will cover a greater number of people—should not be diminished. This amendment seeks to ensure that that is the case. On that basis I hope that the Government can accept the amendment. I beg to move.

Lord Rix

I support the amendment. Clearly, travelling expenses for those people with a learning disability who are able to undertake work are of the greatest possible use and value. I believe that the amendment covers that point extremely well.

Baroness Hollis of Heigham

As the noble Lord, Lord Higgins, said, we discussed this matter on an earlier amendment. Therefore he will not be surprised if I give him much the same reply. The new clause seeks to prevent the Government from taking away "passporting" from recipients of DPTC. I appreciate the purpose of the amendment; however, it does not achieve its objective. It misunderstands the way in which passporting works. The rules and regulations—which are generally set out in various statutory instruments in the way the new clause suggests—currently refer to family credit or to DWA as a way of identifying a particular group for help. However, the regulations that passport recipients to that help are not made under family credit or DWA legislation but under legislation setting up the help such people would receive. Therefore legislation about passporting to free prescriptions would be made under the National Health Service Act and not under this Act, as the new clause suggests. No regulations about passporting will be made under this Bill.

But, as was said when we debated Amendment No.26 moved by my noble friend Lady Turner, the increased generosity of DPTC will mean—as with WFTC—that the support provided could go considerably further up the income distribution than was the case with DWA. However, I recognise that the amendment seeks assurances for those only on DWA.

As I said in response to the debate on Amendment No.26, we certainly take note of noble Lords' concerns on this issue and their desire to debate it. We are looking at what can be done and we shall set out what we intend to do before the Bill leaves Parliament. I am afraid that I have not been able to advance the situation much beyond what I said when we discussed passporting WFTC claimants. However, with those assurances I hope the noble Lord will feel able to withdraw his amendment.

Lord Higgins

I understand the technical point which the noble Baroness makes with regard to regulations. If no regulations can be made under this Bill, it would be inappropriate to press an amendment to state that no regulations will be made under the Bill. That is not a terribly difficult point for the Committee to understand. Having said that, as the noble Baroness rightly said, we discussed the question of passporting earlier. However, that was in a broader context. As the noble Baroness said, one of the problems is that the arrangements now being made go way up the income scale. However, the amendment is concerned with the disabled, not with passporting in general. It would seem strange if the switch from DWA to disabled person's tax credit resulted in some disabled people at present entitled to certain passported benefits suddenly finding they were no longer entitled to them because their income was above a certain level. That is what I understood the noble Baroness to say. She shakes her head and no doubt, as we are in Committee, she will be able to clarify the situation in a moment.

In making my next point I seek to assist the noble Baroness in her continued fight against the Treasury and other malign forces. The noble Baroness says that this matter will be clarified before the Bill leaves Parliament. In my view that is too loose an expression. The Government have had months and months to consider this matter. They have had months in which to consider it since the Bill started its progress through the Commons and the Lords. I understood the point made by the noble Baroness on a previous occasion that a number of different departments are involved and inter-departmental committees have to be set up and so on. Nonetheless it is high time that the Government produced a specific proposal so that this Chamber and the other place in due course, if necessary, can take a view on whether what the Government are doing is right. Otherwise there is genuine concern that particular individuals suddenly will not be entitled to benefits which they previously enjoyed. I therefore urge the noble Baroness as strongly as I can that a decision should be reached on this matter before we come to Report stage. We are entitled to say that the Government have had long enough to make up their mind on this issue. Specifically in this debate, is the noble Baroness really saying that some disabled people who were previously entitled to the disability working allowance and related benefits will not now receive them?

Now I think about it—I am thinking on my feet—this cannot in any way affect people on the ground that their income is too high. This relates only to people who are already receiving the benefit and who should, in our view, continue to receive it. If I may put it another way, the argument advanced for the reason for the delay in saying whether those people who at the moment get general passported benefits may no longer have them extended higher up the income scale does not apply as far as concerns the intention of the amendment. I am referring only to people who are already receiving the benefit and who, in our view, should continue to receive it.

9 p.m.

Baroness Hollis of Heigham

I think that the noble Lord is saying that the amendment differs from the previous one in that it confines passported benefits to those who would, were DWA still to be in existence, qualify via DWA for those passported benefits. As I said at the time, the Government are seeking to get the balance right between protecting the position of those who currently hold passported benefits, and who would possibly be worse off if we went over to a new system in which they lost their passported benefits, as against the much wider and higher income scales which will apply not only to WFTC but also to DPTC. That, too, is more generous than DWA. As I said when the noble Lord, Lord Swinfen, was urging me on this matter, the Government will come back with our proposals before the Bill leaves Parliament. But it will be a proposal based on the NHS low-income scheme" not something peculiar to DPTC and WFTC. It will also apply to other areas of low income. Therefore, it is still a matter for negotiation with the DoH.

Lord Rix

Before the Minister sits down. will the negotiations recognise that the costs of disability, both in travel and in living generally, are still greater than those of the low paid?

Baroness Hollis of Heigham

Yes. That was the argument that I advanced against some of the amendments which were pressed when we were last in Committee. The noble Lord, Lord Swinfen, suggested that either the rates of DPTC were applied to the WFTC, at a cost of many hundreds of millions of pounds, or, alternatively, that people on DPTC, disabled people. would have their rates reduced to the level of the working families' tax credit. The argument I used at the time was that disabled people receive on average only 70 per cent of the income of non-disabled people and have expenses which range from £50 to £80 a week more. I think that is common ground between us. I suggested that that was one of the reasons why the disabled persons' tax credit was, family for family, something like £30 more generous. For a family earning £200 a week, with two children under 11, and receiving the 30-hours premium, DPTC was, for that family, just under £29 a week more than WFTC. I said that that was a recognition of the extra costs of disability, as the noble Lord, Lord Rix, has reminded us tonight. That is still the Government's view.

Lord Swinfen

The noble Baroness does not do me justice. I was trying to seek information from the Government as to why the differences were as set out; why the allowance was not very much greater and more beneficial for disabled people; and why whatever was taken into account was different from one instance to the other. We can come back to this on Report. I do not wish to labour that point now.

Lord Higgins

We can indeed come back to this matter on Report—I hope to do so—but the problem is that it is more difficult to get to the bottom of such matters on Report than in Committee. Perhaps I may try to narrow the issue. The noble Baroness, if I may say so, is trying to go off into the wider question of passporting benefits. I want to narrow it right down as far as the disabled are concerned. Will she ensure, first, that people who are at the moment receiving disability working allowance and the related passported benefits will continue to do so under the new arrangements, if they qualify under the new arrangements? Secondly, as far as concerns the change from one system to the other, is the noble Baroness saying that considerations with regard to income will apply to disabled people as far as receiving the same benefits are concerned? It would be helpful if, for the reasons I have mentioned, we could be clear about the Government's intentions in advance of Report stage. I am almost tempted to ask exactly what the noble Baroness's hopes are, regardless of the departmental discussions.

Baroness Hollis of Heigham

The noble Lord may press me to narrow the matter but I repeat that I refuse to narrow the matter in that way. As I have said to the Committee on a couple of occasions tonight and during our first day in Committee, we shall return to the issue of passporting and, within that, we shall address the issue of passporting for DPTC and WFTC. We shall return to that issue before the Bill leaves Parliament.

Lord Higgins

The noble Baroness keeps saying, "Before the Bill leaves Parliament", but can she give us an assurance that we will have a specific proposal before us at Report stage?

Baroness Hollis of Heigham

If I was able to say to the noble Lord that he would have the proposal before Report stage, that is what I would have said. The fact that I did not say that means that I do not intend to say that. I repeat: the noble Lord—all of us—will have that measure before the Bill leaves Parliament.

Lord Higgins

That is not satisfactory. It means that on Report—probably with the support of the noble Lord opposite—we shall need to put forward our own proposals on this matter and then, in effect, flush the Government out. We really cannot let the matter go on beyond the stage where the House can take a view on what the Government propose. Procrastinating in such a manner is not a satisfactory way to treat Parliament. I am glad to see that I have the support of the Government Chief Whip, who has rapidly changed from nodding to shaking his head, but whose first reaction was the correct one.

With some hesitation, but largely because I am not in favour of passing into legislation defective amendments—the noble Baroness pointed out that the amendment is defective—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Rix moved Amendment No.56:

Before Clause 14, insert the following new clause

DEFINITION OF REMUNERATIVE WORK: DISABLED PERSONS TAX CREDIT (". The definition of remunerative work in respect of which a disabled person's tax credit may be payable shall include remunerative work for less than 16 hours a week as set out in-

1. (a)section 129 (disability working allowance) of the Social Security Contributions and Benefits Act 1992: and
2. (b)section 128 (disability working allowance) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992. ")

The noble Lord said: Before I speak to Amendment No.56, perhaps I may remind your Lordships that in Committee last week I paid tribute to my noble friend Lady Darcy de Knayth for her constant attention to our debates on disability. Unfortunately, she is unable to be in her place tonight but I am happy to announce that her understudy is the noble Lord, Lord Swinfen. who will say a few words and will no doubt give his usual immaculate performance.

This amendment abolishes the requirement for disabled person's tax credit recipients to work 16 hours or more per week in order to be eligible for financial support. I explained my reasons for favouring a relaxation of this rule at Second Reading. Many people with learning disabilities may be able to do some work, but may not be able to undertake full-time work. This is not just an assertion; this is the direct experience of MENCAP's employment service, Pathway, which finds that many people with learning disabilities benefit from part-time work. This can often develop an individual's skills or self-confidence and may act as a springboard on to positions involving more hours.

Under current proposals, the system is being carved up to create arbitrary exclusions from in-work benefits. People find that they can work up to four hours on the minimum wage and keep hold of income support and housing benefit; people can work over 16 hours and receive support from the disabled person's tax credit; and people can work for very specific therapeutic reasons and retain benefits. But those who undertake ordinary work for between five and 15 hours per week are afforded no support, even if the work that they do extends their capabilities and promotes their social inclusion.

This is, of course, an idealistic amendment, open to the charge of spiralling spending and liable to draw the predictable response of "We have to draw the line somewhere". My expectations are, however, very realistic. I should like a commitment from the Minister that her department will explore ways of assisting disabled people who work between five and 15 hours, perhaps through a phased entry to the tax credit. During the Second Reading debate, the Minister alluded to the possibility of pilot schemes. Perhaps she might like to tell the Committee in a little more detail about her thinking in this area.

If the ideas are in their infancy, I am sure that disability organisations would welcome the opportunity to discuss this matter further with the Minister and/or her officials. I beg to move.

Lord Swinfen

I am very happy to support the noble Lord, Lord Rix, but not as the understudy of the noble Baroness, Lady Darcy de Knayth. I hope that she, the noble Lord and I work as a team from different parts of the House in trying to support people with disabilities. In the past I can recall frequently having the support of the noble Baroness, Lady Hollis of Heigham, and the noble Lord, Lord Carter. I now have the support of my noble friends Lord Higgins and Lord Astor. Wherever I am in the House, I seem to be agin the Government. Therefore, I must be right because governments are not always right. They sometimes forget that they are as human as the rest of us. I have a horrible feeling that most of the time the Treasury tells them what they may do and not what they would like to do. As I have said before, the Treasury seems to have no experience outside the Treasury. It does not really know how the real world works.

I support what the noble Lord, Lord Rix, said in asking the Government to consider ways of supporting a greater number of low-paid disabled people in the workforce. However, we must not forget single parents with very young children, particularly those living in sparsely populated rural areas where there is likely to be a dearth of registered child minders and where they may be too far away, either in distance or time, to be of any practical value. It seems that there is a disproportionate concentration on full-time work in the Government's welfare-to-work strategy. Full-time work benefits the Treasury greatly. But let us not forget the benefit to thousands of people who work part-time. The benefits system should not mitigate against part-time work for those who wish to try it and where it is the only work they can practically take.

Lord Higgins

I support the noble Lord, Lord Rix, and the strength of his arguments and those of my noble friend because, when this point was debated last Monday, the first day in Committee, the noble Baroness asked why I was not supporting the noble Lord, Lord Rix. I said that I thought it was obvious that I supported the noble Lord, and I stood up and did so formally, whereupon the noble Baroness turned down the amendment. I thought that rather unfair. I have great pleasure in supporting the noble Lord's proposal.

Lord Goodhart

1, too, support the noble Lord, Lord Rix. This is an extremely desirable amendment. Certainly, the noble Lord made a very strong case as an exception to the general principle that tax credit should be payable only where there is a substantial amount of work. There is a strong case for the more limited hours of therapeutic work in the case of the those claiming disabled person's tax credit. I hope that the Government will look upon the amendment sympathetically.

9.15 p.m.

Baroness Hollis of Heigham

The purpose of the amendment is to redefine remunerative work for disabled people to include work of less than 16 hours a week. I am sorry to disappoint the noble Lord, Lord Higgins. It is clear that whenever he stands up to support the noble Lord, Lord Rix, he brings with him faint comfort. He might be advised in future not so energetically to do so.

There is a real difficulty here. The issue concerns us all and has aroused much discussion from the day DWA was introduced. We all want to see and help disabled people into work. Members of the Committee will not need reminding that this Government have introduced a new deal for disabled people with pilot schemes across the country. We are introducing personal advisers and work trials for disabled people. Also, I am pleased to report that, as of last October, we have been able to introduce the linking rules so that disabled people who move into work and then find that they cannot sustain work can return to the higher level of benefit arid not. so to speak, go down the snake and to lower rates and have to climb up. Thus we have reduced some of the risk—laid off the risk, as it were— on to the government benefits system. I do not think there is any dispute between us, on all sides of the Chamber, that we want to do everything we possibly can to help disabled people back into work. After all, the 2 million or so people on incapacity benefit once had a job. It would be to their pleasure and to ours if we could encourage them back into work.

But disabled person's tax credit, like WFTC, is not primarily an income support benefit; it is a work support measure. We have to make a distinction, a definition of what counts as work, so that on one side there are work support benefits—currently family credit, in future tax credit—and, less than the dividing line of work, what we then get is a disregard for some part-time earnings to support income support or disability benefit. The question is whether that line is properly drawn at 16 hours. We believe that it is.

Sixteen hours represents two full days a week or three to four part-time days a week. We believe the 16 hours is the point at which there is a clear commitment to work, which entitles a person who meets the other criteria to the much more generous in-work support provided by DPTC rather than out-of-work benefits. We want to ensure that the system helps, rather than hinders, people who want to move from benefits to work.

Disabled people who work less than 16 hours are, of course, able to keep the first £15 of their earnings. We particularly want to overcome the lack of awareness of the therapeutic earnings provision within incapacity benefit. Therapeutic work is a valuable opportunity. It is a first step back to independence. The therapeutic earnings limit has been increased this month from £48 to £58 per week. So effectively there is already a series of steps. People have a disregard when working modest hours of £15 to top up either income support, disability premium or incapacity benefit. People may be doing therapeutic work in which case they can keep £58 a week of the earnings from that. Finally, if they work more than 16 hours, under the qualifying benefit rules or fast track procedures people may be entitled to DPTC. This improvement, together with the greaser generosity of DPTC compared to DWA, and the proposed new fast-track gateways to DPTC will, we believe, greatly enhance work opportunities available to disabled people.

We are keeping under regular review all aspects of the DPTC. We have discussions with the Disability Benefits Forum and are piloting possible improvements to tax credit. We certainly plan to use pilots on various aspects of both WFTC and DPTC. However, I am afraid that I cannot, despite the invitation to do so, give any commitment as to what aspects of the DPTC will be piloted. However, I shall certainly bear in mind the concerns and issues raised in this debate. I am sure that the disability organisations will note them.

I believe it is right to say that a person who works 16 or more hours a week is in work and that therefore the benefits that are appropriate to supporting someone in work apply to that individual, but that someone who works less than 16 hours a week is essentially either in part-time work with a disregard or is engaged in therapeutic earning. While I understand the intention of the noble Lord, Lord Rix, in moving the amendment I regret that I am unable to accept it. I ask the noble Lord to withdraw his amendment.

Lord Rix

Before the noble Baroness sits down, perhaps she can explain for a simple soul like me the maximum amount of money that can be earned by a person with learning disability who works over five hours but is unable to work up to 16 hours. What is the maximum amount of support that can be given?

Baroness Hollis of Heigham

A person with a learning disability may be on severe disablement allowance, which is topped up by income support if the SDA is below his income support entitlement. If he is not living at home with parents he may be entitled to housing benefit and CTB and keep the first £15 of his earnings.

Lord Rix

I cannot over-emphasise the benefits of part-time work both to disabled individuals, particularly learning disabled individuals, and society. I hope that the Minister will think again about what support can be offered to disabled people who work part time, but I am delighted to hear the figures that she has quoted. No doubt the subject will be revisited. I believe that the Minister is working with the Disability Benefits Forum in this regard. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No.57:

Before Clause 14, insert the following new clause—

HOUSING COSTS

(". In section 135 of the Social Security Contributions and Benefits Act 1992 (the applicable amount) after subsection (1) there shall be inserted—

"(1A) The applicable amount prescribed for a working families' tax credit and a disabled person's tax credit shall include an amount for prescribed housing costs."")

The noble Lord said: This is a probing amendment only because I recognise that in practical terms it is quite impossible to include a housing cost element in working families' tax credit at this stage. Therefore, this is purely a matter for the future rather than inclusion in this Bill.

This was an issue taken up by my honourable friend Professor Steven Webb in the other place. While the taper is reduced from 70 to 55 per cent for working families' tax credit as compared with family credit, an increase in the claimant's earnings will also lead to the loss of housing and council tax benefits. For people who receive all three—working families' tax credit, housing benefit and council tax benefit—and also pay PAYE and national insurance contributions, the marginal rate of tax (to use that shorthand) is reduced only from 96.9 to 95.3 per cent. If the person in the same situation does not receive council tax benefit it is reduced only from 92.7 to 89 per cent.

There is also a problem with home owners who have mortgages. They receive payment of their mortgage interest under income support but not under family credit now or, as proposed, working families' tax credit. There is therefore a disincentive for home owners to get low-paid jobs. Professor Webb says that the only people in his constituency, where the unemployment rate is extremely low, who cannot afford to take jobs are those with mortgages.

These problems would be reduced if an element of housing costs was built into the definition of the applicable amount. Almost everyone who receives these tax credits has housing costs in the form of either rent or mortgage interest. To replace housing benefit in part by a housing element in tax credits would reduce the number of people with extremely high marginal rates, which we all recognise is a serious disincentive. The housing element would also contribute to mortgage costs and give better incentives to home owners to seek low-paid jobs.

I recognise the enormous difficulties in the reform of housing benefit due to great differences in rents and housing values in different parts of the country. To take a slightly random example, we all know that the housing values in Hartlepool are a great deal lower than those in, let us say, Notting Hill. The housing element in the working families' tax credit would have to be much less flexible and less geared to actual costs than housing benefit. I do not believe that it could completely replace housing benefit. But even if the housing element in tax credits would have to be supplemented by a continuing housing benefit in some places, it would reduce the problem of the very high marginal rates and remove the disincentive to home owners with mortgages.

I understand that the Government are intending to review housing benefit. Is the Minister in a position to undertake that in the course of that review they will at least consider the possibility of incorporating a housing element in tax credits? I beg to move.

Lord Astor of Hever

I understand the reasons for the probing amendment put forward by the Liberal Democrats. They are right to raise the issue of housing costs and work incentives for lower income families. Labour's manifesto maintained that its housing strategy would address the needs of home owners and tenants alike. However, housing costs have not been considered in the Bill. After all, housing benefit forms one of the largest chunks of the social security budget. As a result, a confused position is already more confused. One wonders whether some of the people the Bill aims to help will be better off.

It seems odd that someone can be given the working families' tax credit or the disabled person's tax credit with one hand but could find his local council reducing his housing benefit by a corresponding amount with the other. If the Government are trying to cut the £12 billion housing benefit bill, this seems no way to do it.

More importantly, if local councils deduct from housing benefit the same amount as the tax credit, can the Minister tell the House how that will act as an incentive to get people back to work, which is the objective of the Bill'?

Baroness Hollis of Heigham

The clause is similar to that introduced on Report in the other House. As there, it is aimed at probing the intentions of the Government on the way that housing benefit will interact with the WFTC and the DPTC. It is the interaction of benefit tapers, such as that for housing benefit with the two tax credits, which produce high marginal deduction rates. Academic research—some of it by the noble Lord's honourable friend Professor Steven Webb—indicates that the difficulties of replacing out-of-work help for mortgage costs may be a barrier to entering work.

We can all accept that there is a problem by definition. However, it may be worth reminding the Committee that the Liberal Democrats' proposals outlined by Professor Webb could be very costly. The figures I have are that a flat-rate £30 mortgage interest credit would cost around £1.1 billion; and, if applied to rented accommodation net of HB, would cost a further £0.6 billion, the two together totalling £1.75 billion. We are talking about very large sums, even at a flat-rate element of something like £30 a week.

None the less, I wonder whether Members of the Committee are beginning to overestimate the problem we now face. The new tax credits already do two things that help in this area. The more generous help that the credits provide will help to float more people off the interaction of those three tapers, which the noble Lord, Lord Goodhart, rightly identified as producing high marginal deduction rates (MDRs). At present 25 per cent of people on family credit also claim and are entitled to HB and CTB; and for them we have high marginal deduction rates. That is undeniable.

In future, as a result of the more generous lift of WFTC, instead of 25 per cent of people claiming family credit, housing benefit and council tax benefit, the figure is likely to be 2 per cent. So the proportion of people affected by very high MDRs will diminish sharply. That is one of the good things that can come from the problems that we discussed during the first day in Committee relating to shallow tapers and greater generosity with WFTC. Fewer people will be affected by the triple taper.

Secondly, the lower taper within WFTC and DPTC—55 per cent. compared with 70 per cent at present—will mean not only that fewer people will be affected but that fewer people who are affected will see high marginal deduction rates. Under family credit, three-quarters of a million people face MDRs of 70 per cent plus, but under WFTC it will be only one-quarter of a million. That is a fall of two-thirds, or half a million people. Therefore, in both ways the generosity of the basic credit and the greater shallowness of the taper will reduce the problem considerably.

As the Economic and Fiscal Strategy Report made clear, the Government believe that Britain's current housing system is failing those in need. Our ambition is to modernise housing policy; to make the housing and labour markets fairer for all concerned, In his Budget Statement, the Chancellor indicated that over time he wants the Government's better deal for work to include help with housing costs for both renters and homeowners going back to work. But personal housing support will need to be reformed gradually. The current system of housing benefit is too complicated to be integrated with WFTC and DPTC. Even if personal housing support were simplified, the systems for administering the element for housing costs in the two tax credits will take the IR many years to restore.

Furthermore, the current structure for social rents would need to be reformed before we could move in this direction. The Government have been working in partnership with local authorities to develop proposals for the certification and improvement of the existing system of housing benefit. For the future, the: Government are looking at options for strengthening the link between social rent and the size. location and condition of properties. The Government will consider further reforms over the coming months and will announce details in a housing policy Green Paper later in the year. There will be extensive consultation with all concerned.

Given, first, that the problem is much less severe; secondly, the imputed cost of what might be the import of the Liberal Democrat amendment; and, thirdly, the statement of intent in the Chancellor's Budget, I hope that the noble Lord will be able to withdraw his amendment.

Lord Goodhart

At the beginning of my speech I indicated that this was a probing amendment introduced in order to hear a statement of the Government's intention. We have had that from the noble Baroness and I am grateful to her. In those circumstances. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.30 p.m.

Lord Swinfen moved Amendment No.58:

Before Clause 14, insert the following new clause— (". At the end of subsection (1)(b) of section 129 of the Social Security Contributions and Benefits Act 1992 (disability working allowance) there shall be inserted "or is the parent of a child under 16 entitled to any rate of either component of disability living allowance or for the disabled child's premium". ")

The noble Lord said: In moving Amendment No.58, I shall speak also to Amendment No.60 in the name of the noble Lord, Lord Rix. The purpose of my amendment is to extend entitlement to the disabled person's tax credit to families with a disabled child. That will benefit parents with low incomes and those restricted to part-time work due to caring responsibilities. It will also boost the Government's welfare-to-work strategy. Families with disabled children incur disability-related expenditure and have a higher ongoing regular extra cost. The disabled person's tax credit is therefore the most applicable in-work benefit. It is paid at a higher rate than the WFTC because it recognises these costs.

I strongly support Amendment No.60 tabled by the noble Lord, Lord Rix, because often the only option for childcare provision is that in the home specially adapted for the disabled child. His amendment should therefore be agreed to by the Government. I beg to move my Amendment No.58.

Lord Higgins

I support the amendment. My noble friend Lord Swinfen spelt out clearly the reasons why it ought to be accepted and referred to the related amendment in the name of the noble Lord, Lord Rix. As I know from my constituency experience, there are real problems with regard to disabled children in the home and the need to adapt buildings to cope with their problems. I hope that we shall receive a sympathetic response from the Government.

Lord Rix

My amendment has been grouped with Amendment No.58, although I believe that each addresses a slightly different subject. However, I am extremely grateful for the support given to me just now by the noble Lord, Lord Swinfen.

Perhaps I may express to the Minister my overall support for this very important Clause 15, which enables the Secretary of State to make regulations regarding new categories of childcare provider for tax credit purposes.

This clause was introduced by the Government in another place, demonstrating their willingness continually to improve on the scope of this legislation. Indeed the Minister has very kindly written to me and to others informing us of the Government's commitment to investigating further improvements to assist parents of children with special needs. I have tabled this amendment for the sole purpose of probing for further information on work in progress to extend verifiable childcare so as to enable those who look after children in their own home to benefit from the tax credit.

These arguments are well rehearsed but cannot be sufficiently reiterated. It is deeply unfair to penalise the parents of children with learning disabilities who require intensive support and care which can only be met in the child's home. They too should have access to childcare credits. I am aware that this may raise problematic issues in terms of accreditation but I urge the Government to solve this problem for disabled persons' tax credit and working families' tax credit recipients as a matter of urgency.

Baroness Hollis of Heigham

The proposed new clause, Amendment No.58, aims to widen the scope of DPTC to able-bodied couples with disabled children. It is grouped with Amendment No.60, which seeks to enable the new system for proven childcare providers to extend to care provided for disabled children in the home.

I turn first to Amendment No.58. The desired effect of the new clause would appear to be to widen entitlement to DPTC to the working parents of disabled children, even if the parents themselves are able-bodied. I have to say, although I do not want to get hung up about this, that the clause would not have that effect. The qualifying rules for DPTC, as for DWA, which it replaces, have another leg which the clause does not address. The parents of the disabled child would still need to be in receipt of a "qualifying benefit" in the period—to be extended from 56 days to 182 days by this Bill—prior to the claim being made. That would rather frustrate what appears to be the object of the clause.

The clause proposes to extend eligibility to able-bodied parents who have disabled children and for the child's disability to be the gateway to this tax credit. But supporting parents of disabled children, desirable though that is, is done through other aspects of legislation, in particular the disability living allowance. It is not the object of the DPTC, which remains a work incentive measure for disabled people and non-disabled people alike.

DPTC is a tax credit aimed at helping people who have a disability or illness which puts them at a disadvantage in getting a job to move into or remain in work. That is why DPTC, not WFTC, has the lower credit for an individual who is not responsible for any children. In other words, DPTC is a personal and not a household benefit. The tax credit which is aimed at supplying help to families with children is the WFTC.

However, the clause raises the question of how the tax credits should help disabled children. In an earlier amendment (Amendment No.10), we debated the differences between the two benefits and what would be the two new tax credits. I acknowledge that DPTC—like DWA, upon which it builds—has a specific additional credit for a disabled child, whereas WFTC, like family credit, does not.

As I pointed out on earlier amendments, the new tax credits have been built from the platform that the benefits provide, and specific changes are being made to enable the tax credits to deliver their objectives in response to points raised during the development period.

These differences, repeated tonight, were raised during the debate on Amendment No.10 by the noble Lords, Lord Swinfen and Lord Rix. I said then that the point which he raised was a proper one for us to reflect upon, and that remains the case. The noble Lord said that he was delighted that the Government would be tabling an amendment. I said, no, that we were reflecting and not committing ourselves to any further amendment. However, we recognised that there was an issue on which to reflect.

Amendment No.60 aims at a slightly different target but still relates to providing help where there is a disabled child. It proposes that Clause 15, which was introduced on Report in the other place, should be amended so that there is a specific mention of care for disabled children in their own homes. That was a point raised by the noble Lord, Lord Rix, at Second Reading.

However, Clause 15 of this Bill is not the place for this amendment because the clause enables a wholly new category of approved childcare providers to be created and, most importantly, achieves that by accrediting organisations with appropriate quality assurance schemes for that approval.

The measure is aimed specifically at out-of-school care for those aged eight and over who are catered for to only a limited extent under the current rules for eligible childcare. The clause is particularly important because of the increase in the age limit to 14 year-olds or 16 year-old disabled children to help with childcare costs. I do not believe that the noble Lord would want help limited to disabled children just within that age group, which is what the proposed clause would push us to.

I have sympathy with the sentiments expressed by the noble Lord both today and at Second Reading. Those sentiments are widely shared. The general principle of what the Government are doing is to make good quality childcare more affordable as part of those work incentive measures. That is in line with the Government's national childcare strategy as set out in the Green Paper, Meeting the Child Care Challenge.

We are aware of the problems which disabled children face. On 13th January, my honourable friend the Paymaster General said that, the Government is looking at all the types of childcare provided currently, their quality assurance and whether the types of eligible childcare for the childcare tax credit could be extended. We arc looking particularly at care provided for children between 11 and 14--who are beyond the age covered by most of the current regulatory arrangements—and at care provided for disabled children where there may be special care needs". We shall continue to reflect on what can be done.

I should point out also, in relation to both amendments, that the issues raised are generally matters for regulations. If the noble Lord were not to press the amendment, that would not impede us reflecting on how we should take forward those issues.

The disabled child credit in DWA is set out in regulations, as it will be for DPTC. The categories of eligible childcare providers are also specified there. Having said that and having said in relation to both amendments that we shall reflect on them, I ask that Amendment No.58 be withdrawn.

Lord Swinfen

I shall read with care what the Minister said. I may return to this matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No.59:

Before Clause 14, insert the following new clause—

SOCIAL SECURITY ADVISORY COMMITTEE (". Section 170 of the Social Security Administration Act 1992 (social security advisory committee) shall apply in connection with tax credits as if references in that section to the Secretary of State were references to the Treasury or the Board arid as if this Act was one of the relevant enactments as defined in that section. ")

The noble Lord said: Section 170 of the Social Security Administration Act requires the Social Security Advisory Committee to give advice to the Secretary of State in connection with the discharge of his functions under the relevant enactments. Those enactments are defined to include the Social Security Contributions and Benefits Act which continues to be the primary legislation governing the WFTC in the same way as it now governs family credit.

Section 170 also authorises the Secretary of State to ask the committee for advice. The effect of the Bill is that the Secretary of State will cease to have functions in relation to tax credits under the contributions and benefits Act because those functions will have been transferred to either the Treasury or the Board of the Inland Revenue. Nothing in the Bill provides for the committee to give advice to the Treasury or the Board of the Inland Revenue.

A similar point arises under Section l72 of the Social Security Administration Act which requires the Secretary of State to refer to the committee in draft any regulations that he proposes to make. By an oversight, my amendment does not refer to Section 172 but I assure the Committee that if we bring back the amendment on Report, we shall certainly include on that occasion a reference to Section 172 as well as to Section 170.

On Section 172, of course, it will not be the Secretary of State who makes draft regulations in relation to tax credits. So there will be no obligation to refer those draft regulations to the committee. One may ask rhetorically: why is it that the committee is excluded from this role in relation to tax credits? Surely, the Treasury and the Inland Revenue will need advice as much as the Department of Social Security does at present, and indeed probably more so, because the Treasury and the Inland Revenue will be less familiar with what I might call broadly benefit issues than is the DSS. Surely, the committee performs a valuable role and it should be allowed to continue to do so. I beg to move the amendment.

9.45 p.m.

Lord Higgins

I support the amendment of the noble Lord, Lord Goodhart. As the amendment refers to the Secretary of State, it echoes the debate earlier which also referred to the Secretary of State. I have often wondered why we do not say, in legislation, which Secretary of State is concerned. In the debate on Clause 15, as I understand it, it was the Secretary of State for Education, whereas in this context presumably it is not the Secretary of State for Education but another Secretary of State.

The curiosity is that if it is the Chancellor of the Exchequer, apparently he is not included within the category of Secretary of State. The noble Lord, in his amendment, seeks to widen the reference to include the Chancellor of the Exchequer. I believe that he is right in saying that the Inland Revenue, the board and the Chancellor are more likely to be in need of advice from the Social Security Advisory Committee than is, for example, the noble Baroness who, I gather, will reply to the debate.

Ever since I took up my present task on the Front Bench on social security matters, I have had the impression that increasingly less work is being given to the Social Security Advisory Committee. We discussed a Bill last year which appeared to exclude the committee. Can the Minister say whether it is the Government's intention that it should have an important role? Can she also say, in the context of the point made by the noble Lord, Lord Goodhart, whether it is important, given the switch from the Department of Social Security and its Secretary of State to the Chancellor of the Exchequer, that the committee should be concerned with the Inland Revenue and the other departments?

Earl Russell

Perhaps I can say a brief word in support of my noble friend's amendment. Although I did not have the privilege of hearing the debate on Clause 2 stand part on the first day in Committee, I have read Hansard.

I understand that the Minister does not think that there will be a big culture problem between the two departments. However, there are bound to be adjustments. In making those adjustments, I believe that the advice of the Social Security Advisory Committee would be extremely valuable. Inevitably, there will have to be some marrying up of cultures and some adjustment in the process. I believe that some outside comment on how the system is working would be extremely valuable to the Government as well as to us.

In addressing the Minister, I do not need to stress the value and quality of reports of the Social Security Advisory Committee. The noble Baroness and I have spoken to those reports enough times for me to know that she is as well aware of their quality as I am.

We shall need a great deal of expert advice on regulations as they come forward. In any other field, I know of no advice that is quite as independent, as expert and as regularly available as that we receive from the Social Security Advisory Committee. The Minister may say that this is a work incentive and not a benefit, but if she looks at reports by the Social Security Advisory Committee in 1993 on the role of incentives in the benefits system she will see that those are some of the best reports produced by that committee. They suggest to me that the committee will be entirely at home, within its cultural remit, in working in this area. It could save the Government a great deal of trouble in the future. They might perhaps like that.

Lord Swinfen

I wonder whether, on this amendment, the Minister can answer a question I posed earlier to which I do not recall receiving a reply. The Treasury spends its time trying to cut down the costs of the other ministries. With that in mind, and with the Chancellor of the Exchequer in the Cabinet, I asked what Minister in the Cabinet would be arguing for those who are in need of both these tax credits. Who will be fighting to make certain that these people receive high enough tax credits? Or will it be entirely up to the Chancellor of the Exchequer?

The nature of the Chancellor's job—I am not being personal because it will apply to whichever government are in office—is to make certain that the Treasury outgoings are reduced to the lowest possible level. Which Minister in the Cabinet will be fighting to make certain that the people who qualify for tax credits receive sufficiently high credits?

Baroness Hollis of Heigham

The proposed new clause seeks to provide broadly that Section 170 of the Social Security Administration Act shall apply to tax credits. That provision establishes the role of the Social Security Advisory Committee. Its role is to advise the Secretary of State for Social Security in connection with the carrying out of his functions. The new clause therefore proposes to extend the remit of the committee to providing advice to another department—the Board of Inland Revenue. The SSAC at the moment has no remit but to advise the Secretary of State.

Perhaps I can say that I defer to no one in my admiration for the work of the Social Security Advisory Committee. I have attended its meetings. I have the highest regard for Thomas Boyd-Carpenter, who chairs it. I agree that the report of 1993, which I know well, was a powerful one and, indeed, a reading of the latest annual report of the committee, which I am sure Members of the Committee have read, confirms our high estimate of its work.

The committee has regularly not only discussed regulations that come to it from the Department of Social Security which are traditionally at some distance from a Bill and therefore not open to the usual scrutiny in that regard; but it has also taken on board discussion of specific issues, reflected on them and reported. All of that is highly valuable.

At the moment, SSAC currently has no remit to do anything other than advise the Secretary of State. "Secretary of State" is a generic term because obviously it is the Prime Minister who allocates specific responsibilities to specific departments. The Board of Inland Revenue is a statutory body.

Lord Higgins

Perhaps I may interrupt the noble Baroness; it may avoid her taking longer on the point later on. The Minister is rightly saying which Secretary of State is determined in the way she described. But, for example, in relation to Clause 15 there is reference to the Secretary of State who is in fact the Secretary of State for Education as I understand it. Presumably on the basis of what she has just said—namely, that the Social Security Advisory Committee is to give advice to the Secretary of State for Social Security—it would be precluded from giving advice to the Secretary of State mentioned in Clause 15.

It has always seemed to me odd that one should not be more specific in legislation, making clear to which Secretary of State one is referring in any given context. In any event, can the noble Baroness say whether the Social Security Advisory Committee will be able to advise the Secretary of State referred to in Clause 15?

Baroness Hollis of Heigham

The Social Security Advisory Committee is not a general social security advisory committee on all areas of social policy, irrespective of which department they fall into. That is not its function. Its function is to advise the Secretary of State for Social Security and in particular to advise on regulations which may not have had the same possibility for parliamentary scrutiny as regulations which are attached to a Bill. Beyond that it engages in wider issues associated with social security, but it is not an advisory committee to the Department for Education. The Department for Education has its own professional advice, including its own chief advisers, Ofsted and the like, as does the Department of Health.

Lord Goodhart

I am most grateful to the Minister for giving way. Is not the answer to the question posed by the noble Lord, Lord Higgins, the fact that the Social Security Advisory Committee would have no power to advise the Secretary of State for Education and Employment under Clause 15 because this legislation is not one of the relevant enactments as defined in the Social Security Administration Act 1992? Indeed, is it not a fact that the power to make regulations under Clause 15 is not one that can be read back into the Social Security Administration Act?

Baroness Hollis of Heigham

The noble Lord may well be right. Certainly, that is also my understanding. However, it is very clear that the function of the Social Security Advisory Committee is to advise the Secretary of State for Social Security. If other areas including childcare regulations and the like—for example, passported benefits—fall outside the direct remit of the Secretary of State for Social Security, they would not come within the advisory role of the Social Security Advisory Committee.

The Board of Inland Revenue is a statutory body with statutory duties as set out under the Inland Revenue Regulation Act 1890. It is answerable to Treasury Ministers and to Parliament. That is the proper channel for advice and help. It would not be appropriate for a committee which has been set up to advise the Secretary of State for Social Security to extend its remit to advise the Board of Inland Revenue.

However, having said that, I recognise the concern of noble Lords that draft regulations on tax credits should be exposed to interested and expert parties for comments, as happens with SSAC. However, I can provide a response in that respect. The normal practice of the Inland Revenue is to publish all major regulations in draft for comment. In practice, they are reaching a much wider audience than would be the case with SSAC. In addition, the Revenue's record on targeted consultations is very good; for example, as I said, as regards the regulations dealing with the payment to employers, it has been consulting regularly over the past year with groups representing business, both small and large, and payroll managers. Therefore, the proposed new clause is unnecessary because there is already a clear practice within the Inland Revenue. As a result of my response, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Swinfen

Before the Minister sits down, can she answer the question that I put to her?

Baroness Hollis of Heigham

I shall do so with pleasure. If I recall the noble Lord's question accurately, I believe that it was motivated by a suspicion that the Treasury was dominated by the desire to cut costs and save money. Therefore, if that responsibility passed to the Chancellor of the Exchequer, there would be no advocate for disabled people or families falling within the working families' tax credit system, as is the case at present where there is some division of responsibility between the DSS and the Treasury. Have I expressed the noble Lord's view correctly?

Lord Swinfen

Yes. The noble Baroness is quite right.

Baroness Hollis of Heigham

I am glad of that at least. The noble Lord put that point to me on a previous occasion. I simply do not recognise that description. There are two points involved. First, it is obvious that the Treasury is acting on behalf of all of us as custodian of public money. Indeed, it is the usual cliché: the Government do not own the money; it is our money, taxpayers' money. The Treasury has to ensure that it is prudently and wisely spent and that the flows of expenditure and income match appropriately.

Secondly, we do not doubt that the Treasury has a housekeeping role. However, to assume from that that the Treasury is not therefore an advocate for investments in social policy is simply wrong. One only has to look at the experience of the past two years where, under this Chancellor of the Exchequer, leading a Labour Treasury within a Labour Government, we have seen an increase in real terms in child benefit which is tar greater than anything that happened during the preceding 18 years. We have also seen £40 billion of investment going into health and education—a far greater amount than anything in recent years. We have seen a commitment of resources to the minimum income guarantee for pensioners and a commitment of resources to the New Deal and to the working families' tax credit. Indeed, we have seen a commitment of resources towards alleviating the poverty of disabled people, of children and of pensioners.

We have a Chancellor of the Exchequer who does not hoard money. He believes in investing in the common wealth of this country, which is the human capital of our people. He wants business, the Treasury and departments to invest to ensure that we are spending on creating strength and opportunity for people and not simply continuing, as in the past, to spend money to perpetuate people on benefits in ways which lock them out of the mainstream of society. I do not have to predict what the Chancellor is going to do. We have to look at what has happened in the Budget over the past two years. We have seen greater expenditure and investment in people and public services than anything thought conceivable even three years ago.

10 p.m.

Lord Swinfen

The noble Baroness appears to be legislating for one person as Chancellor of the Exchequer. They come and go. Others may well be in the Chancellor's shoes in the future. In addition, the Chancellor of the Exchequer was in the extremely fortunate position of inheriting a sound economy and benefiting from that which may not always be the case. The trouble in the Balkans at the moment could flare up and become very expensive. There may well be problems in raising funds to give away on tax credits. We may then be in a very much more difficult position. To have one person only responsible for reducing the expenditure of departments and the same person responsible for ensuring that people have adequate tax credits is not satisfactory. I am sure that the noble Baroness will not agree with me, but to my mind that is not satisfactory.

Baroness Hollis of Heigham

It is understandable that the noble Lord speaks about the experience gained in 18 years of Tory government in which the Chancellor of the Exchequer may very well have served as a block on the development of social policy. That is not the case under the Labour Government.

Lord Higgins

The remarks of the noble Baroness a few moments ago are quite extraordinary unless one assumes, as appears to be increasingly the case, the Chancellor of the Exchequer takes over everything. The whole basis of the Government's spending arrangements is for departmental Ministers to press their claims for increased expenditure and greater priority for their particular department. That is the way it works. In turn the Treasury tends to say no and a compromise is eventually reached. The idea that one can forget that and that the Chancellor will decide every priority without reference to the department is unrealistic and likely to prove disastrous. I believe we are going rather wide of the amendment. I do not believe that that is the way in which these matters work. If we had the kind of situation that the noble Baroness described it would be very dangerous.

As regards the more substantive matter, the noble Lord, Lord Goodhart, is saying that, given the switch from one ethos to another, namely, the DSS to the Inland Revenue and the Treasury, there is need for advice. His amendment seeks to ensure that the Social Security Advisory Committee, which is expert in these matters, is able to give that advice to a department not familiar with that particular area. It seems to me that the noble Baroness's response reinforces the case for the noble Lord's amendment.

Earl Russell

I am not going to reply to the party political broadcast. I wish to get back to the amendment. If I understand the noble Baroness correctly, she is saying that the central point against the amendment is that the function of the Social Security Advisory Committee is to advise the Secretary of State for Social Security. I understand that. Were that not the case the amendment would be unnecessary and I am sure that that is not the case.

I am also sure that the Minister has piloted through his House far too many Bills dealing with the transfer of functions to argue that it is impossible for Parliament to transfer functions should it wish to do so. Parliament could perfectly well give the Social Security Advisory Committee the power to advise the Treasury, the Chancellor of the Exchequer or anyone else. It is not impossible. The point at issue is simply whether Parliament wishes to give the committee that power. I would argue that there is a strong case for doing so because we are transferring to the Treasury an area which, even if it is not a pure social policy issue. is an issue which has quite considerable social policy implications.

Without wishing to make any pejorative reflections on the Treasury whatever, that is not the Treasury's normal sphere of expertise. It is also a sphere in which expertise is not as readily available to the Treasury as it has hitherto been to the Department of Social Security. I argue that, if we made the expert advice of this extremely high quality committee available to the Treasury, we could save us all a great deal of trouble.

Lord Goodhart

The Government's response to this amendment seems to indicate that in their mind appearances are more important than reality. The Social Security Advisory Committee performs extremely useful functions in relation to benefits and, so far as I can see, the only reason it is not to be allowed to continue that function in relation to the working families' tax credit is in effect the name of that benefit or credit; that is, the idea that the working families' tax credit must not be treated in any way as if it were a social security benefit. That is ironic when one considers that at least for the time being the primary legislation which will continue to govern the working families' tax credit is the social security contributions and benefits legislation.

I am glad to hear that the Inland Revenue intends to consult widely on the draft regulations. Nothing in this amendment is intended to restrict the Inland Revenue's power to do so and to consult as widely as possible. However, the Social Security Advisory Committee is in a position to give the Inland Revenue extremely valuable advice. The Inland Revenue should be required to seek that advice and to consult the Social Security Advisory Committee. I must confess that I find the Government's response on this issue extremely disappointing. While at this time of night I do not intend to divide the Committee, this is an amendment which we may well seek to bring back at Report stage. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 agreed to.

Clause 15 [New category of child care providers for tax credit purposes]:

[Amendment No.60 not moved.]

Lord Goodhart moved Amendment No.61:

Page 8, line 32, after ("which) insert ("shall in the case of the first regulations made under 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: This is the final amendment in my name and that of my noble friend Lord Russell. During the debate on Clause 6 I moved an amendment asking for the affirmative procedure to be used for the initial regulations governing payment of tax credit through employers. A similar issue now arises over the new childcare regulations under Clause 15. These are novel and important regulations.

Under family credit, disregard of childcare costs was allowed for registered childminders and other registered daycare providers. For family credit, there were no separate childcare regulations because family credit made use of the existing scheme of childcare registration under the Children Act 1989. Registration under that Act is carried out by local authorities and the rules on the basis of which they conduct their registration functions are contained mainly in the Act itself. Those who have to be registered under the Children Act are providers of care for children under the age of eight. The local authority registration will continue to be the test for eligibility for childcare credits for children under eight.

However, childcare credits will be capable of being claimed under the working families' tax credit for children up to 14, or indeed up to their 16th birthday if they suffer from a disability. Therefore new rules are needed to cover care for children from the ages of eight to 14. These are provided by a new set of regulations which will be made not by the Treasury but by the Secretary of State. As the noble Lord, Lord Higgins, mentioned in the debate on the previous amendment, that will be not the Secretary of State for Social Security but the Secretary of State for Education and Employment.

The Bill provides not for registration of providers by local authorities but for approval by accredited organisations—therefore, to some extent, one could say it is being privatised. The draft regulations which have been published lay down the rules for accreditation. To be accredited, an organisation must operate a satisfactory system for approving care providers; it must have a good record and reputation in the field of childcare; it must have the ability to ensure the quality of childcare provided by those whom it approves. Schedule 1 provides a detailed list of matters to be covered by the system to be adopted by an accredited organisation. Those matters must include the setting up of an independent award panel to take the decisions; the setting out of criteria to be met by providers; the provision of trained quality assessors; the provision for an appeal against a refusal to approve; and the provision of a complaints procedure.

Schedule 3 sets out the matters which are to be included in the criteria for approval. Those criteria must include ensuring the health, safety and welfare of all children; the employment of sufficient staff; the offering of a planned programme of supervised activities; and the operation of an equal opportunities policy. These regulations, therefore, are extensive and of great importance because they will be the whole bedrock of the childcare that is to be provided for children from their eighth birthday up to their 14th birthday.

The Delegated Powers and Deregulation Committee said: In view of the width and significance of the power 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".

The Government response in this case, as in the case of Clause 6, was, I regret to say, negative. They said: The draft regulations will be published and comments will be actively sought from key opinion formers in the childcare field'.

That is right. But Parliament should be allowed to debate these issues before they become law.

As I said earlier, consultation is not enough, nor is the publication of these draft regulations now. Further consultation is to take place; it is clear that these regulations are not in their final form. The final form could be substantially different and Parliament should have a chance to look at these regulations in their final form, which it can do only if the affirmative procedure is used or if someone goes through the elaborate and, frankly, unnecessary business of praying against the regulations. Once again, I ask the Government to reconsider their decision not to use the affirmative resolution procedure even on the first occasion when these extremely important new regulations are introduced. I beg to move.

Lord Higgins

I support the amendment of the noble Lord and I hope that the Government will take into account the points that he has made.

Lord Haskel

I welcome the additional help with childcare costs for children from eight to 14 and 16 for disabled children. It is certainly a major development and I congratulate the Government on it. However, the scheme is complicated. Indeed, there will be two tiers of regulation. There will also be the quality assurance scheme, about which the noble Lord, Lord Goodhart, has spoken. The scheme will be welcomed by parents and by organisations involved in childcare. However, it is complex and it is new, as the Delegated Powers and Deregulation Committee has pointed out. It seems to me that, with all the complexity and novelty, parents and childcare organisations might benefit from the debate which goes with an affirmative procedure. Perhaps the Government might benefit from hearing the expert views of noble Lords in the House when we debate the affirmative procedure. Perhaps my noble friend the Minister may wish to give further thought to this matter.

10.15 p.m.

Earl Russell

I shall not repeat what It have already said tonight about the standing of the Delegated Powers and Deregulation Committee. We have already debated one amendment dealing with a recommendation of that committee which was not accepted. If it should happen again, one might be tempted to say that one such accident might happen to any government but two savours of carelessness.

Baroness Hollis of Heigham

Never carelessness by intent or by intent aforethought.

This amendment seeks to provide that the regulations to be made under Clause 15 should be made using the affirmative procedure when the powers are first introduced. It may help if I begin by describing briefly what Clause 15 does.

As many noble Lords will be aware, WFTC builds on the rules for family credit and the new childcare tax credit WFTC builds on the definition of eligible childcare used in family credit. However, there was a gap here in relation to childcare for the eight to 14 year-old age group. Clause 15 aims to plug that gap by extending the range of quality childcare for this group that will be eligible for the childcare tax credit. I am delighted that so many noble Lords, including my noble friend Lord Haskel, welcomed this extension of government policy. Indeed, I think the relevant government departments are to be congratulated on taking it forward not just to 12 but to 14 through to 16 for disabled children. That is a major extension of the support we can offer working parents.

The two departments—the Inland Revenue and the DfEE—have worked up this scheme, which will create a new type of childcare provider which can be added to the list against whose costs the parents can claim the childcare tax credit. The scheme will enable parents to use a wider range of childcare—breakfast clubs, after school clubs, holiday clubs; the kind of provision that is more appropriate for older children—regardless of whether they are run by a school or use school premises. As I said, the proposal has been widely welcomed. It will make an important contribution to national childcare strategy. It will help working families and boost the provision of good quality affordable childcare for older children. The regulations under Clause 15 are to provide for this new scheme for the accreditation of childcare providers.

The amendment seeks to provide that these regulations should be made by the affirmative procedure, at least in the first round. Perhaps I may paraphrase the remarks made earlier by my noble friend on Amendment No.40. The clause currently provides the power for regulation followed by the negative procedure before both Houses. Sometimes your Lordships seem to suggest that if regulations are dealt with by the negative procedure the House does not have the opportunity to scrutinise them. That is simply not true. As my noble friend Lord McIntosh said, on many occasions the noble Earl, Lord Russell, and I prayed against regulations under the negative procedure and we had exactly the same kind of debate and the same kind of scrutiny as we would have had under the affirmative procedure.

Earl Russell

Perhaps I may elaborate on that. It has happened to me that I have put down a prayer and then found that time was not available to debate it. As regulations become more frequent, that may happen to others.

Baroness Hollis of Heigham

I stand to be corrected and I would not wish to challenge the noble Earl's memory—perhaps I would like to challenge the noble Earl's memory. I recall that on at least one occasion we ran out of time in terms of the 40-day rule. I have been in the House since 1990 and I cannot recall not being able to debate regulations by virtue of there being no time. The Government have to make time available if noble Lords are praying against regulations. We have certainly run out of time because of the operation of holiday periods and so on—that can indeed be an obstacle—but not because of what the noble Earl has suggested.

Earl Russell

It was neither a social security regulation nor under this Government. It is a rare event. I hope it may remain so. But regulations are becoming more frequent and we need the security.

Baroness Hollis of Heigham

The noble Earl has not described to us a situation in which he sought to pray against regulations but he was not permitted to do so because of pressure of government business. I cannot conceive of that. We have certainly run out of time because, as I said, we have failed to come within the 40-day rule. That may be influencing, perfectly properly, the noble Earl in his concern.

Under the negative procedure, noble Lords have the right, the power and the duty to scrutinise legislation. On social security legislation, I have on occasion held up a regulation by the negative procedure. We debate such matters as we normally would. In addition. draft regulations will be published formally and the DfEE will be actively seeking comments from key opinion formers in the childcare field. That will give many interested parties an opportunity to comment. The regulations are open to public consultation. We are indeed anxious to ensure that they are right and that they do what they are required to do.

1 have listened with great interest to the points made in the debate. We are delighted that the principle of the clause has been so widely welcomed. I recognise the concerns, not merely of Members opposite but of the noble Lord, Lord Haskel, on this side, that the regulations should be further scrutinised. As I have said, the DfEE will publish draft regulations formally for comment. I do not wish to be unco-operative. In the light of the views expressed. and because this policy development is important—it is very good news for parents and children—I should like to reflect further on this issue to see whether I can be more helpful and perhaps return to the House on the matter on Report.

Lord Goodhart

I am grateful to the noble Baroness for agreeing to reconsider this issue. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 agreed to.

Clause 16 [Northern Ireland]:

Lord Skelmersdale moved Amendment No.62:

Page 8, line 42, leave out from ("credit") to end of line 43.

The noble Lord said: Carelessness or not, it is a fact of parliamentary life that over 90 per cent of Northern Ireland legislation is debated by your Lordships outside prime time. Tonight is no exception. That said, I make no apology to the Committee for unashamedly producing what may best be described as a stage two probing amendment. For the benefit of the Committee, no, I have not got the wrong Bill.

Clause 16(1) provides for WFTC and DPTC to be excepted matters under the Northern Ireland Act 1998 and outside the legislative competence of the Northern Ireland Assembly. I am sure we all agree that that is absolutely the right thing to do.

Unfortunately, there is a problem. Subsections (2) and (3) of Clause 16 together provide a loophole in the Government's intentions by allowing the Northern Ireland Assembly to amend or repeal the employment rights order as amended or applied by Schedule 3 to the Bill, provided that the amendment or repeal affects employment rights generally. The fact, as stated in the Explanatory Notes, that WFTC and DPTC are excepted matters could otherwise prevent that. I could describe this as a stage two probing amendment, stage one being the question that I asked the noble Baroness the Minister at Second Reading, to which she helpfully produced a reply in the form of a round robin letter to my noble friend Lord Higgins. The letter stated: However, it seems unlikely that any Northern Ireland Assembly would want to deny the citizens of Northern Ireland the important employment rights which are available to their counterparts in Great Britain".

Legislation is very often about coping with the unlikely. If the Government blow a hole in their own Bill, I question it not once, but twice. Does the Minister have anything to add in regard to my worries on this issue? I beg to move.

Lord Astor of Hever

I commend my noble friend, with his perceptive eye for detail, on picking up this point. The Committee should be grateful to him. As my noble friend said, he raised this point at Second Reading. The Minister stated in her letter to my noble friend Lord Higgins that the Northern Ireland Assembly would be unlikely to repeal this order; but the inconsistency is there. I look forward to the Minister clarifying this point in more detail.

Lord McIntosh of Haringey

The effect of this amendment would be to allow the Northern Ireland Assembly to single out for repeal or amendment the protections contained in Schedule 3 for those entitled to WFTC and DPTC. I am puzzled that the noble Lord should want that to happen. It is extremely unlikely that the Northern Ireland Assembly would ever want to deprive the people of Northern Ireland of the protections enjoyed by their counterparts in Great Britain except in the context of a wider reform of employment rights.

Perhaps it would be helpful if I explained the intention and effect of Clause 16 as it stands in the Bill. Subsection (1) provides that WFTC and DPTC will, like tax matters in general, be excepted matters under the Northern Ireland Act 1998 and therefore outside the legislative competence of the Northern Ireland Assembly. So far, so good. But the Bill also contains the Schedule 3 provisions amending employment law. Employment law is not an excepted matter. It is a transferred matter and therefore within the legislative competence of the Northern Ireland Assembly. The Northern Ireland legislature has always been able to have different provisions in employment law from those that apply in Great Britain, although it has chosen, with only rare exceptions, to have exactly the same provisions.

The situation is that the Tax Credits Bill not only covers WFTC and DPTC, which are excepted matters, but also amends employment law which is a transferred matter for Northern Ireland. So a compromise was necessary and this is achieved by subsections (2) and (3) of Clause 16. It is exactly the same compromise as was reached in relation to the National Minimum Wage Act on which the provisions of Schedule 3 are modelled. The compromise is reflected in subsections (2) arid (3) of Clause 16. It enables the Northern Ireland Assembly to amend the Schedule 3 protections as part of a general amendment applying to similar protections in Northern Ireland law, but it does not allow the Assembly to single out those protections for special treatment. The effect of the noble Lord's amendment would be to allow the Northern Ireland Assembly to single out the protections for those entitled to tax credits for amendment or repeal in contrast to provisions in other comparable legislation such as the National Minimum Wage Act.

I apologise for this somewhat technical digression on Clause 16 but I hope I have persuaded the Committee that the clause as it stands strikes just the right balance between the rights of tax credit recipients throughout the United Kingdom and the right of the Northern Ireland. Assembly to amend Northern Ireland employment law as it sees fit. I hope that the noble Lord will, agree to withdraw his amendment.

Lord Skelmersdale

In introducing and explaining my amendment the Minister has done a better job than I did in moving it. I rather wish that he had moved it himself. However, he did not take the Committee much further forward. The matter that my noble friend and I addressed was that, however unlikely, the Northern Ireland Assembly could repeal its employment rights legislation. If it did so it would repeal its part of Schedule 3 to the Bill, which no one wants to happen.

I readily accept the comment of the Minister that I have tabled the wrong amendment to deal with the matter but we do not want the Northern Ireland Assembly—or do we?—to have the slightest chance of throwing out the baby with the bath water. That would be a mistake. For that reason I have pursued the matter. I shall read carefully what the Minister said. At this stage I am fairly sure that I shall have to return to the issue at the next stage of the Bill. However, at that stage it will no longer be a probing amendment. Even I cannot produce a stage three probing amendment.

Lord McIntosh of Haringey

I hope that I can persuade the noble Lord that he does not have to come back to the matter at Report stage. I did not criticise the drafting of his amendment. I thought that what the amendment intended was quite clear. I did not seek to say that the amendment was defective, but that it ignored the compromise which had been reached in other legislation between the Northern Ireland and the rest of the United Kingdom on employment law and tax credits. I sought to persuade the noble Lord that when there is a general change in employment law in Northern Ireland that should be a matter for the Northern Ireland Assembly because that is one of the transferred functions, but that the Assembly should not be encouraged or allowed to pick out amendments to this legislation and therefore produce an anomaly for recipients only of working families' tax credit and disabled person's tax credit.

That was the argument I sought to put. I do not expect the noble Lord to respond now, but between now and Report stage I hope that he will feel that I have made his amendment unnecessary, rather than that it was in any way defective.

Lord Skelmersdale

If I were being unkind, I would say that my suspicions deepen. However, as I said, I shall read the remarks of the Minister. In the meantime, I can do no better than beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

10.30 p.m.

Lord Freeman moved Amendment No.63:

After Clause 16, insert the following new clause—

REPORT ON FIRST YEAR OF OPERATION (". The Board shall lay before Parliament no later than 31st January 2001 a report on the performance in the first year of operation of each of the working families' tax credit and the disabled person's tax credit, setting out—

1. (a)the targets set for take up of each tax credit and actual performance against those targets;
2. (b)the comparative time for finally determining claims compared with the final year of operation of family credit and disability working allowance;
3. (c)the targets set by the Board for fully accurate determination of entitlement to tax credits and actual performance against those targets, and
4. (d)the percentage of claims which were—
   1. (i)submitted by claimants in an incorrect form,
   2. (ii)fraudulent, and
   3. (iii)incorrectly determined by the Board (whether or not the determination was subsequently rectified). ")

The noble Lord said: This is a probing amendment, but I hope that it will commend itself to the noble Earl, Lord Russell, and the noble Lord, Lord Goodhart, with whose earlier comments in Committee I find myself much in agreement, in particular as regards the role of the Social Security Advisory Committee.

Noble Lords may find my amendment a poor substitute for what was argued earlier. It requires the Inland Revenue to report to Parliament and to reveal the take-up rates for the working families' tax credit and the turnaround time rates. I wish to associate myself with the comments of my noble friend Lord Swinfen. He referred to the cultural difference—a point I made earlier—between the practices of the Benefits Agency and of the Inland Revenue. That is not a criticism of the Inland Revenue; it is a fact.

In response to an earlier intervention in Committee, the Minister referred to the policy of the Chancellor of the Exchequer. The noble Baroness was right. I do not quarrel with her comments. But there is a difference between the policy of the Government and the administrative culture of a department. Therefore, the purpose of my amendment is to reveal to Parliament in due course what happens in terms of the administration of the working families' tax credit.

I should like to draw two parts of the clause to the Committee's attention. First, there is the requirement to report the take-up rate as against the target which the Inland Revenue either will have set itself or have had set for it by the Chancellor of the Exchequer. I find it disappointing that the take-up rate as reported by the Social Security Select Committee in its report of 3rd February 1999 is 70 per cent by volume. Seventy per cent of those estimated to be eligible have taken up family credit. I think that the target should be higher. That in no way implies a compromise with the importance of ensuring that there is no fraud in applications for the working families' tax credit.

In the other place on 9th March the Paymaster General is reported to have indicated—and I paraphrase—that on behalf of the Government he was assuming that the take-up percentage for WFTC would be slightly higher than for family credit. I find that disappointing. If there are people in need under the scheme, the duty of the Government and the Inland Revenue, which from 6th October will be taking over responsibility for WFTC, is to ensure that that take-up rate is improved upon. The target should be higher and I would like the Inland Revenue to report the take-up for the first full year of operation.

Secondly, I am concerned that the time taken to process such an application might become significantly greater than is presently the case for the assessment of family credit. The pre-award processing time within the Benefits Agency for family credit is on average five working days. I stand to be corrected, but that is the only statistic I can find. It bears out my constituency work experience in the other place. Five working days compared with the time that the Inland Revenue could take if the cultural practice of the Revenue is to be followed could be significantly greater by several weeks. The process is verify then refund. The principles of the Benefits Agency are process, pay, sample check and penalties where appropriate. That is a very different approach.

Therefore, I commend to the Committee a change in procedure. That is that after two weeks, for example, the Inland Revenue should process the application and ensure that it is paid and, where necessary, check afterwards. That will represent a major change in the procedure.

We need a balance between higher take-up to benefit those in need and fraud prevention. I note what the Social Security Select Committee stated in its report of 3rd February when it expressed concern that the Benefits Agency under the DSS had not in its pilot study of fraud instituted a more wide-ranging review. The figures we have to hand are alarming; almost a 50 per cent rate of fraud or error in claiming family credit. I do not believe those statistics because the sample was far too small. However, the report of the Select Committee was published after the Bill had largely completed its passage in the House of Commons. It asked what improvements will be incorporated in the design and administration of the WFTC to minimise the risk of losses to fraud in the future. Those questions, to the extent they have not been answered by the Government, deserve answer. I beg to move.

Lord Higgins

I support the amendment. My noble friend Lord Freeman has had extensive experience in government. He is right to stress the importance of clearly appraising the way in which the new scheme will work. Throughout the debate there has been considerable doubt about the effect of the transfer from the DSS to the Inland Revenue. Indeed, during the course of the debate the DSS has received many compliments. Leaving on one side problems with computers and so forth, it has conducted its business so as to ensure that benefits reach people on a timely basis.

It is appropriate that my noble friend should suggest that if we change the system we should evaluate how successful or unsuccessful it has been in its introduction. He suggests that a full year would be appropriate.

I would like to pick up one or two particular aspects of what he suggested. He suggested particularly a target for take up. In that regard, I am still not absolutely clear whether it is the view of the noble Baroness that the take up will be higher under the new scheme than it is under the existing scheme. If that is so, it is surely appropriate to set targets in relation to the performance which we have at the moment under the DSS with regard to family credit. Perhaps she would give us some indication of the extent to which she expects the take-up under the new system to be better and perhaps even to suggest something that might be an appropriate target in that respect.

The other matter which my noble friend suggested in particular is the question of how quickly the claims will be determined. If I understand it correctly, the Government are proposing that the Revenue shall reach these assessments very quickly indeed. With regard to cash flow, if it is necessary to pay a balance in the direction of the company rather than the other way about, it will do so within a matter of three days. We certainly need in that area—and perhaps this is an extension of my noble friend's targets—to have some idea of what the situation is.

The hour is late and I will not go much further in expanding my noble friend's proposals. They seem to me to be eminently reasonable. We should not embark on the whole of this new system without being assured that the way in which it works out in practice will be evaluated after the event.

Lord Goodhart

I rise briefly to support the principle of the amendment moved by the noble Lord, Lord Freeman. It is arguable that there is a case for saying that the report ought to cover not the first year but the first 18 months of the scheme. If it covers the first year, it will only in fact cover six months of its operation relating to payment through the wage packet. I think that might be too short a period to enable an adequate evaluation of that process to take place. It may be that an appropriate date would be the 18 months ending in April 2001, with a report by 31st July that year rather than 31st January.

It is clear that information of the kind referred to in this amendment must be provided if Parliament and the country as a whole are to be able to do a proper evaluation of the success or otherwise of the tax credit scheme. The Government may take the view that this is a matter which can be adequately provided for by means other than an amendment to the Bill. If that is so, I would listen to their views with some respect. I hope very strongly that the Government will be able to give us an absolute assurance that, at the appropriate time, whether after 12 or 18 months of operation of the scheme, they will provide all the information referred co in this amendment.

Lord Blackwell

I too would like to support my noble friend by asking the Government to give serious consideration to this amendment. I believe there is merit in this kind of report back to Parliament after any changes of this magnitude have been introduced in this form. In this instance, I believe there is a wider interest in the application of the principle of shifting from the payment of benefits directly to tax credits. It is a principle which I imagine the Government might want to consider in other areas of policy. The particular benefit applied to direct payments has, of course, always been that there will be a higher take-up than through tax credits. Having introduced this kind of change in this specific area of policy, I consider that it would be very helpful to have a like-for-like comparison of what the take-up rates had been, so that general lessons could be learnt.

10.45 p.m.

Lord Skelmersdale

I support my noble friend. Indeed, I asked the noble Baroness last week when would be an appropriate moment at which to start probing those matters. I seem to recall that she said that, although the figures were published quarterly, it would not be practical until after a year. Therefore, the noble Lord, Lord Goodhart, rather took the words that I was about to utter out of my mouth, except that I should not be quite as generous as he was, in suggesting 31st July. I would opt for 30th June, but what is the difference?

Lord McIntosh of Haringey

I too rise to support the principle of the amendment moved by the noble Lord, Lord Freeman, because it is one for which the Government have the greatest sympathy. The noble Lord is seeking to require the Board of Inland Revenue to lay before Parliament a report after the end of the first year, setting out the various targets which it has set and the performance achieved. I agree absolutely with the spirit of the proposed new clause.

It is right that the board, taking responsibility for tax credits, should set targets and be seen clearly to monitor their performance. Every Member of the Committee who has spoken has confirmed that. We want to ensure that tax credits are paid quickly to the right people and at the right level. We are all in agreement about that.

The only difference that I have is in the requirement to lay a report before Parliament. That is not because I believe that the board should not do that but because it already does so. The board lays a report before Parliament every year. The report covers the aims and targets of the department spreading over all parts of its business. Clearly, in future, the report must cover separately WFTC and DPTC. That cannot simply be subsumed into the report on the operation of PAYE and the board's other responsibilities.

WFTC and DPTC will be the responsibility of the Inland Revenue, so tax credits will be included in the board's report, with figures on performance and amounts paid. The board's report is, therefore, the appropriate place to include details on the performance of tax credits.

Let us take the individual issues as set out in the amendment. First, as regards targets, the board will publish details of performance against targets set for the tax credit. The amendment refers to take-up targets. We have never declared a take-up target of that kind. The figures which the noble Lord, Lord Freeman, cited were simply a conservative assumption for statistical purposes in the Answer to a Parliamentary Question of 9th March. Obviously, we are keen to have as high a target as possible and targets are being discussed between the Board of Inland Revenue and Ministers. But we do not think it is a particularly good idea to set a target at this stage.

On paragraphs (b) and (c) in the amendment, the noble Lord asked about finally determining claims and full accurate determination of entitlement. If he means by that the position when the claim has been determined at the end of the possible appeals process—and that is the only thing it can mean—in practice, it would not be possible for the board to set meaningful targets as it has no way of knowing who or how many applicants may exercise their right of appeal.

As regards paragraph (d), the noble Lord asks about fraudulent claim. The board will certainly wish to monitor both the number of cases of identified fraud and the numbers of claim which are referred for further investigation or inquiry as part of the compliance regime for the new tax credit. The board's report to Parliament already includes details of compliance activity, and the board would expect to include details in respect of new credits in the same way.

On turn-around times, the board will publish its key operational targets for the credits and the performance achieved against those targets. It is considering with Ministers the extent to which turn-around targets are appropriate in the light of DSS experience.

The noble Lord referred to the follow-up to the fraud study. The Benefits Agency has shared the results of the pilot study and the emerging findings of the benefit fraud inspectorate with the Inland Revenue. Risk assessment is a part of the Inland Revenue's fundamental approach and a system is being designed to address the tax credits risk. The findings of both the pilot study and the follow-up study are helping with the design of the system, but some procedures designed for family credit will not be appropriate for working families' tax credit.

I hope that the noble Lord, Lord Freeman, will see that the targets and achievements on tax credits will be carefully monitored and reported on. The noble Lord, Lord Blackwell, is quite right that when making such a change in social policy, it is essential that there are adequate monitoring and recording procedures. In the light of what I have said, I hope that the noble Lord will feel that there is no need for this new clause.

Lord Freeman

I am grateful to the Minister and to other noble Lords for their support for this probing amendment. I shall certainly read the record carefully. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 17 to 20 agreed to.

Schedules 1 and 2 agreed to.

Schedule 3 [Rights of employees not to suffer unfair dismissal or other detriment]:

[Amendments Nos.64 to 66 not moved.]

Schedules 3 and 4 agreed to.

Schedule 5 [Use and exchange of information]:

Baroness Hollis of Heigham moved Amendment No.67.

Page 26, line 43, leave out (""121F—) and insert (State)"')

The noble Baroness said: The purpose of Amendments Nos.67 and 68 is to up-date cross-references to other legislation and the purposes referred to in Schedule 5. The references are to provisions in Section 110 of the Finance Act 1997. Those provisions were recently amended by the Social Security (Transfer of Functions) Act 1999. For the information of the Committee, the provisions referred to in the schedule relate to exchanges of information between the Board of Inland Revenue and the DSS. Schedule 5 as a whole contains provisions to allow the necessary exchanges between the Revenue and the DSS to take place to ensure that the business of the two departments may proceed.

The amendments are technical and seek to ensure that the cross-references are correct. I ask the Committee to accept them. I beg to move.

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendment No.68:

Page 26, line 44, at end insert ("(supply to Inland Revenue for purposes of tax credit of information so held)")

On Question, amendment agreed to.

Schedule 5, as amended, agreed to.

Remaining schedule agreed to.

House resumed: Bill reported with amendments.