HL Deb 18 May 1999 vol 601 cc275-90

(" . Any schemes for working families' tax credit or disabled person's tax credit prescribed under functions transferred under section 2(1)(a) shall provide that, regardless of any savings, all families with children and with an adult in full time work shall receive a minimum income of £200 per week.")

The noble Lord said: My Lords, I hope that this amendment will not take quite so long. It is designed to get confirmation of various statements made by the Government.

The new clause follows the debate that the noble Lord, Lord Astor, and I initiated in Committee. I am not sure that the Minister fully grasped the point at which we were aiming. As a result we may have been speaking at cross-purposes. I hope, therefore, that on this occasion we will be able to establish the position more clearly.

In his Budget speech in March the Chancellor of the Exchequer said: Every working family will be guaranteed a minimum income. It will be introduced in October, not at the previously announced rate of £190 per week but at £200 a week, more than £10,000 a year. No income tax will be paid until earnings reach £235 a week.

Similar statements were made in the Red Book, which gives the background to the Chancellor's Budget proposals. When the new 10 pence rate of income tax is introduced in October the minimum income guaranteed for families with someone in full-time work will be £200 a week or £10,400 a year.

Similar statements have been made by a number of Ministers on a number of occasions, and particularly by the Paymaster General in another place and also by the noble Baroness. They were given without equivocation, exception or qualification.

However, let us imagine an individual, either a lone parent or someone with a partner, who stays at home to look after the child or an elderly or dependent relative. Let us assume for the moment that that individual has one child under 11 and works 40 hours per week at the minimum wage of £3.60 per hour. He will earn £144 per week, of which he will pay income tax of £6.32 and national insurance contributions of £7.80 to give a net income of £129.88 per week. He will then be entitled to working families' tax credit of £61.27 which, together with child benefit of £14.40, will give the family £205.55 per week. So far, so good.

But now let us assume that an individual, either on his own or in conjunction with his partner, has savings of £8,000. That may come from a redundancy payment received when a previous job folded. Then he will not be entitled at all to working families' tax credit. At current rates of interest, he might, if he were lucky, earn interest on savings of £5 per week after tax, to give a total income of £149.28 per week. That is much less than the guarantee of £200 which the Chancellor gave.

Equally, that individual will be paying tax on both his earnings and interest, even though the income is even further below the figure of £235 which the Chancellor promised. I should add that a disabled person with savings faces a broadly similar picture of broken promises. The figures are slightly different, but the story of unfulfilled commitment is the same.

So how is the position to be resolved? One possibility would be for the noble Baroness to persuade the Chancellor of the Exchequer to go to the other place and to correct clearly and unambiguously the guarantees and promises that he had given with as much publicity for the correction as the Budget Statement received. However, although that would set the record straight, it would leave the highly unsatisfactory position that the individual would have a very strong incentive to spend his savings until they were reduced to £3,000. when the individual could draw working families' tax credit in full.

The alternative is to follow the route taken in the amendment which gives effect to what the Chancellor guaranteed. The amount of working families' tax credit would not be restricted because of the family's savings if that would leave the family with an income of less than £200 or if it would mean that income tax were being paid on income of less than £235. There would still be exclusions because someone with a large amount of capital would be able to receive interest equivalent to the amount of the tax credit which was being lost so that the total income would be above £200 in any event.

I look forward to hearing the Minister's views on these proposals. However, bearing in mind my difficulty at school of taking down maths sums in a hurry late in the afternoon, it may be that the noble Baroness would prefer to write to me on that point. That may be easier. I beg to move.

Lord Higgins

My Lords, from time to time, I am suspicious about matters being dealt with in writing when they really should be on the record; for example, in relation to the position of the Chancellor. If, as my noble friend seemed to suggest, rather a lot of small print was left out of the Chancellor's Statement, we should be clear about that on the record.

Nevertheless, my noble friend raises an important point with regard to savings. We need clarification after the success of the previous amendment in producing results, for which the noble Baroness is altogether too modest. If the Paymaster General had wanted to do it, he could have done it when the Bill was going through the other place.

Perhaps the noble Baroness, even at this late hour, will clarify the position with regard to savings. If the position on savings, as far as working families' tax credit was concerned, were not in line with the harsh regime that exists for those on income support, or in relation to pensioners and others who are not in the situation of getting working families' tax credit, that would be of concern.

Baroness Hollis of Heigham

My Lords, we assumed, correctly, that the amendment probes the background to the announcement by the Chancellor in his Budget that the minimum income guarantee of £190 a week for working families would rise to £200 a week as a result of the changes introduced by the Budget.

The £200 minimum income guarantee to which the Chancellor referred, is income for a household, whether a couple or a lone parent, with a child under the age of 11., where the adult, who works 35 hours a week, is working at the national minimum wage. As The noble Lord said, that £200 is made up of his net earnings, WFTC and child benefit. Therefore, it provides a minimum income guarantee. That is extended to everyone whether or not they currently qualify for a WFTC.

All income-related benefits—of course, the tax credit builds on the benefits—have a capital test. People with capital of less than £3,000 and who receive income support, JSA and WFTC are unaffected by the test. People with more than £8,000 do not qualify for WFTC. Capital of between £3,000 and £8,000 is taken into account in calculating the amount due. We think that is fair. You cannot hand out tax credits without having regard to the applicant's capital.

Perhaps I may step sideways for a moment. We wondered why so many pensioners were living below income support levels—for example, not drawing down income support—and we found that it was because they had capital. Nearly half of those who were not claiming that income support had capital of over £20,000. We cannot say that we should be handing out taxpayers' money as income support on top of an old age pension because pensioners choose not to use their savings or their capital which has been designed for that purpose. That is the position.

If we were to do as the noble Lord suggested—to disregard savings for this purpose—that could not be restricted to WFTC. It would have to be extended to other income-related benefits, such as income support, JSA and the like.

We estimate that abolishing capital limits would cost, for those income-related benefits, between £0.75 billion and £1 billion. That is the cost of abolishing all capital limits. If there were to be more generous capital limits, and we did not abolish them in total, but for example, we raised the lower limit from £3,00 to £5,000 and raised the upper limit from £8,000 to £10,000, the cost would be about £110 million.

To disregard all capital, as the noble Lord suggests in his amendment, so that those with an income of £200 a week, regardless of whatever capital they may have, may receive benefits and to apply that across to other income related benefits on which the WFTC has been modelled, would cost in the order of £0.75 billion to £1 billion. That would be public money from other taxpayers, who may have a slightly higher income, but often much less capital than those who would receive that credit or that income-related benefit.

Lord Higgins

My Lords, I have two questions. First, did the Chancellor make clear what the position was on savings in the course of his Budget speech, when he announced the guarantee? Secondly, I am somewhat astonished at how little the cost is. If I understood it correctly, the noble Baroness said that to raise the limit would cost £110 million and to abolish all capital restraints would cost £1 billion. From a personal point of view, I am rather surprised that that is so. One knows what frightful anguish there is, particularly among pensioners, who find that their last bit of capital has to be run down before they can receive any benefits.

11.15 p.m.

Baroness Hollis of Heigham

My Lords. the noble Lord asks whether the Chancellor made it clear in his Budget speech. He made it clear to me. I am sorry if the noble Lord did not get the same understanding, but I was perfectly well aware that a minimum income guarantee, a disablement income guarantee or a pensioner's income guarantee was subject to the capital rules. That has always been the case. If the Chancellor of the Exchequer had meant to say, "Irrespective of the capital they may have in this, and only in this, case", he would have said so. He did not. Therefore the existing framework of capital rules applies as elsewhere. That is perfectly unambiguous.

Lord Higgins

My Lords, did the Chancellor make it clear to the public at large, who may riot necessarily be aware of this point?

Baroness Hollis of Heigham

My Lords, in all fairness, the Chancellor of the Exchequer can hardly read out the Social Security Rule Book or the way he is building on WFTC. He made it clear, as the DSS in its turn made clear with the minimum income guarantee, that this is subject to the capital rules. The reason for that is a perfectly proper one. People who might have quite low incomes—say, a pension—who are in their sixties, and then their elderly parents die and they inherit a substantial sum of money from a property ;say, £50,000, £100,000 or £150,000), cannot reasonably still expect to enjoy income support corning from other taxpayers who may have fractionally higher earnings but no capital at all. That is the reason for the capital rules. It is not unreasonable that people should draw clown their capital.

I said to the noble Lord that if we were to raise the capital ceilings from £3,000 to £5,000 and from £5,000 to £10,000—these figures came out in discussions with the honourable Member in the other place, Mr. Webb, of the Liberal Democrat Party—the cost would be £110 million; if we were to abolish the ceiling altogether, as a ballpark figure the cost would be £0.75 billion to £1 billion. Those are very large sums going to people who have a generous amount of capital. That cannot be reasonable and I hope the noble Lord will therefore feel able to withdraw his amendment.

Lord Swinfen

My Lords, I shall withdraw the amendment. But I shall read with interest what has been said by all who have taken part in the debate and may possibly come back at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 10 not moved.]

Clause 3 [Transfer of associated property, rights and liabilities etc.]:

[Amendment No. 11 not moved.]

Clause 5 [General functions of Board]:

Lord Astor of Hever moved Amendment No. 12:

Page 2, line 45, at end insert— ("( ) The Board shall take reasonable steps to ensure that a person applying for working families' tax credit is aware that if she fears domestic violence from her partner she may submit the claim form without the signature of her partner.")

The noble Lord said: My Lords, Amendment No. 12 seeks to ensure that a woman fearing domestic violence from her partner should be able to apply for WFTC without first obtaining his signature. Writing this on to the face of the Bill would ensure that this option was made plain in all WFTC forms and leaflets.

The proposed legislation assumes that couples are able to discuss together who should receive the payment. Indeed, the WFTC explanatory leaflet advises a couple to think how they budget and who organises the family's money in deciding who should receive the payments. But the CAB tells me that it sees many clients who are not in a position to reach agreement with their partners. In particular, women living in violent relationships may be afraid to assert their wish to receive WFTC.

Many women seeking CAB help because of domestic violence are short of money and cannot meet the needs of their children. It is likely that those most in need of exercising the choice for WFTC payments will be those least able to exercise it. The CAB told me of a typical case in the south of England of a woman with one daughter whose husband was both an alcoholic and violent. He spent all their benefit income on drink and she had no money at all. She and her daughter were afraid to live at home.

According to a women's unit fact sheet—Better for women, better for all—the Government are making violence against women a priority, as women themselves are telling them that it is one of their biggest concerns. Indeed, the Women's Unit commissioned a package of research into the accommodation support services for households experiencing domestic violence.

The noble Baroness, the Lord Privy Seal, is the Minister for Women. Indeed, according to this fact sheet, she is a member of the ministerial committee overseeing the Violence Against Women crime reduction programme. When the Minister responds, perhaps she can tell me whether she has discussed this amendment with her noble friend the Lord Privy Seal and whether or not she welcomes it.

At present, family credit must be paid to the female partner. Under WFTC, it is proposed that the couple will decide who is to claim. We wish to ensure that a woman, fearing domestic violence from a partner, should be able to submit a claim for WFTC on her own, without the signature of her partner. We believe that that should be stated in the WFTC claim pack and contained in primary legislation so that it cannot be ignored in the future. I beg to move.

Lord Goodhart

My Lords, I certainly support the spirit behind these amendments. As far as concerns Amendment No. 12, I believe that what the noble Baroness said in response to Amendment No. 6 makes it clear that the Government have already gone some way towards this position. In the event of the couple failing to reach an agreement as to which of them is to receive the tax credit, it is now clear that the Government are prepared to authorise the Inland Revenue to accept applications submitted by the caring parent herself, without the signature of her partner. The only practical question is whether the parties need to have made an attempt to agree; in other words, the right of the caring partner to submit an application without the partner's signature can only be done if there has been discussion about it. At any rate, in exceptional circumstances, it would mean that the caring partner could do it without reference to the working partner.

It is desirable, in general, that this should only be done where there has at least been a discussion on the subject. If Amendment No. 12 were adopted, there would obviously be the risk that it could merely postpone rather than avoid the incidents of violence which will happen, not when there is discussion about who is to receive the tax credit but when the man, whom we assume to be the violent working partner, discovers that his non-working partner has already claimed for credit. Of course, that would be an unfortunate situation. Nevertheless, it seems to me that there may be exceptional cases where it would be desirable to have the possibility of applying, even if a previous attempt has not been made to reach an agreement.

I strongly support Amendment No. 13. Indeed, it merely raises again the point I made on Amendment No. 6. At that stage, the noble Baroness's reply was cut off by circumstances before she could make it. Although she indicated by sign language that she would write to me, perhaps this would be an opportunity to put a statement on the record about what the Government intend as regards providing information on this issue in the claim pack.

Lord Swinfen

My Lords, I should also like to express my support for Amendment No. 12. However, we have been given an example of a situation where the husband drinks. I just wonder what the position would be where the wife drinks. There is no provision for that and I am not sure that such a situation would be covered by Amendment No. 6.

Baroness Hollis of Heigham

My Lords, with all due respect, I do not think that in this Bill we can sort out all the problems of drinking partners. Other agencies such as Alcoholics Anonymous, or even the police where the situation has escalated into violence, may be more appropriate agencies to deal with the matter.

As regards Amendment No. 12, I am grateful to the noble Lord, Lord Astor, for raising the issue of domestic violence. It becomes your Lordships to discuss this matter even though the hour is late. The noble Lord asked about the work of my noble friend Lady Jay in this respect. She chairs a women's committee which considers violence, among other issues. I represent the DSS on that committee and I 'work closely with my noble friend, as with other Ministers, both male and female, across government to ensure that issues such as domestic violence are reviewed across the waterfront of government, if I may put it that way.

The noble Lord is quite right in assuming that the Government regard this issue with great concern. Under the guidance of my noble friend we are doing our best to respond to it. We know of some of the circumstances that trigger domestic violence, such as drink and drugs. We are studying anger management. We are also considering issues such as child contact and family contact centres. We recognise that domestic violence occurs but we do what we can to ensure that children at any rate are protected and enjoy a decent quality of family life in so far as the state, in its limited capacity, can ensure that. I am sure that my noble friend Lady Jay will be willing to write to the noble Lord, Lord Astor, if he wishes to know more about our initiatives on this front. I am happy to send him literature, if he wishes.

There is a difference between whether the presumption in a situation of domestic violence is that the couple are still together or whether they are separated. Clearly, if they are together, if she fails to sign his form, or he fails to sign her application form, the money goes to her as the applicant. This position will now he protected—as we said earlier on Amendment No. 6—by regulations to that effect. If they remain as a couple despite domestic violence, the regulations are in place to ensure that she will get the. money. If he knocks her around subsequent to that, I am afraid that her recourse then is to the police, women's aid and the like. If the violence has resulted in the couple separating, at that point she becomes, for our purposes, a lone parent. If she is in work, she will qualify for WFTC on her own. If she is not in work, she will not qualify for WFTC; she will be eligible for income support and related benefits. He, as effectively a single, separated man, will qualify for nothing at all. That is the situation as regards domestic violence. I am happy to try to enlarge on any of the wider issues of domestic violence through correspondence or literature, if the noble Lord wishes.

The second amendment in the group—

Lord Higgins

My Lords, I believe there has been some misunderstanding. The two amendments raise quite different issues. I had understood that they were to be taken separately but the initial typing went wrong. I was told that the typing would not be corrected but we would take the amendments separately. I think that would be more convenient.

Baroness Hollis of Heigham

My Lords, I thought the second amendment in the group had already been moved and spoken to. Am I incorrect in that belief? I think the noble Lord, Lord Goodhart, thought that too.

Lord Astor of Hever

My Lords, I was just speaking to Amendment No. 12.

Lord Goodhart

My Lords, I was under the same misapprehension. I had not realised that the amendments had been degrouped. I simply assumed that because they appeared in the same group on the Marshalled List I should speak to both of them simultaneously.

Baroness Hollis of Heigham

My Lords, given the lateness of the hour I wonder whether it would help your Lordships if I said that all the points that were raised by the noble Lord, Lord Goodhart—that I am sure would have been raised by the noble Lord, Lord Astor—sought to make it clear that the couple have a choice as to whom the money is paid and payment is made to that person. Page 6 of the guidance notes points out the things a couple should bear in mind in making that choice and emphasises, that the person receiving the payment does not have to be the person working". The substance of the amendment is that it should be made clear that the choice may be made in that way to that person. I agree with that. If the noble Lord has any worries or concerns about the forms, I am happy to discuss that with him.

Lord Higgins

My Lords, if the noble Baroness does not mind—I do not think this will greatly inconvenience the House—there are one or two points on the second amendment in the group I should like to have raised, but perhaps the noble Baroness would like to end her discussion on the provision we are discussing and then tackle the next one.

Baroness Hollis of Heigham

My Lords, had hoped I had done that. I hope that in that context the noble Lord, Lord Astor, will withdraw his amendment.

Lord Astor of Hever

My Lords, I am grateful to the noble Baroness for her reply. She offered to ask her noble friend the Lord Privy Seal to write to me. I would be grateful if she would do so as it is an important point. We wish to consider the matter carefully and may return to it at Third Reading. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.30 p.m.

Lord Higgins moved Amendment No. 13:

Page 2, line 45, at end insert—

("( ) The Board shall take reasonable steps to ensure that a couple applying for working families' tax credit is aware that it may be paid to either partner, and that it may be paid by the Board direct to a partner not in employment.")

The noble Lord said: My Lords, there are one or two points which we have not covered for the reasons we have just mentioned. There are very strong feelings, particularly among the Citizens Advice Bureaux, that it is extremely important that the points covered by Amendment No. 13 are accepted by the Government. The CAB have described it as vital that it should be made clear to people that they have the option and the choice. They even recommend that it should be made clear in statute that that is so. Perhaps I may ask the noble Baroness whether the Government accept that point completely? What steps are they taking to ensure that the parties concerned are aware of the choices in this matter?

At the risk of trespassing on the noble Baroness's generosity, perhaps I might add one other point. In the earlier discussion about whether the credit should go to the carer and so on, the CAB has also in the context of this amendment raised the whole question of purse to wallet. As we are a little uncertain at the moment, it would be helpful to know before Third Reading where the noble Baroness stands with regard to the credit being paid to the mother, which is currently the situation under family credit. Does she have a view on whether it should be paid to the mother rather than to others? The CAB stress very strongly that they have a number of specific cases where that would have been helpful.

Lord Goodhart

My Lords, what should be provided by way of information in the forms and the guidance notes is not merely the options that are open to the parties if they agree, but also guidance as to what will happen in the event of their failing to agree. That is the last point where I believe that the present information provided is seriously defective. I am hoping for some indication that clearer information will be given when the forms are produced.

Baroness Hollis of Heigham

My Lords, three points have been raised: first, what information do we give; secondly, whether we believe that essentially the mother should be the recipient of WFTC; and thirdly, the guidance to be given if the parties do not agree.

I do not know if the noble Lord, Lord Higgins, has seen the draft of the October form. I am not sure that I am allowed to do this in your Lordships' House, but perhaps I may point it out.

Lord Henley

My Lords, the noble Baroness is not.

Baroness Hollis of Heigham

If the noble Lord, Lord Henley, from a sedentary position, wishes to assist the House, he will allow me to read the words that clearly cannot be seen from across the Dispatch Box by the noble Lords opposite. It says in bold type: Please read this note before"— and the word "before" is in heavy capitals; it is the biggest word apart from "Revenue" on the entire form— you complete the form". It goes on: If you are a married couple (or a man and woman who live together as if you are married) you must decide who is going to apply for and receive the payments. That person completes the form as the applicant and the payments will be made to her or him. Once we receive your application, you cannot change this decision. You do not have to be working to receive payments as long as you have a partner who works". That is written in bold type; it asks people to read the form before they fill it in; I do not think it can be made more visually prominent typographically than it is—even if your Lordships cannot see it across the Dispatch Box. I think your Lordships will agree that the forms are as unambiguous as they can be. These are the October forms; they will be revised again from the following April.

Lord Higgins

My Lords, I am most grateful for that helpful intervention. Does the form also make it clear that it may be paid by the board direct to the partner not in employment?

Baroness Hollis of Heigham

My Lords, that was the point I was making, perhaps slightly opaquely, by saying that I have the October form, under which it would be paid directly at home, whereas from April it will be paid through the pay packet to the partner who chooses to receive it if that partner is in work. At that point the form will be changed to reflect that additional information. That takes place from April, not from October. I made the point that the form will need to be changed in April.

Lord Swinfen

My Lords, when reading from the form the noble Baroness said that once an option had been taken by the couple as to who was to receive the credit, it could not be changed. What would be the position if the person who was receiving the credit was involved in an accident or was taken ill so that he could not handle the credit? Is there a method for dealing with emergencies such as that?

Baroness Hollis of Heigham

My Lords, if I may, I will follow up that point in writing. What is certainly the case is that the decision cannot be changed within the six-month period. A WFTC claim runs for six months. The couple could choose to make a different decision at the renewal of the claim after six months. Their circumstances may very well have altered, as they usually do, in that situation. However, the presumption is that, to make it easier for employers and also for the couple concerned, a claim runs for six months. If there were an emergency such as he was no longer in work, it would depend on whether he was still on the employer's payroll on statutory sick pay and therefore whether it could be paid through that if he so wished or whether he was no longer employed at all. In that case, the WFTC payment would run and be paid by the board and the couple's income would be topped up by JSA or income support, as appropriate, for the remainder of that six-month period.

The noble Lord raised a specific point about a sudden emergency. It may be helpful if I simply write to him on that point. But normally those circumstances would prevail.

Lord Swinfen

My Lords, with the leave of the House, I thank the noble Baroness. I was thinking of the case of an injury that prevented the person actually dealing with the money, particularly if it was paid into a bank account. Sometimes salaries are paid directly into an account and the other party to the partnership may not have access to that account. That is not at all unusual.

Baroness Hollis of Heigham

My Lords, I am happy to give the noble Lord the assurance for which he asks. I do not need to write to him. I can allay his concerns. Under emergency procedures, the partner is the alternative payee. So if someone was incapacitated, the other partner could be authorised to receive the payment. I am grateful to the noble Lord for raising that point and for allowing me to clarify the position.

The noble Lord, Lord Higgins, asked whether I agreed in principle that it was right for the payment to go to the mother. I have said it so many times that your Lordships must be tired of hearing me say it—this is a working families' tax credit. It is not income support. It is designed to do two things. It is designed to give families support but it is designed to do that by encouraging parents into work. It is a work incentive. We believe that the best way of helping families and children out of poverty is to see one of those parents in work. We believe that the best way of ensuring that one of those parents is in work is to pay the entry wage if they are going back into work, or the minimum wage, so to speak, if they are already in work but their income has fallen by virtue of shorter hours, loss of bonus or loss of commission through the wage packet. But at the end of the day we respect the fact that this is a couple's choice. If they prefer for it to be paid direct to a mother who is not working for waged work at home, that is their choice. That is the Government's view. It is intended to be a work incentive. We believe that that is the best way to alleviate family poverty. But if the couple so choose for it to be paid to the mother, that is their choice. It would not be my preference but it is their choice. That choice is being fully respected.

Finally, the noble Lord asked about guidance if they did not agree. This point was also raised by my noble friend Lady Lockwood during the Second Reading debate. We gave an assurance that we shall seek to amend subsequent forms to cover that point.

Lord Higgins

My Lords, I am grateful to the noble Baroness for taking the two matters separately. Even at this late hour the debate covered points which would otherwise not have been clarified. In the light of her helpful remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Freeman moved Amendment No. 14:

Page 2, line 45, at end insert— ("( ) The Board shall issue a code of practice as to the operation of both credits, after consultation with interested parties.")

The noble Lord said: My Lords, I shall be brief. I am grateful to the House for agreeing to take this amendment before the House rises. It is a further probing amendment. I am grateful to the noble Lord, Lord McIntosh of Haringey, for his very helpful responses in Committee, in particular the agreement to change the nature of the claimant's declaration on. all the forms, which was most welcome, and for promising a rolling programme of review of the tax credit forms, in particular WFTC501. The noble Baroness referred to that or a similar form.

I readily appreciate that no fundamental changes can be made to the forms because they are geared in to existing computer systems and procedures in departments. But the commitment to that rolling programme of review, subject to one point that I wish to make, is accepted and welcomed. I am grateful to the Minister for also ensuring that there will be reporting to Parliament by the Board of the Inland Revenue on the operation of the tax credit scheme.

Clause 5 gives to the Inland Revenue the normal care and management responsibilities that we find in much tax legislation. It gives the Revenue broad discretion to operate the system and gives it non-legislative powers. But in this kind of legislation the devil is in the detail. It is important to continue probing some of the unanswered questions.

The issue I want to address is the normal Inland Revenue practice of issuing a code of conduct for the operation of a scheme such as the tax credit scheme. The code of conduct, which has not yet been issued, is separate from the explanatory booklet which is available in this House. Many noble Lords will have already read the draft that has been circulated.

I say to the noble Lord at the outset that, because I am dealing with practice, not policy—and I hope my noble friend Lord Higgins will agree with me—a reply in writing will be perfectly acceptable. I should not expect the noble Lord to go into detail as I did not give him notice of the points that I wished to raise.

My first point is: when will the code of conduct be issued? I assume that it will be as soon as possible, and well before the commencement date in. October. Secondly, will the noble Lord confirm that there will be proper consultation on the code of conduct before it is put into its final form?

I wish to make four specific points on what could, in my judgment, be included in the code. First, we need to be clear as to when formal entitlement starts. Is it when an application is received, or when it is validated? 'That is an important point, simply because the practice of the Inland Revenue is very different from that of the Department of Social Security. Noble Lords will recall that the department's procedure regarding the payment of benefits is to receive, process, pay and then sample check at a later date. The practice of the Revenue, certainly when it comes to tax repayments, is to make sure that a particular claim is validated before payment is made. Therefore, if there is to be any significant gap between receipt of an application and payment, it is perfectly appropriate to raise the issue of back-dating to the date when the application was received.

The second point relates to the need for exemption of small self-employed applicants from having to file complete accounts and answer the detailed questions in WFTC501 and instead use the present system operated by the Inland Revenue for the small self-employed; that is to say, a simplified system, a simplified application form dealing with turnover, expenses and profits.

I am well aware of the argument that the Department of Social Security's system is being inherited by the Inland Revenue, but the Inland Revenue may well in week one be dealing with the small self-employed, using the simplified form of reporting, and in week two, unless there are changes, being asked to administer the working families' tax credit scheme, asking for a complete set of accounts. That will be confusing to perhaps 10 per cent of the total applicants for this credit. We should address this. There is plenty of time for the Inland Revenue by a code of conduct, a code of practice, or by amending its procedure, to simplify the reporting, to simplify the claim for the self-employed where turnover is beneath £15,000 per annum.

Last year the President of the Chartered Institute of Taxation said that he thought it unlikely that the existing form—in its new form WFTC501—could be completed correctly by more than one in five inspectors of taxes. Having read the form, I must say that if I were in the position of a small self-employed individual I would find it very difficult to complete it. Please may we have an assurance that this will be put right before April 2000?

Thirdly, a small point perhaps to your Lordships, but significant to many claimants, under the old DSS system one could send one's application form in using a post-paid envelope. The Inland Revenue, I think I am right in saying, withdrew that procedure some eight years ago, and it is now seeking to employ the same principle: that is, as far as I can see from the forms lodged in your Lordships' House for perusal, no envelope and no postage paid.

Finally, it is important to apply the principle of the helplines for both credits being at local phone charge rates. The Inland Revenue gives this benefit not only during weekdays in normal working hours, but also in the evenings and at weekends, for income tax self-assessment. I beg to move.

11.45 p.m.

Lord Higgins

My Lords, the House will be grateful to my noble friend Lord Freeman for his comments in an area where he has very considerable expertise. I am sure that the Government will wish to take his views into account.

As to the form of response, I have a slight feeling that we are in danger of becoming a correspondence college rather than a debating chamber, and that would be dangerous. I hope that the noble Baroness, Lady Hollis of Heigham, will not think me discourteous in making that point. None the less, I hope that we shall get a response one way or another from the Minister concerned.

Lord McIntosh of Haringey

My Lords, when people ask us to write to them I am reminded of "Yes, Minister", when Jim Hacker asked "How can I write letters?" and Sir Humphrey replied "But, Minister, you don't write letters; you sign them." We should always bear that in mind.

The simple answer to the noble Lord, Lord Freeman, when he said in the amendment that there should be a code of practice, is that there will be. I have to say a little more, because he asked some very precise questions.

In the Inland Revenue, as the noble Lord well knows, there are always codes of practice to explain the administrative procedures and how they will operate in practice. That is the way it has always worked, particularly in those parts of the tax system which relate to compliance, where codes of practice help ensure that customers know their rights and know that they are being treated fairly and reasonably, in the way in which all customers in their position would be treated.

For example, the Inland Revenue has codes of practice on investigations, on reviews of employers' and contractors' records, on inspection of schemes operated by financial intermediaries, on inspection of charities' records and on investigations by the specialist investigation branch where fraud is suspected and in cases of other suspected irregularities. There are also codes of practice covering the Revenue's policy on giving advice and on dealing with any serious or persistent mistakes that might occur.

Clearly, the payment of tax credits is a new line of business for the Inland Revenue, but it will be conducted in the Revenue's usual effective and efficient manner. Tax credits will need to be looked at with the same critical eye that secures tax revenue, and many of the same sort of skills will be brought to bear to combat fraud.

The Revenue will, after consultation and by October 1999, be issuing a code of practice about how it will handle inquiries into tax credit applications. This will be in addition to the existing codes of practice about inquiries into taxpayer's tax affairs. As the amendment suggests, consultation on the code will be essential to ensure that it commands broad acceptance by applicants and that they can be certain of fair and appropriate treatment by the Inland Revenue. This consultation will begin shortly.

Finally, from April 2000 employers will also have responsibilities to administer tax credits—much in the same way they already administer PAYE and NICs. Because the handling of tax credits will be part of their PAYE and NICs systems, the guidance for employers about how the Inland Revenue will handle examination of these records will be included within the current code of practice on review of employers and contractors' records. The additional material will be developed in consultation with employer representatives, as has been the Revenue's normal practice.

The noble Lord asked me four specific questions. The first was whether the code of practice will cover the start of formal entitlement. He asked that it should be backdated to the date of receipt of the form. We can do better than that. It will be backdated to the date of the intent to claim. If necessary, that can be made clear.

Secondly, the noble Lord asked about a simplified form of accounts for exemptions for those self-employed with small businesses. We need to stay within the current system of reporting, which is not unlike the current standardised accounting information within self-assessment. The form for the self-employed will be kept under special review to keep it as simple as possible.

The noble Lord also asked about post-paid envelopes. They will continue.

The noble Lord asked finally about the availability of helplines with local call charges on a seven-day basis. I do not appear to have an answer to that so I shall have to sign a letter to him—which somebody will write! On that basis, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Freeman

My Lords, I have learnt a lesson. Some 30 years ago, the training for accountants in this country was entirely by correspondence course. I have learnt that that is not really appropriate in your Lordships' House and therefore I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey

My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

House adjourned at eight minutes before midnight.