HL Deb 18 May 1999 vol 601 cc237-90

8.44 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)

My Lords, I beg to move that this Report be now received.

Moved, That the Report be now received.—(Baroness Hollis of Heigham.)

Lord Higgins rose to move, as an amendment to the Motion that the Report be now received, to leave out ("now") and at end insert ("only after Her Majesty's Government have announced their intentions in respect of passported benefits").

The noble Lord said: My Lords, the purpose of this amendment, for which there appears to be ample precedent in Erskine May, is, first, to register some protest at the way in which the Government have dealt with the House in regard to the question of passported benefits; secondly, to relate specifically to that issue; and, thirdly, to ask the Minister to state the Government's present position.

There has been some concern about the way in which the preparation of this Bill has been made. The child benefit clauses were not produced until the last day of the proceedings in the other place, thereby not allowing any discussion other than the last day of Report stage. We therefore find ourselves in a situation where an important issue arising from the changes which the Government are proposing to make in the social security arrangements has not been clarified.

The House may recall that I raised this issue in Committee. The noble Baroness responded at cols. 641 and 643 of the Official Report of 4th May. I urged the noble Baroness that a decision should be reached before Report stage with regard to the Government's intentions in relation to passported benefits. In the subsequent columns the Minister repeated time and again that we would return to the issue before the Bill left Parliament.

It seemed a formula somehow ingrained in her thinking, but clearly it is not satisfactory, as I pointed out at the time. The reality is that the Government have had many months to work out the position in relation to passported benefits.

The change from family credit to the working families' tax credit creates a situation where entitlement to various passported benefits does not necessarily transfer from those entitled to one specific benefit to those entitled to the other. For that reason it is a matter of considerable importance. It covers a whole range of individual benefits; for example, prescription charges, exemption from the cost of dentures and dental treatment; free eye tests; vouchers for glasses, fares to and from hospitals; and much more. For that reason it is important that we know what the Government's position is. We ought to have known far earlier. If we wait until the period about which the noble Baroness is so concerned—before the Bill leaves Parliament—then this House will not have an opportunity of expressing a view on the way in which the new structure under the working families' tax credit should operate. Indeed, it is the case that unless we were to move an amendment to the Bill which covered this point, the House of Commons would have no opportunity to amend whatever the Government eventually propose.

The noble Baroness raised a number of reasons in Committee as to why it was difficult for the Government to reach a decision. In particular, she mentioned that seven or eight different government departments were involved. It is not acceptable that the House should be left in the dark and that Parliament should be prevented from considering the matter altogether because Ministers from seven or eight government departments have not managed to get together and decide an appropriate way of dealing with the problem.

Having said that, the noble Baroness will know that we are concerned about the way in which the Department of Social Security is being taken over—I believe that that is the right expression—more and more by the Treasury. Indeed, not only is the Contributions Agency being transferred, but there are also a number of other important proposals in relation to this Bill. I believe it is true to say that the department is virtually being dismembered.

My own feeling is that it is very dangerous when the Treasury gets too much control over a particular government department. The system relies intrinsically on there being a conflict between the spending department and the Treasury. I well recollect many years ago when Sir Keith Joseph was responsible for social security. He thought that he was on the side of the Treasury, so instead of there being a balance between those conflicting forces the whole thing became unbalanced and the department's interests were not protected.

With the growing influence of the Treasury in all the social security matters, one fears that the tendency is for benefits not to be dealt with in the way in which the department itself would normally wish to deal with them. That applies especially as regards these passported benefits. The events during the past few days in the other place certainly suggest that it is not only the case in relation to this Bill, but also in relation to another Bill which is being dealt with in the other place at present and will no doubt arrive here soon.

There are many areas, especially with regard to the disabled, where we find that the tendency is for the influence of the Treasury to be more and more prevalent. For that reason it seemed to me that it might be helpful to the Minister, because we all recognise the deep concern that she has for the disabled, and others, to table such a Motion so as to put some pressure on the Government between the Committee and the Report stages to sort out the matter. It should have been sorted out months ago. The noble Baroness has had another two weeks in which to try to knock ministerial heads together. One very much hopes that she will be able to tell us this evening what progress has been made in that respect.

As I say, there are two aspects involved. First, we should know what the Government's intentions are; and, secondly, we should be in a position to decide whether or not this House, with its responsibility for examining the implications of legislation, does or does not wish to amend those particular proposals. In Committee, the noble Baroness pointed out that, at present, such matters are dealt with in regulations and that a series of different regulations operated to bring about the passporting of benefits across a series of departments. None the less, it is certainly not impossible to draft amendments to the Bill—or, more accurately, it is not impossible for the Government to put forward proposals in the Bill. That is their responsibility. That would enable the House to consider what they propose. Indeed, there is no reason why they should not put forward such proposals so that the House can consider them on their merits.

I see that the noble Baroness is shaking her head. If the Government are bringing forward legislation of the kind that we have in this Bill, the implications of which are very serious for the disabled and other groups, they have the responsibility to ensure that the House has an opportunity to express a view as to how such matters should be dealt with. We well know from our earlier debates that there are problems because the Government have extended the working families' tax credit up to levels of income way over £25,000 a year in some cases. We can understand that perhaps the Government do not feel it appropriate that those people should, for example, get free prescriptions. But that is a problem which the Government have created, unnecessarily in our view. Therefore, having created it, they ought to say what they intend to do to solve it. We can then consider whether or not we consider their solution to be appropriate.

However, as the matter stands, we do not even know whether they are proposing to have some arrangement whereby those receiving working families' tax credit, or the disabled allowance, will receive these passported benefits automatically, as is the case at present, or whether they will only receive them subject to a means test, which is certainly something that the Government have extended time and again. Indeed, they attempted to do so last night and have done so in many other ways. The extension of means testing is certainly something which gives us cause for concern. If the passported benefits, which are extremely important, are to be means tested in future rather than being given automatically, we ought to know. But up until now the noble Baroness has given us no indication of how she proposes to deal with the matter; indeed, she has given us no indication as to the way in which we can amend what the Government eventually propose.

In fact, to say that we shall return to the issue before the Bill leaves Parliament—indeed, I am not clear why the noble Baroness did not simply say before it receives Royal Assent—is not satisfactory. We gave her ample notice in Committee that we thought we ought to know about this before we proceeded to the Report stage. As I said, I have tabled my Motion in the hope that the noble Baroness will be able to reassure us this evening that the Government have finally got their act together and that the government departments have finally managed to spare the time on this issue to reach agreement among themselves. We will then be able to consider what the Government propose and, if necessary, debate and amend such proposals.

Lord Goodhart

My Lords, perhaps I may begin by saying that I hope that the noble Lord, Lord Higgins, does not intend to divide the House on his Motion. If he does, I have to say that I will be unable to follow him. However, from the way in which the noble Lord introduced his Motion, I rather suspect that he does not actually intend to do so.

Having said that, in our view the complaint which the noble Lord makes is entirely justified. We quite understand the Government's difficulties, which result from the fact that the increased generosity of the working families' tax credit may lead to families with well over average incomes receiving the tax credit. Therefore, the Government may well feel that it is inappropriate for everyone who receives the tax credit to receive passported benefits in the way that those who received family credit were entitled to do. We also understand that this will involve the decision being taken by a number of different departments and that that will take some time.

Nevertheless, the fact that we have now reached the Report stage in this House without yet knowing what the Government plan to do about passported benefits, shows a very depressing lack of a sense of urgency. We realise that the right to passported benefits is something which, in the normal course of events, would be dealt with in regulations. The Government have very rightly and properly produced draft regulations as regards all other aspects of the Bill; for example, we have seen the draft regulations which fall under Clause 6 and those which come under Clause 15. We have also seen the draft regulations which amend the existing regulations governing family credit. However, we have still not seen anything that tells us what will happen about passported benefits.

I hope that the Government will be able to bring forward information, if not tonight then at least before Third Reading, which will tell us their decision about passported benefits. Therefore, before the Bill leaves this House for what will no doubt be the last time, we will he able to see what the Government intend to do.

Baroness Fookes

My Lords, I rise to support this amendment to the Motion because I am extremely disappointed that so far we do not appear to have had the slightest indication of what the position might be. I of course understand the difficulty of involving a number of different departments but it was surely this Government who were going to pride themselves upon joined up government. What does that mean if not getting various government departments to act together where it is appropriate to do so? I am not impressed if it is the case that that difficulty is preventing the Government from making any decisions so far.

I ask your Lordships to look at this matter from the point of view of the individual and of individual families. The question of free prescriptions or other free provision is extremely important to people who have small incomes. Obviously the whole point of this exercise is that money will be paid to encourage people into work even when perhaps they cannot earn much when they first enter work. These are matters of great importance to individuals and to families. Therefore it is high time that the Government gave us some information as to whether they will allow passporting, or if that is not to be done as a whole as it was done previously, whether at least certain benefits may be passported. even if not all of them. At least that would give us something to work on. I beg the Minister to try to give us some indication of that.

Lord Swinfen

My Lords, this is a most unusual Motion and one that I do not recall previously in my 22 years in this House. However, it is quite right that the Motion has been put down. This House would be failing in its duty if it did not inquire into the position of passported benefits. I believe the Government have been lax in not coming forward with their suggestions at least by this stage of the Bill, bearing in mind that it has gone through the other place. We are now just about to start on the Report stage. We have Report stage to come and Third Reading only. This position may have arisen because the tax credits are being moved from one ministry to another. However, joined up government means that ministries talk to each other, or should do so. I am certain that if the Minister was sitting on the Front Bench on this side of the House and another party was in power she would be doing something similar to my noble friend Lord Higgins. She shakes her head. She may not have done it in the same way but she would still want the information that is required.

Baroness Hollis of Heigham

My Lords, the amendment to this Motion would stop the House moving to Report stage of this Bill until the Government had stated what they proposed to do about prescription charges for those who from October will be on WFTC or DPTC. At the moment those on family credit and disability working allowance are passported on to free prescriptions. Their benefits act as proxy indicators of low income households. However, as your Lordships have identified, WFTC and DPTC will target a much larger group of households and this raises the question of whether the tax credits will continue to be an appropriate means of automatically identifying the target group for the benefits provided by the NHS and other departments. The issue is a complex one, particularly given that there are half-a-dozen other government departments involved. The Government have been giving careful consideration as to how to provide help to those who need it through a scheme which is fair and simple to operate. It is not a question of whether but of how to provide help to those who need it through a scheme which is fair and simple to operate.

As the noble Baroness, Lady Fookes., said, we are all agreed that this is an important issue. It is therefore entirely proper that this issue should be debated at Report stage. I do not disagree with those noble Lords who wish to debate it. I entirely take the points made by the noble Lord, Lord Swinfen. The matter should he debated at Report stage as it was at Committee stage; that is, it should be debated around an amendment in the Bill rather than an amendment to a Motion; namely, that the Report stage be deferred. I made it clear at Committee stage that the Government would make their position clear before the Bill left Parliament. I was in no position to commit us to a faster timetable than that. However, the noble Lord, Lord Higgins, has now moved that we do not proceed to the Report stage of this Bill; in other words, that we abandon today's and next week's business until the Government have made a statement on passporting.

As I say, I believe that this is an issue that matters. However, it is not central to this Bill. It is one of several issues such as childcare proposals and the maintenance disregard which are affected by this Bill, which are consequential on this Bill but which are not central to this Bill. The issue does not require primary legislation and it requires no changes to this Bill. Indeed this Bill builds on family credit and DWA to create WFTC arid DPTC by renaming the benefits and then building on those foundations. Other departments—not the Inland Revenue, not the Treasury, not the DSS—notably the Department of Health, name the benefit recipients in their rules and regulations in order correctly to identify recipients. It will in particular be for the DoH to determine eligibility for its low income scheme.

Therefore when the noble Lord, Lord Higgins, said this issue was a matter for this Bill, I am afraid he was wrong. It is not a matter for this Bill. This Bill is about eligibility for tax credits and how they will be determined. It is for the separate departments to legislate in their regulations if they do or do not want to passport WFTC or DPTC as if those same recipients were still on family credit or DWA. As I say, like several other issues—childcare is one and maintenance is another—NHS charges, while properly of concern, are side aspects of this Bill. Therefore in my view it is wrong to seek to delay the entire Report stage of this Bill and to stop the Government getting their business through on a matter which is not central to this Bill and which requires no action in this Bill.

As the noble Lord, Lord Swinfen, said, to force a Division to defer Report stage is without precedent in this House to the best of my knowledge. I do not think any of us can recall a Report stage being deferred in this way, let alone on something not even central to the policy of the Bill and not even part of the Bill's legislation. The resulting dislocation to government business would inevitably be taken seriously. I regret this method of proceeding. As I say, I think it is entirely proper to discuss this issue around an amendment later in the Report stage. However, I regret this method of proceeding even more because the noble Lord, Lord Higgins, gave me no warning either in person or by letter that he intended to take this action.

Following the Committee stage a number of your Lordships around the Chamber wrote to me following up issues of concern. The noble Lord, Lord Goodhart, wrote on issues of care and maintenance; the noble Lords, Lord Swinfen, and Lord Rix, on issues of the disabled person's tax credit; my noble friend Lord Haskel on the issue of affirmative regulations for childcare. In all of the cases where people wrote to me I did my best, as I always do, to respond as positively as I could. Where it seemed that there were points of substance that we could and should take on board I would seek to bring forward either government amendments or to give assurances. As I have said, the style of the House is not confrontational. We take points on board and if we can and should address them we seek to do so.

The noble Lord, Lord Higgins, did not choose to act as his colleagues did by writing to me to see whether we could clear up the matter, which would have been courteous and appropriate. That would have given me the opportunity of setting out a possible timetable by correspondence and clearing up the matter that way, rather than seeking to disrupt the entire Bill. I do not know why the noble Lord should choose the path of confrontation rather than that of discussion, as his noble friends and other noble Lords have done. I regret that he has done so. It is not appropriate to the style of the House.

We are giving careful consideration as to how to strike the right balance between protecting low income recipients of WFTC who would have been eligible while on family credit—a point made so well by the noble Baroness, Lady Fookes—while not at the same time giving free prescriptions to those with much higher incomes.

I have already given a commitment that the Government will state their intentions before the Bill leaves Parliament. I have every expectation that I will be able to set out our intentions at Third Reading. That will give the House the opportunity to discuss the proposals. That would have been clear when we came to discuss the appropriate amendments either tonight or next week. Indeed, I could have made that clear to the noble Lord, Lord Higgins, had he chosen to write to me on the issue, as his noble colleagues did, after the Committee stage. Then perhaps the Motion might not have been necessary.

For all those reasons and the fact that I will be able to give a statement to your Lordships at Third Reading—as I have always hoped I would—I hope that the noble Lord will feel able to withdraw his Motion tonight.

Lord Higgins

My Lords, I am grateful to the noble Baroness for her response. Let me say right away that it was certainly not my intention to be in any way discourteous to the noble Baroness. But I could not have made it clearer at the Committee stage that we did not believe the situation which she described was satisfactory. I said: 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".— [Official Report, 4/5/99; col. 641.] Had I written to the noble Baroness she would simply have written back, as I understand it, and said, "I am very sorry, I am not in a position to say". That is not satisfactory.

Baroness Hollis of Heigham

My Lords, the noble Lord is in no position to anticipate what I would have replied in a letter as he did not choose to send me one. It was a hypothetical statement.

Lord Higgins

My Lords, had I done so I would clearly have received the same answer we have received this evening. It is not a satisfactory answer. The noble Baroness has again come to the House and said that she is not in a position this evening to say what is the Government position. The Government have had months to get together the various government departments in order to reach a decision. They are treating the House with contempt—I overstate it perhaps. They are not enabling the House to do its job of examining these issues, which are very important to a number of disabled and other individuals outside, if we do not know what is the position of the Government.

The noble Baroness has said that we can debate the matter on amendments. We need to know what is the position of the Government before we know whether we need amendments. For us to table amendments and then for the noble Baroness simply to stand up and say, "We do not know what the answer is yet", is not satisfactory.

I simply do not understand why the Government have been unable to reach a decision on this matter. None of us disputes that it is a difficult issue—it involves a number of departments and so on—but as far as concerns timing it is simply a matter of the Government taking all the various issues into account and making a decision.

Having said that, it does not seem to me that this is an inappropriate way of proceeding. As far as concerns Erskine May, perhaps the noble Baroness would care to look at page 479 of the current issue. There the point is made very clearly that this procedure in one form or another has been used on a number of previous occasions. It seemed to me a matter of urgency to bring the issue to the House. It seems to me that the Government are not giving the House a fair opportunity to consider these issues.

The noble Baroness said, "This matter is not central to the Bill; it is a consequence of the Bill". Before we pass legislation that will affect a large number of disabled and other disadvantaged people, we have to consider what the implications are. It is not satisfactory to say that that is not central to the Bill. The fact that there can be serious consequences as a result of the Bill should be taken into account when we consider the specific measures which the Government have proposed. Those consequences follow from the actions which the Government are taking in the Bill. Therefore, to say that it is not central is to ignore the repercussions of the Bill. To argue that when considering a Bill one should not take into account its repercussions or ask the Government what they expect to do about the repercussions and, if necessary, have an opportunity to amend the Government's proposals about those repercussions is to take an extraordinarily narrow view of legislation and does not enable—

Baroness Turner of Camden

My Lords, has not the noble Lord tabled an amendment, Amendment No. 15, which deals with passported benefits? Why is it necessary to move this Motion now?

9.15 p.m.

Lord Higgins

My Lords, for the reasons I have mentioned, we should have known long since what the position is. We have tabled an amendment. But our tabling an amendment is not the way in which this should be done. The Government should put forward their proposals and we can then consider whether they are appropriate. If I understand correctly what the noble Baroness has said—

Baroness Hollis of Heigham

My Lords, the point is that there is nothing the Government can put down because what the noble Lord is concerned about is not part of the Bill. It is not primary legislation; it belongs to the regulations of another department. All the Government can do in due course is make a statement of their proposals. As my noble friend said, an amendment gives the opportunity for debate—precisely what we are doing now, and apparently we are to do it twice over—but there can be no consequences for this Bill. It is not part of the framework of this Bill and cannot be because it belongs to the regulations of another department. I am sorry that the noble Lord does not understand that point. That is not to say that this is not an important issue and cannot be debated. But the Government cannot bring forward amendments because it is not part of this Bill in terms of going from family credit to working families' tax credit. That is why there cannot be government amendments and therefore opposition amendments to amend the Government's position.

Lord Higgins

My Lords, with respect to the noble Baroness, that is not truly the position. If we can put down an amendment, so can the Government. It may be that such an amendment will require careful drafting, but there is no reason why one should not incorporate into the Bill an amendment to deal with this issue.

The noble Lord, Lord Goodhart, made an alternative suggestion. In a number of respects the Government have been extremely good—I give them all credit—in putting forward draft regulations concerning both the Bill itself and the repercussions of the Bill. Therefore, it would have been possible for the Government to have done the same in this case. They could have put forward draft statutory instruments, although we would not have been able to amend them.

Lord McIntosh of Haringey

My Lords, perhaps I may, with the deepest respect, suggest to the noble Lord that there is a difference between government amendments and opposition amendments. Opposition amendments can be probing amendments. They can be defective but still have a value to the House in enabling it to debate the issues before Parliament. A government amendment has to be necessary; it has to be perfect; and it has to be relevant to the subject matter of the Bill. My noble friend Lady Hollis has made it clear that any decision about passporting would not require primary legislation and the regulations that would be necessary for it would not form part of the regulations dependent on this Bill. Under those circumstances, the noble Lord's suggestion that the Government should put down an amendment to the Bill on passporting simply does not stand up.

Lord Higgins

My Lords, these are technical matters.

Lord McIntosh of Haringey

My Lords, they are not technical matters; they are essential to the way in which we deal with government business in this House.

Lord Higgins

My Lords, the reality is that this is a matter on which the House should be able to express a view; and not only express a view but carry a view.

Baroness Hollis of Heigham

My Lords, that surely is the purpose of Amendment No. 15, to which my noble friend Lady Turner referred. That is the appropriate point for this discussion—not now and riot on this Motion.

Lord Higgins

My Lords, I am not proposing to discuss the specific point on this Motion. We shall come to it, as the noble Baroness rightly said, on a later amendment. But, given the repercussions of what the Government are doing, we ought to have an opportunity to amend whatever the Government have in mind. At the very least we ought to know what the Government intend. That is why the suggestion of the noble Lord, Lord Goodhart, to publish draft regulations would be a way of doing it, albeit that we could not then actually amend them. It would perhaps be a second best solution. Otherwise, the Bill will disappear into the public domain with our having had no opportunity of discussing the substance of what the Government ultimately have in mind. The crux of the matter is that they have failed to consider this issue in time to give the House an opportunity of discussing and, it is to he hoped, amending their proposals.

That said, as I say, there is certainly ample precedent for this procedure, but I do not wish for one moment at this stage to push the matter to a Division. However, I hope that the noble Baroness will take back the message to her ministerial colleagues that they have been appallingly slow and negligent in not sorting out this matter before now. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Report received.

Clause 2 [Transfer of functions relating to tax credits]:

Lord Goodhart moved amendment No. 1:

Page 2, line 2, at end insert— ("( ) The Social Security Advisory Committee constituted under section 170 of the Social Security Administration Act 1992 shall be renamed the Social Security and Tax Credits Advisory Committee. ( ) Part XIII of the Social Security Administration Act 1992 shall have effect, in relation to working families' tax credit or disabled person's tax credit, as if references to the Secretary of State were references to the Treasury or the Board, as may be appropriate.")

The noble Lord said: My Lords, this amendment is a redrafted and, I hope, improved version of an amendment that I moved in Committee. The substantive part of the amendment is the second subsection. Its purpose is to ensure that the advice of the Social Security Advisory Committee continues to be available to whichever government department is administering tax credits.

At present. the Social Security Advisory Committee is governed by Part XIII of the Social Security Administration Act 1992. It has a number of statutory functions. Under Section 170 of the Act it has a duty, to give … advice and assistance to the Secretary of State in connection with the discharge of his functions under the relevant enactments".

Also under Section 170, the Secretary of State, may from time to time refer to the Committee for consideration and advice such questions relating to the operation of any of the relevant enactments as he thinks fit (including questions as to the advisability of amending any of them)".

Under Section 172, where the Secretary of State proposes to make regulations under any of the relevant enactments, he shall refer the proposals, in the form of draft regulations or otherwise, to the Committee".

Under Section 174, the committee considers proposals submitted to it under Section 172 and makes a report on them with recommendations to the Secretary of State. The Secretary of State is then required, when laying any regulations before Parliament, to lay also a copy of the committee's report.

The relevant enactments are defined in the 1992 Act as including the Social Security Contributions and Benefits Act 1992; the Social Security Administration Act 1992 itself; and parts of the Social Security Act 1998. There are also corresponding provisions relating to Northern Ireland. I have not attempted to cover them in this amendment, but if it is accepted similar amendments would obviously have to be made for Northern Ireland. "

The effect of the Bill on the role of the Social Security Advisory Committee in relation to tax credits is unclear. Under Clause 2(1)(c) and Part III of Schedule 2 to this Bill, the functions of the Secretary of State under the relevant enactments in relation to tax credits, so far as they are not transferred to the Treasury or to officers of the Board of the Inland Revenue, are transferred to the board itself.

No alteration is made by this Bill to the functions of the Social Security Advisory Committee. One of the functions of the Secretary of State is, for example, to refer any proposals for new regulations which he proposes to make to the Social Security Advisory Committee under Section 172 of the 1992 Act. Arguably, therefore, in relation to tax credit regulations, this is a function—that of referring proposals—which is transferred to the board, although not, it would seem, to the Treasury in cases where the regulation-making power is transferred to the Treasury under Part I of Schedule 2. But the Social Security Administration Act gives the advisory committee no power to advise anyone other than the Secretary of State or his Northern Ireland equivalent, and that power is not extended by the Bill so as to authorise the advisory committee to give advice to the board.

It seems to me, therefore, to be—if I may use an oxymoron—a plain ambiguity. It would seem absurd to say that one of the functions of the board is to refer draft regulations to the advisory committee, but the advisory committee has no power to comment on them. So does the board, by implication, have no power or duty to refer matters to the advisory committee, despite the general transfer of the functions of the Secretary of State to the board under the Bill, or does the advisory council, again by implication, have power to respond to references by the board, despite the absence from the Bill of any extension of the functions of the advisory committee?

In Committee I assumed that the board would have no powers or functions under Part XIII of the Social Security Administration Act, and the noble Baroness replied to my amendment on the same assumption. I apologise for not warning the noble Baroness that I was going to raise a new point on the construction of the Bill. I would have done so, but it was only when I was preparing this morning for the debate that I realised that the assumption on which we had proceeded in Committee might not be correct. Obviously, she will need time to consider the position, and to provide for that it is my intention to seek to withdraw the amendment today, but it may be necessary to bring it back at Third Reading to consider the legal position.

Whatever the position may be under the Bill as it now stands, it is important that the advisory committee should have a continuing role. In Committee the noble Baroness acknowledged the valuable work which the advisory committee carries out. There are many matters covered by the regulations which will apply to tax credit in the same way as they apply to other benefits. These include how claims are to be made; how decisions are to be taken; how decisions are to be revised; how decisions are to be appealed against; and how payments are to be made where they are not paid through the employer. The advisory committee has great experience in dealing with these matters, and it would be a terrible mistake to abandon this resource.

The noble Baroness said in Committee: 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".—[Official Report, col. 657, 4/5/99.]

With great respect, that is not an adequate answer. Of course, I welcome the fact that the Inland Revenue proposes a wide consultation. But, however wide that consultation goes, clearly the advisory committee should be one of the bodies consulted by the Inland Revenue. Of course, it should not be the only body that the Inland Revenue consults, but it should certainly be one of them.

should say that the amendment does not propose to include the Bill as one of the relevant enactments. Regulations under Clause 6 for payment through employers are different from the kind of regulation which is considered by the advisory committee, and I do not think that the advisory committee needs to be consulted on those particular regulations. Possibly the regulations under Clause 15 should be included, but that would have made the amendment complicated, and therefore I have not pressed for it.

Finally, I have not yet mentioned the first subsection, which relates to the renaming of the advisory committee. I have included that as what might be described as a "sop" to the Government. The Government are convinced that by changing the name "family credit" to "working families' tax credit", people's perception of family credit will be changed. That may be true. Many Members of your Lordships' House have had experience of changing their names and many have found that, on doing so, other people's perceptions of them changed, even if their own perception of themselves did not. If it will help the Government to accept the principle of consultation with the committee, I am more than happy to propose a change in its name from the "Social Security Advisory Committee" to the "Social Security and Tax Credits Advisory Committee".

Be that as it may, the important feature is that this valuable source of advice on the sort of regulations that will have to be made to the administration of working families' tax credits should be made available to the Board of Inland Revenue in the same way as such advice has been available in the past to the Secretary of State and the Department of Social Security. I beg to move.

9.30 p.m.

Lord Higgins

My Lords, the noble Lord, Lord Goodhart, spelled out the points relating to his amendment in great depth and with considerable analysis. I do not want to add anything further, other than to say that it is right that he should raise such issues and to ask one very simple-minded question: Is there any problem with the advisory committee advising a government department rather than a government Minister?

Lord Swinfen

My Lords, in Committee the Minister confirmed that there would be no Minister in the Cabinet fighting to improve the tax credits where necessary, and said that the only Minister in the Cabinet dealing with this would be the Chancellor of the Exchequer who, as is generally realised, always attempts to cut expenditure. The amendment is extremely useful and should be given serious consideration by the Government.

Baroness Hollis of Heigham

My Lords, this proposed amendment seeks to provide that the provisions in Part XIII of the Social Security Administration Act shall apply to tax credits, and that the Social Security Advisory Committee be renamed the "Social Security and Tax Credits Advisory Committee''". So far, we are agreed.

We had some discussion of this issue in Committee. I explained then that, as it stands, the role of the SSAC is to provide advice to the Secretary of State for Social Security in relation to the carrying out of his or her functions. We greatly value such advice, of which I have first-hand experience.

The position of the Board of Inland Revenue is different from that of the DSS. Noble Lords expressed some concerns in Committee to the effect that the Revenue would need advice on the issues raised by the tax credits because this is a new area of work for it.

The Inland Revenue may not have a formal advisory body, but as the noble Lord, Lord Good hart, acknowledged—in a back-handed if not a fore-handed way—it has a good record on consultation. Indeed, specifically on tax credits, there is a standing consultative committee of representatives from businesses large and small, payroll managers, and software providers. This committee has been meeting to discuss the scheme for the tax credits for over a year. The Revenue has also held regular discussions with other groups representing lone parents and people with disabilities and families on low incomes.

The Revenue regularly publishes regulations in draft for comment. For the DSS, that task is often carried out by the SSAC. As I said in Committee—the noble Lord, Lord Goodhart, recycled my words earlier—it thereby reaches a wider audience.

However, a similar situation arose recently as a result of the transfer of NIC issues to the Revenue, with the merger of the Contributions Agency, where the formal role of the SSAC has changed. That area of formal responsibility has moved away from the SSAC. Here, the Inland Revenue is currently discussing with the SSAC how best to establish appropriate arrangements for informal consultation on NICs regulations and is continuing to tap into its extensive expertise on social policy. As the recent 12th report of the SSAC states, We look forward to being kept in touch with relevant developments within the NICs system". I am confident that similar, informal arrangements drawing on SSAC expertise will be developed for tax credits as for NICs which will prove satisfactory both to the Inland Revenue and the SSAC. Discussions to that effect are currently under way with the committee and the committee's chairman, Sir Thomas Boyd-Carpenter. I shall be happy to write to noble Lords explaining the arrangements when the discussions have been concluded. In the light of that, I hope that the noble Lord will be able to withdraw the substantive points of his amendment.

The noble Lord, Lord Goodhart, also raised points about the interpretation of the legal constraints under which the Act works. The advice I have been given is that it is also a new point for us. We appreciate it and accept that it was put very clearly. As we were invited to do, we shall write to the noble Lord with our considered response. In the light of that explanation, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Goodhart

My Lords, as I indicated earlier, I propose to withdraw the amendment, but before I formally ask leave to do so, may I say that I am grateful to the noble Baroness for having indicated that the situation will not be quite as bad as I had feared in that it is expected that the informal consultation with the advisory committee will continue. Nevertheless, it is unfortunate that formal role of the advisory committee is not to be continued. The advisory committee is a useful link between the normal tax collecting functions of the Inland Revenue and the new functions it will have under the Bill. Whether or not one describes tax credits as a benefit, the new functions will certainly be much closer to benefits than anything that the Inland Revenue has dealt with in the past. Therefore, it would be very appropriate for the formal role of the advisory committee to be continued. Nevertheless, I suppose that half a loaf is better than no bread. I am grateful for that.

As regards the point of interpretation which I raised, it is a matter which needs to be brought forward again at Third Reading for clarification. By that time I hope that it will be possible, whether by correspondence or otherwise, to make a clearer statement of what is intended to be the continuing role of the advisory committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 2:

Page 2, line 2, at end insert— ("( ) The Treasury, in making regulations under any functions transferred to it under subsection (1) above, shall ensure that payments of the tax credit are not made to individuals who have an income, or to couples who have a joint income, in excess of the income at which the higher rate of tax would be payable by an individual.")

The noble Lord said: My Lords, in moving this amendment I hope that it is convenient also to consider Amendment No. 3 because they are variations on the same theme. We discussed these matters in Committee. The amendments reflect the concerns we have expressed about the way in which the Government propose to change to a working families' tax credit, which means that benefits will become payable to those receiving what might be regarded as very high incomes. The first amendment seeks to deal with the matter by capping—the expression I believe we normally use—at a level where a higher rate of tax is payable. Alternatively, there is a tapered cap which in some ways has an advantage inasmuch as it increases the withdrawal rate of the working families' tax credit from 55 per cent. to 75 per cent. for families with incomes over £25,000. That figure has been calculated as probably being high enough for the majority of people to be above housing benefit and council tax benefit tapers. Thus the increase in the working families' tax credit taper would not compound with other benefits to produce high withdrawal rates.

We believe that this amendment is worthy of consideration. I raised the issue at Question Time today with the noble Lord, Lord McIntosh of Haringey. He is not present. At some stage we must consider the way in which we are beginning to pay benefits to people with high levels of income of something over £25,000 a year, yet with other benefits, for example, income support, we are reducing benefits to those who may have a relatively small amount of capital. I may be somewhat out of date; no doubt the noble Baroness will remind me of the figures. Benefits used to be reduced if one had capital of more than £3,000. People used to say to me on interview nights, "I am in a bad way, but I do not wish to give up my last bit of capital which gives me a feeling of security".

We need to consider whether the balance is right. In the one situation it concerns income, and in the other capital. It seems strange if the taxpayer is paying out benefits to people with income of £25,000 a year but is taking away benefits from people because they have capital of only £3,000, or whatever the amount may be. We need to look at the system as a whole. I suspect that the measure the Government are now introducing does not take sufficient account of the overall structure of social security benefits. We should be grateful if the noble Baroness could respond.

Lord Goodhart

My Lords, we are sympathetic to the spirit underlying the amendment. The reduction in the taper rate and the more generous childcare benefit, as well as the increased generosity of the other benefits, mean that tax credits are payable to some people who have well above average incomes.

I believe that this Government or one of their successors will have to deal with the problem sooner or later perhaps by tapering off the benefit more sharply when income rises above levels where other benefits such as housing benefit are payable.

I am somewhat doubtful whether it is a problem that should be dealt with in primary legislation. However, it is an issue that the Government should take on board. I shall be interested to hear the noble Baroness's reply.

Lord Blackwell

My Lords, my noble friend raises an interesting issue. Have the Government estimates of how many people would be affected by the overlap? Can that information be made available?

Baroness Carnegy of Lour

My Lords, on a more general point, it is increasingly realised that a large expenditure is incurred by the state in transferring money from the same households within the tax and benefits systems. Households receive money in benefit and pay tax. The cost probably amounts to billions of pounds. The cost will need to be addressed and reduced. That is an undisputed fact.

In making the WFTC available to people on the higher rate and on an income of up to £35,000 a year, the Government are exacerbating the problem. More people will experience the receiving of the benefits and the paying of tax within the same household, adding to the expenditure of the nation. Do the Government consider that when they extend the dependency of people on benefit? It is a separate point, but I wonder whether the Minister is able to comment on it.

9.45 p.m.

Baroness Hollis of Heigham

My Lords, I should love to, but I am not sure whether this is the time to do so in the detail required. The amendments seek to restrict the amount of tax credit available to households with relatively high incomes. In moving the amendment, the noble Lord, Lord Higgins, spoke about savings. I take his point, but given that Amendment No. 9 deals specifically with that issue perhaps he would allow me to deal with it separately.

The noble Lord raised some interesting points of a Second Reading nature which were followed up by the noble Baroness, Lady Carnegy. Without trying to recycle what I said in Committee, there is an interesting, difficult and decent problem about the shallowness of tapers so that as low a deduction rate as possible is gained. For every pound earned, people should receive enough of it to make it worthwhile to seek to increase their hours or earnings. The price of that is that they remain on those benefits for longer, at higher public cost.

The alternative route is to have a much sharper withdrawal rate, which gets them off benefits sooner. That is cheaper, but it also produces a strong disincentive to increase hours and earnings. We discussed that in Committee, but I do not believe that at this time of night your Lordships would wish me to repeat the argument. The debate has exercised all parties and all social policy commentators for a long time.

The Government believe that a 55 per cent taper, compared with the old tapers, has reduced the minimum deduction rates, particularly for those living in rented housing who might therefore be eligible for housing benefit, to a more acceptable figure. But for some people, the MDRs are still very high and to reduce them would require an even more shallow taper, going further up the income levels with greater public cost.

We believe that we have struck the balance right, but we must return to the issue whenever we are considering the integration of tax and benefits., or looking at the scope of the benefit or at what happens when a benefit becomes a tax credit, because they are proper and decent issues to raise. We believe that we have got it right, but that is not to say that a 55 per cent taper, for example, is right for all benefits or all tax credits in future.

Lord Higgins

My Lords, the noble Baroness rightly says that Amendment No. 9 deals 'with savings in relation to WFCs. I was seeking to make a wider point which I made to the noble Lord, Lord McIntosh of Haringey, at Question Time. We are now extending the payment of these new benefits to people on what would normally be regarded as relatively high incomes while at the same time taking away benefits from people on, say, income support simply because they have a small amount of capital—10 per cent or so—of this amount of income. At some stage, one needs to sit back and look at the structure as a whole in order to see whether it is sensible.

Baroness Hollis of Heigham

My Lords, I take the wider issue, but we are not paying benefits to people on higher earnings. We are offering tax credits as incentives for the most part to people on low to middle incomes to go back to work and to hold down a job. The reason it goes so high is the cost of childcare. That would normally apply where a couple is working and therefore it would be rare that one of them would be a high-rate tax earner. If one of them were a high-rate tax earner, almost by definition the other person is likely to be at home because of the way the sums work. Therefore, the tax credit would not arise and would not go up that income scale. The noble Lord is correct in saying that in regard to savings the figure begins to be reduced at £3,000 and tapers out at £8,000. We shall return to this issue when we consider Amendment No. 9.

Amendment No. 2 would stop tax credits going to families with a joint income equal to the higher rate threshold.

As I said in Committee in response to Amendment No. 12, I do not think that the amendment would work, even if I agreed with its basic premise. I do not want to overdo the point about technicalities, but it is worth saying that because the amendment appears in the same format for a second time, even though I pointed out its defects at Committee stage, it appears to limit the opportunities to pay applicants WFTC. It would mean that families above the threshold given in the amendment that met all the conditions for eligibility would remain entitled to an award that they could not be paid. That would obviously be inappropriate.

According to the amendment, you could be entitled to some WFTC each week, but the Inland Revenue could not pay it because the family had a joint income above the limit. That would mean applying an additional and overriding income limit on top of the normal threshold and taper which would act to target awards of WFTC.

That is not all that I believe is wrong with the amendment. As I said in Committee, the amendment links the award, which is based on a snapshot of current circumstances, to a ceiling, the higher rate threshold. The threshold can only be set by reference to an individual circumstance of the whole tax year and it cannot finally be known until the end of the tax year.

There is clearly a mis-match and it is not clear how it would work. It could in practice mean that the Revenue would need to hold that payment until after the end of the tax year, when the figure could finally be worked out, and in some cases until after submission of the individual's tax return. The ceiling that the amendment uses, the higher rate threshold, is not a set figure but will differ from person to person and from year to year, depending on a number of factors.

In addition, the amendment would introduce an undesirable and harmful cliff edge. A family below the limit would get help; a family that earned £1 more a week above that limit would lose perhaps £10 or £20 of WFTC to which it would otherwise be entitled.

I understand the concern that money is going to those on higher incomes; however, WFTC tailors the amount of the tax credit to family circumstances, with the threshold and the taper ensuring that the amount they receive is gradually reduced as they earn more. It avoids a situation where it is a positive disadvantage, because of the high marginal tax rates, to earn more.

Amendment No. 3 seeks to steepen the taper to 75 per cent where family income rises above 25,000. Again, the change from 55 per cent to 75 per cent at that income point will provide, if not a cliff edge, then a steep slope, which is a better situation than the previous amendment but still damaging in terms of encouraging people to earn more.

In the few cases where large income families would get some help when earning relatively high incomes because of their high childcare costs, the proposal is to introduce a complex second taper for this group only which increases the reduction rate and current withdrawal rate of 70 per cent in family credit to 55 per cent in WFTC. It takes it back up to 70 per cent as family credit and then, for good measure, adds another 5 per cent on top.

I believe that the single taper is easy to understand. It will allow applicants to see the rewards of work more clearly. Multiple tapers and special rules would bury the clear effects of what we are trying to achieve in a mathematical fog. I would not wish to go down that route simply because of the few numbers of people involved with large families that get help through family credit for their children and childcare.

The issue is how many would gain and what the numbers are of those on high earnings. There is a strict trade-off between incentive, the pitch of the taper and the scope of the help. A simple, single, shallow taper applied to all people is easier to understand and will send a positive message about working longer hours and getting better jobs, but it does mean that a few large families with children, where both parents are in work, will get help they would not have got under the preceding benefits. We accept that.

Perhaps I may give some examples as an instance of the figures for which the noble Lord, Lord Blackwell, asked. We calculate that only about 80,000 families—that is, about 5 per cent—of the 1.5 million eligible families have a household income of more than £17,000 per year. We calculate that about 5,000 families of the 1.5 million will be eligible for WFTC with household earnings of over £25,000. That is less than half of 1 per cent of the total for which one would introduce that extremely complicated second taper.

There is a balance, and the truthful answer is that we do not believe that it is worth it. The proposals to do away with that small number of gainers—less than half of 1 per cent for those earning more than £25,000 and less than 5 per cent for those earning more than £17,000—are not worth the complexity and the blurring of the message that that would cause.

I understand the concerns but I honestly believe that it would be a case of—I use a clumsy metaphor—the tail wagging the dog. We should lose so much in simplicity for very little clawback from a very few relatively comfortably off families, with large numbers of children, entitled to help with their children's care. Therefore, under the circumstances, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Higgins

My Lords, the noble Baroness was in sparkling form in knocking down that amendment. I find her arguments very largely convincing and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 3 not moved.]

Lord Astor of Hever moved Amendment No. 4

After Clause 2, insert the following new clause—

    cc256-62
  1. WORKING FAMILIES' TAX CREDIT TO BE PAID TO PRINCIPAL CARER 3,368 words
    2. cc262-6
  2. CHILD CARE ELEMENT 2,270 words
    3. cc266-9
  3. CALCULATION OF TAX CREDIT FOR PARENTS IN RECEIPT OR NOT OF MAINTENANCE PAYMENTS 1,355 words
    4. cc269-75
  4. ADDITIONAL PAYMENTS OF WORKING FAMILIES' TAX CREDIT IN CERTAIN CASES 3,195 words
    5. cc275-90
  5. PROVISION FOR MINIMUM INCOME 7,500 words