HL Deb 18 May 1999 vol 601 cc256-62

(" . Regulations made by the Board under section 2(1)(c) shall provide that where a couple is entitled to working families' tax credit the credit shall be paid to the principal carer.")

The noble Lord said: My Lords, in moving this amendment, I wish also to support Amendment No. 6 which is grouped with it.

Amendment No. 4 is designed to protect the family by ensuring that payment is received by the primary care giver. The Labour Party manifesto stated: We will uphold family life as the most secure means of bringing up our children. Families are the core of society".

This amendment addresses closely the arguments put forward by organisations across the spectrum—from the TUC and the Low Pay Unit to the Institute of Directors and the CBI.

The assumption of the Department of Social Security has always been that the best way to get money to the children is to pay the mother. After all, why pay child benefit to the mother if it is not the best way to ensure that it is spent on the children? Those concerns should not be readily dismissed by the Government. I urge them seriously to consider their approach. I beg to move.

Lord Goodhart

My Lords, I rise to speak to Amendment No. 6 which is the second of a pair of amendments in this group, both of which cover the purse-to-wallet issue. I should say that until now the noble Lords, Lord Higgins and Lord Astor, and I have largely agreed with each other and supported each other's amendments. However, on this occasion. I am unable to support Amendment No. 4 because, although there is a good deal to be said for it in principle, I must regard it as a wrecking amendment. It would mean the automatic payment of the tax credit to the non-working parent of a couple even though the couple wished the payment to go to the working parent. I recognise that that is what happens in respect of family credit at present but the main purpose of the Bill is to change that situation. Therefore, it seems to me that this is a wrecking amendment and like it or not—and I do not like the Bill very much on this point—I feel unable to support Amendment No. 4.

Therefore, I turn to Amendment No. 6. The background is that the Government have not accepted the principle that in cases of disputes between parents as to which of them should receive the working families' tax credit, it should normally go to the caring parent rather than through the pay packet.

The Inland Revenue stated that in a memorandum published in March, and that was strongly emphasised as being the Government's intention by the noble Baroness in Committee when the amendment was debated. However, the draft regulations said only that the working families' tax credit in the case of a couple should go to whichever of them they agreed, and the draft regulations said nothing about what happened in the event of a disagreement.

Apparently, the Government are anxious to keep any references to disagreement or the consequences of disagreement between a couple off the face of the regulations. The result of that appears to me to be that the regulations give no authority to the Inland Revenue to pay working families' tax credit to either member of the couple in the absence of an agreement between them as to which of them is to receive the tax credit.

The noble Baroness said that the Inland Revenue proposed to deal with that matter under its statutory powers of care and management. In Committee, I expressed doubts as to whether that power could be used to authorise payment to a person not entitled to it on the face of the statute or on the face of regulations made under that statute.

The Inland Revenue have taken advice and, as I understand it, they have concluded that whether or not they agree with my arguments, there is at least enough force in them to make it advisable to give the Inland Revenue a discretion under the regulations to decide who is to receive the payment in the case of disagreement. That provides a legal basis of payment to the carer parent. Therefore, we are prepared to accept the Government's undertaking as to the way in which the discretion is intended to be exercised, subject only to one outstanding point.

That point concerns the application forms and the explanatory notes. The drafts which the department produced and which I saw said nothing whatever about the procedure if a couple were unable to agree which of them should claim. The remarks of the noble Baroness on the 26th April at col. 114 of Hansard gave some degree of comfort, but not enough. On that occasion she said: As consultees have suggested. the form and guidance notes set out what needs to be considered by a couple when making the choice. More recent comments have suggested further changes which refer specifically to what happens in the case of a dispute or tell applicants where to go for help. We are looking for these. We very much hope that we shall he able to embody them to the satisfaction of all concerned in the forms that go out as of next April. In addition, the working families' tax credit helpline is always available and our guidance will be made public.

We would like an undertaking that either the form or the notes, or preferably both, should contain information about the procedure if the parties are unable to agree. If not, a woman may come under pressure to agree to payment to her husband simply because of a belief that if she does not agree to that there will be no money. Now that the Government have agreed to extend the regulations to cover situations where there is no agreement, can the noble Baroness undertake that the forms given to the applicants will explain what happens if there is no agreement?

10 p.m.

Baroness Hollis of Heigham

My Lords, the new clauses introduced by Amendments Nos. 4 and 6 bring us back to the subject, first, of whether couples be given the choice of who should be paid and, secondly, whether the safeguards we described in Committee are sufficient. They deal with choice and the disputes procedure which are made clear to potential applicants.

Amendment No. 4 seeks to replace the Government's approach with a rule which would result in the addition that WFTC provides going to the principal carer. Not only do we believe that this is the wrong way in which to approach the issue, but even if we were to subscribe to the sentiments behind it, that would not be the way in which to put it into practice.

The second amendment would support the Government's approach of giving the couple a choice, but seeks to ensure that legislation deals with the situation where a couple cannot come to an agreement.

Let me return to Amendment No. 4. I shall seek to show why the new clause would be unworkable and say something about why the Government's approach is preferable. In the light of that I shall seek to address the concerns expressed by the noble Lord, Lord Goodhart.

The new clause introduced by Amendment No. 4 looks deceptively simple. It says that if a couple is entitled to WFTC, then make payment to the principal carer. But there are problems with both of those statements. The technical problem and the reason why that new clause would not work is that there needs to be an applicant. That is the core of the application procedure where the applicant fills in the left-hand side of the form—I have copies here should your Lordships wish to see them—and the partner fills in or supplies details for the right-hand side. Together the two sides of the application form comprise the family circumstances. So the new clause is defective.

The amendment seeks to resolve the problem of what to do where couples may disagree by providing a statutory rule, and I sympathise with that purpose. But as I said in relation to defining principal care, there are difficulties in that regard. The clause, even if it worked, would simply shift the issue of who is to be the applicant, which is what it is now and therefore the forms set it out, to who would be the principal carer. Therefore the tax credit would not necessarily be paid to the applicant, but to whoever was determined to be the principal carer.

Let us think about that. Given that three-quarters of married women work, how would we determine who was the principal carer? Would the test be the hours that each party worked? Would it be the earnings, who did the school run, who went to the parents' evening or who did the dentist visits? Or if she were in waged work and he was self-employed at home, would the presumption be that he was paid because he was self-employed and working from home? Deciding who the applicant is on the basis of the choice that the couple have made is simple; deciding who the principal carer is when both of them may well be in work or have a complexity of family arrangements is much harder and much more intrusive. Therefore, we believe as a matter of principle that the way we have set out the provisions, to pay the tax credit to the applicant rather than to the principal carer though the applicant may well be the principal carer, is the right way to proceed.

WFTC is a work incentive measure designed to help families; it is not a family support benefit paid to families; it is not child benefit paid to families. It is paid to someone in work. The way we dealt with it is for couples to have a free choice as to which of them is to receive the money. It is not a choice about how they are to be paid. If they choose for it to be paid to him and he is in work, it must be paid through the pay packet. If the choice is to pay it to her and she is in work, it must be paid through her pay packet. If the choice is to him and he is at home, it will be paid to him directly. If the choice is to her and she is at home, it will be paid to her directly. But it is their choice as to whom it is paid and following what their circumstances are—whether they are in work or at home—will follow a decision as to how it is paid. We do not expect that to be a problem in the vast majority of families. I hope that explanation is reasonably clear. It can go to either him or her, but according to whether he is or is not in work or she is or is not in work, so the payment will follow.

Viscount Astor of Hever

My Lords, in principle, would not the Government rather see the payment going to the wife?

Baroness Hollis of Heigham

My Lords, no. It is not a principle about it going to the wife. It is not child benefit. It is not support for the wife. It is not support for the children. I want it to go to the family, but I want it to go to the family in such a way that it is a work incentive. If it is detached from the pay packet, as the noble Viscount's amendment would make it, then we address the issue of family support—I give the noble Viscount all credit for seeking to preserve that—but it does not perform the function of being a work incentive.

Lord Astor of Hever

My Lords, if the Government care as much as they say they do about the family, is not the idea that this should eventually go to the children in the family and that, therefore, the wife is the best route to use to enable that to happen?

Baroness Hollis of Heigham

My Lords, we have two separate arguments going here. We agree that we want to support families. We are seeking to do so with increased child benefit. I do not need to go into the statistics but we are increasing it by £15 for the first child and £10 for the second child from this year. We are improving working families' tax credit and the array of in-work support that goes to families, as compared with family credit. There is no dispute between us. Above all, we want to lift children out of poverty. As we know, the best way to do so is not by payments of income support but by helping families into work and ensuring that they have a working member in the household.

The reason children are poor and the reason poor children need our support as taxpayers is precisely that they live in households in which there is no adult in work. The best way to springboard those children out of poverty is to help one of their parents into work. The best way to do so is to increase the work incentives to go into work. Therefore, in my view, the noble Lord's amendment would not achieve what he seeks. If he wants to help children, the best way to help them out of poverty is to ensure that we make work as attractive and as feasible as possible for one of the parents. That will spring the children out of poverty. The best way of doing that is through the working families' tax credit and not through a disguised form of income support.

Therefore, I am sure that we do not disagree about our philosophic objectives, but we do disagree as to what is the most effective way of achieving them. If we believe that the best way to help children out of poverty is to get one of the parents into work, I hope that the noble Lord also accepts that anything which strengthens the work incentive while also supporting the family—in other words, anything that gives you two gains rather than just one—must add to the public good.

However, we recognise that there is considerable concern about how we handle the cases where couples cannot agree, for whatever reason, on who should apply for the tax credit and how it should be paid. My noble friends Lady Turner and Lady Lockwood also raised such concerns and, indeed, they have been raised again tonight. I hope that the explanations given in the other place set out clearly what we want to achieve. Again, we hope that we have got the balance right.

I now turn to the amendment moved in Committee by the noble Lord, Lord Goodhart, and the concerns that he expressed at that time. We accept entirely the principle and the spirit of Amendment No. 6. We all want disputes to be underpinned by the best legislative framework. We want to make clear that it will be paid to him in work if both agree; but, if there is a dispute between the couple, then, by default—and this is a dispute as opposed to a technical mistake—it will go to the woman. Therefore, having reflected on what The noble Lord said both in debate and in the subsequent letter that he was kind enough to write to me after the Committee stage, I hope that we can see a way forward that will address his concerns and put what we want to achieve and what my noble friends are both anxious to achieve on as secure a footing as possible.

The board's powers of care and management are used to deal with rare cases at the margins of a system that it administers. While we believe that disputes will only happen in exceptional cases, doubts have been raised about their frequency. I agree that we can only know that after the event. Therefore, to ensure that we can apply the procedure we want, however frequent the disputes turn out to be in practice, we see the advantage of putting the necessary powers into regulations. I believe that that will address the noble Lord's concerns.

The regulations would still give couples a choice upon which they must agree. They would then provide that, where couples cannot agree, the board will have the necessary discretion to pay WFTC to the partner it determines to be the main carer. Moreover, in those cases, the board would have the discretion to accept an application which would otherwise be defective only because it lacked a partner's signature. Noble Lords will appreciate that this must be a discretionary power because without the involvement of the dissenting partner the application may simply have been mechanically incorrect—some mistake made. To give couples the right to make single signature applications and have them paid automatically to the carer would be to invite such applications with obvious risks for the Exchequer.

However, I hope that the noble Lord feels that we have met his concern, which was most thoughtfully expressed in Committee. As I tried to say earlier, we have taken the matter away. The noble Lord has a point. We hope that he is not right in thinking that the number of disputes will be higher than we anticipate. But if he is right, then, in the light of what he said, we believe that it will be only right and proper to put the procedure in place. That means that if there is any risk to the woman by default in such a dispute, the payment would go to her. Therefore, we think it right to accept the noble Lord's proposition that we should put the matter on a secure footing by having it covered in regulations.

We want to retain choice for couples and we want to insist that the best way to address child poverty—which we are all concerned about—is to get one of the parents into work. The most appropriate way of doing that is through the working families' tax credit. However, we recognise that disputes could arise. In that situation we certainly want to protect the principal carer who is likely to be the mother. We propose therefore to put that on the footing of regulations. I hope that with those comments both noble Lords will feel able to withdraw their amendments.

10.15 p.m.

Lord Goodhart

My Lords, before the Minister sits clown, I hope I may say that I am most grateful to her for what she has said. That satisfies my concerns about the legality of the proposal—which, of course, I support—to ensure that in the case of a dispute the payment goes to the principal caring parent. However, the noble Baroness said nothing about the final point I raised; namely, whether the draft forms—the application form and the guidance notes—will be amended so as to give some explanation of what the position will be if there is a dispute between partners.

Baroness Carnegy of Lour

My Lords, before the noble Baroness finally sits down—

Lord McIntosh of Haringey

My Lords, we are at Report stage. I think it is legitimate for those who have already had an intervention to be reminded that we are at Report stage.

Baroness Carnegy of Lour

My Lords, the noble Baroness has not finally sat down.

Lord McIntosh of Haringey

My Lords, the Minister has spoken. We are at Report stage.

Lord Astor of Hever

My Lords, I thank the Minister for her reply. I was, of course, heartened to hear that she sympathised with our amendment. I shall want to read Hansard carefully and discuss the matter with the many organisations who have been in contact with us on this point. They feel strongly that the implication of "purse to wallet" is that the mother should receive the credit. I understood that that is what the Minister said. We shall probably return to this matter on Third Reading, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No. 5:

After Clause 2, insert the following new clause—