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1 After Clause 2, insert the following new clause—
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"Annual report to Parliament
The Chancellor of the Exchequer shall lay before Parliament an annual report on the Board that shall include—
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The Commons disagreed to the amendment but propose the following amendment in lieu:
1A Insert the following new clause—
Annual reports
(1) The Board must make to the Treasury an annual report about—
§ (2) The Treasury must publish each annual report made to it under subsection (1) and lay a copy before each House of Parliament."
§ Baroness Hollis of HeighamMy Lords, I beg to move that the House do not insist on their Amendment No. 1 to which the Commons have disagreed and do agree with the Commons in their Amendment No. 1A in lieu thereof.
The Government have listened sympathetically to the view of this House that an annual report on tax credits would be a useful vehicle to ensure effective scrutiny of the operation of the new tax credit system. As noble Lords will recall, I explained on Report that most of the information required for the annual report is already published—much of it in the Board of the Inland Revenue's annual report, which is laid before both Houses. But we want to ensure transparency in the operation of tax credits and to enable proper scrutiny.
So, although we still believe that a requirement for an annual report is strictly unnecessary, we have listened sympathetically to your Lordships' view that it would be useful for the relevant information to be contained in a single document focused specifically on tax credits. I am therefore pleased to speak to the government amendment moved in the other place in lieu of the Lords amendment. Please, my Lords, no jokes about scissors and paste or cutting and gluing.
The government amendment covers much the same ground as the amendment made by your Lordships. Much of the difference is due to a tidying up of the drafting—a matter that I know is close to the heart of the noble Lord, Lord Higgins. It may be helpful to the House if I explain the drafting changes. First, a report such as this is properly for the Board of the Inland Revenue to produce and present to the Treasury, rather than for my right honourable friend the Chancellor to produce himself. As the House is well aware, the Inland Revenue reports to Treasury Ministers, which is why subsection (2) of the new clause imposes on the Treasury the requirement to lay the report before both Houses.
Secondly, I believe that the intention behind paragraph (a) of the noble Lord's amendment was that the report should include the amount of tax credit paid out each year, as reported in the Inland Revenue's departmental accounts. That was not clear in the 418 drafting of the Lords amendment, and subsection (1)(a) of the new clause in the government amendment sets that out in detail. I hope that that is helpful.
I turn to the other items. Subsection (1)(b) makes clear that the report will set out the number of awards of each tax credit made in a year. As the House will know, we normally publish statistical reports of the awards of working families' tax credit and disabled person's tax credit on a quarterly basis, but we understand the value of including information about awards in an annual report on tax credits. That will be a useful set of data to assess whether the credits are reaching the right families.
Subsections (1)(c), (d) and (e) cover information relating to compliance inquiries, penalties and prosecutions. Of course, there must be the greatest transparency in the reporting of the Inland Revenue's compliance activity. Much of that information is already provided in relation to WFTC and DPTC as part of the Inland Revenue's annual report. But again, we acknowledge the convenience of bringing together that information in a single report. Indeed, the government amendment goes further in that respect than the amendment passed by your Lordships' House. The Government's amendment will cover not only details of prosecutions—as noble Lords intended—but details of the number of compliance inquiries undertaken and the number of penalties imposed. That is an important and I hope helpful addition.
There was concern in another place that the number of prosecutions for tax credit fraud currently carried by the Inland Revenue was low and showed a lack of determination on its part to tackle fraud. That is not true. The Inland Revenue is serious in its efforts to tackle fraud both in respect of tax credits and in the tax system more generally. I hope that noble Lords will accept that that information will be useful to them.
Finally, the House will no doubt be aware that the new clause moved by the Government in another place does not include reference to the cost to employers of paying out working tax credit. As I made clear to noble Lords on Report, it is inappropriate to provide an estimate of employers' costs in an annual report. That matter is properly and comprehensively addressed by the regulatory impact assessment. The RIA is being revised in the light of announcements made in the Budget. The revised assessment will be made available to Members of both Houses.
However, if your Lordships would find it helpful, I can give an undertaking that the information carried by the RIA will be included in the report—in other words, bringing together all of the information in one place. Given that a new RIA is made not every year but only as, when and if the financial assessment changes, it would not make sense to promise to review it each year. But I am happy to include the RIA assessment, keep it in the annual report and then change it as and when appropriate, thus bringing even that information into the body of the one report.
I hope that your Lordships will agree that we have clarified the drafting. We have gone even further than your Lordships wanted in producing additional 419 information about fraud and prosecution. We have addressed the substance of concern about employers—that the information be available—without accepting that it is the job of the Inland Revenue to continue to make regular, annual reports on that. That is a matter for employers. I hope that your Lordships will agree that the Government have taken account of the will of this House and are seeking to be helpful; that we have amended the Opposition amendment to embody it in the Bill; and that honour is served.
Moved, That the House do not insist on their Amendment No. 1 to which the Commons have disagreed and do agree with the Commons in their Amendment No. 1 A in lieu thereof.—(Baroness Hollis of Heigham.)
§ Lord HigginsMy Lords, I think that it is true to say that one's view of another place is rather different from this end of the building than when one is in the other place. Even after 33 years in the other place, having chaired the Procedure Committee on various occasions and so on, I read with some surprise the report of the Commons debates on 26th June, when the amendments were discussed. Curiously, when I read Hansard, the amendment in lieu does not appear anywhere. It is therefore extraordinarily difficult to follow what the subsequent debate is all about. The Minister failed to move the amendment in lieu at either the beginning or the end of her speech, but let us leave that on one side. It is in front of us now so I suppose that it is here by some process of osmosis.
On the point that the noble Baroness has explained about the Inland Revenue being responsible rather than the Chancellor, which we fully understand, the Minister in another place said:
That is why subsection (3) of the new clause imposes"— [Official Report, Commons, 26/6.02; col. 892.],the Treasury requirement, and so on. In fact, as your Lordships will see from the amendment before us, there is no subsection (3). It gets worse, because later on in the debate there is further confusion about what is in the amendment and on the Order Paper. The Minister refers to subsection (f), which also does not exist. None the less, one struggled through it all, but it makes life a little more difficult when we come to consider the Commons amendments.There is another point that deserves some consideration. The amendment before us relates to the Bill as it first arrived in your Lordships' House. We do not have a re-print that shows the amendments made by your Lordships and agreed to by the Commons. That is of no consequence for this evening's debate, but, given the utter chaos that accompanied the government amendments that were accepted in this House and in another place, it would have been incredibly difficult to know what the amendment was, had it been of a more technical nature. Dozens of amendments were made here and accepted in another place, but this version of the Bill makes no reference to them. It would be terribly difficult to juggle all the papers.
420 I now turn to the points of substance. We raised the matter of employers' costs in earlier debates. This evening, the Minister—who has, I think, been sympathetic throughout to the idea of an annual report—gave a further undertaking on that issue. We understand the difficulty, but, despite what was said in another place, the costs will vary over time, and the regulatory impact assessment that we have now will be out of date by a later stage. If I understood the Minister correctly, she said that, if there were a significant change, she would take steps to ensure that we are aware of what is going on.
§ 8 p.m.
§ Baroness Hollis of HeighamMy Lords, I shall clarify the matter. The regulatory impact assessment happens when legislation is changed, as part of that process. At that point the revised figures would be incorporated into the annual report.
§ Lord HigginsMy Lords, that is very welcome. In the light of the Minister's helpful reply, we can leave that aspect to one side.
The second issue is take-up. Although it is not entirely clear, the Minister in another place seemed to be under the impression that the Government's amendment in lieu somehow covered the points that our amendment made about the take-up of working tax credit and the estimate of the take-up of child tax credit. My understanding is that that is not the case, although I am open to correction. With the Government's amendment in lieu, we will not get an estimate of take-up; we will get the number of awards of working tax credit and so on. That is something different.
Take-up is an important issue. We must know to what extent the tax credits are taken up. We need a comparison of the number of people who might be entitled to them and the number of people who actually receive them. The Minister in another place seemed to think that that was covered in the amendment in lieu, but that is not my understanding. Perhaps the Minister can correct me on that.
The third matter with which we are concerned is fraud and prosecution. Again, the amendment in lieu goes somewhat further than we had anticipated, as the Minister said. We asked for data on the number of investigations, prosecutions and convictions, whereas the Government's amendment in lieu goes somewhat further. It was explained in another place that that was because the Inland Revenue penalties were different from—and, I suppose, more extensive than—the penalties normally available to the Department for Work and Pensions. In that respect, we can say that the amendment is further progress.
I am not saying that everything that we would have liked is there. The point about take-up is important. However, the principle of an annual report has been accepted, and that is to be welcomed. Although the amendment is not a whole loaf, it is a significant improvement, made as a result of the debates in this House and the Government's undertaking to consider 421 and react to the points raised. It would not be right to reject the amendment and go any further, not least because of the technical point, which the Minister made, that it is for the Inland Revenue and the Treasury, not the Chancellor, to make the report. We welcome the Government's flexible attitude, even though they have not met all the points we made.
§ Earl RussellMy Lords, the proceedings on the amendment do credit to a bicameral parliamentary system. Occasionally, people, fearing that Parliament may become more truly bicameral, express fears of deadlock. They do not realise how lucky they are. They should consider the constitution of the 17th century Dutch republic. It was a union of seven autonomous provinces, each sending delegates to a federal states general. Those delegates were mandated, so, whenever the seven provinces' delegates disagreed, they all had to go back for further instructions. Executive power rested with the stadtholder, who had little, if any, formal legal authority. Anything of importance needed the assent of the chief burgomaster of Amsterdam, who would be largely responsible for funding it. One would have thought that nothing could have worked under such a system: in fact, it was the best governed country in 17th century Europe.
The amendment illustrates that, when people want to reach a compromise, they can do it extremely well. Before listening to the Minister, I was going to say that two thirds of a loaf was better than no bread. However, having listened to what the Minister said about the regulatory impact assessment, the costs to business and the possibility of including that information in the annual report, I think that we have just about the whole loaf. The amendment is rather better drafted than it was in the form in which we originally left it. The Minister and those responsible in another place deserve our thanks for what they have done.
The noble Lord, Lord Higgins, made a point about take-up. It is worth attention. I assume that it will be possible to discover how many people were eligible for the tax credit and did not apply for it and that, were that information to be available, it would be included in a report. The Government are as interested in that information as we are.
The reference to Clause 18 clarifies a good deal. The distinction between prosecutions and convictions is valuable. Generally, the amendment has had a wash and brush-up, which has done it nothing but good. I thank the Minister warmly for her part in the story, and I welcome the amendment before us now.
§ Baroness Hollis of HeighamMy Lords, I am grateful for the warm response from noble Lords. The noble Lord, Lord Higgins, raised one major concern. Although he welcomed the clarification of what we were going to cover, including the incorporation of information that was in the regulatory impact assessment, he again raised the question of take-up.
422 There is an ambiguity in the original amendment, which, I think, the noble Earl, Lord Russell, picked up. The amendment refers to,
an estimate of the take-up".Take-up is something that has happened. If the credit has been taken up, we need not give an estimate; we can give actual numbers. Had the amendment referred to "an estimate of entitlement", it would have picked up the point made by the noble Earl, Lord Russell. The noble Lord, Lord Higgins, said that the other place did not seem to understand what we were getting at. I do not want to sound picky, but it may be that the amendment, as originally drafted, laid itself open to two readings. The other place took the view that take-up was something that had been taken up, as opposed to an estimate of entitlement.There is, in any case, an issue about entitlement. We have a good idea what the entitlement ought to be for families with children because we can extrapolate from the figures for those currently in the system. However, there is a new group—we think about 300,000—of adults over 25 who are without children whose incomes are sufficiently modest. We do not know whether it is 300,000, or 200,000, or 400,000 or whether circumstances will change. It is very flaky. The noble Earl, Lord Russell, is right. We want the system to succeed, and we will track things as far as we can. There will be the sort of outreach work and information provision to encourage take-up that there was for the pension credit—the minimum income guarantee. We have no reason not to wish for people to take this up. Therefore the noble Lord need not worry that we shall not actively pursue it.
With that information, I am glad that noble Lords have been able to welcome the amendment.
§ On Question, Motion agreed to.