HL Deb 29 July 2002 vol 638 cc756-62

8.10 p.m.

Baroness Hollis of Heigham rose to move, That the draft regulations laid before the House on 9th July be approved [35th Report from the Joint Committee].

The noble Baroness said: My Lords, in moving to this Motion, I shall speak also to the Child Tax Credit Regulations.

I am delighted to introduce the Working Tax Credit (Eligibility and Maximum Rate) Regulations, which are made under powers provided by Sections 10, 11 and 12 of the Tax Credits Act 2002. They set out the detailed eligibility rules for various elements of working tax credit, including help with childcare costs and the maximum rate of each of the elements.

The working tax credit is aimed at making work pay for families on low to moderate incomes. It replaces the working families' tax credit, the disabled person's tax credit and New Deal 50-plus employment credit. It will also—this is the important advance—for the first time extend support to people aged 25 or more without children or a disability where they work at least 30 hours a week. In other words, for the first time one can have tax credits without having children. For those over 25 who are in low-paid situations, in particular, that is an extremely important advance.

The key to being eligible for working tax credit is to be engaged in "qualifying remunerative work" and Regulation 4 sets out the four conditions that must be met if a person is to be treated as being in such work. Those conditions are that the person is working at the date of claim; that the person meets the appropriate age and hours conditions—that is, that he or she is aged at least 16 and working at least 16 hours a week or is aged over 50, and so on; that the work will last for at least four weeks from the date of claim; and that the work is done for payment.

Regulation 4 goes on to set out types of work that will not be classed as qualifying remunerative work. These follow the categories that are excluded currently for WFTC: for example, voluntary work, training allowances and sports awards.

The regulations do not follow the current WFTC/DPTC model of saying that hours of remunerative work must be calculated around a particular cycle or period around the date of claim. That approach would not be suitable—it is less responsive than our proposed system.

The qualifying remunerative work test will be based on a person's "normal" or "typical" working hours. The important point will be to establish the number of' hours a person actually does.

Regulations 5 to 8 cover situations where people will be treated as being in qualifying remunerative work when they are not actually working. That, again, is good news. Women on statutory maternity pay or maternity allowance, and anyone on statutory sick pay, will satisfy the work test, provided they were working the requisite number of hours immediately before their statutory payments began. Regulation 6 extends that protection to self-employed people who would have been entitled to statutory sick pay if they had been employees.

Regulation 7 provides that people with a recognisable cycle to their work pattern (such as ancillary workers in schools, for example) will be entitled to working tax credit during holiday periods. Under working tax credit they will in future be treated as being in qualifying remunerative work during school holidays provided that they expect to resume their normal working hours at the start of the new term. Again, that is a welcome change.

Anyone who satisfies the qualifying remunerative work test will be entitled to the basic element of working tax credit. Additional elements will be available depending on claimants' circumstances; those other elements are covered in draft Regulations 9 to 18.

The disability element will be paid to anyone who works at least 16 hours a week, has a disability that puts him or her at a disadvantage in getting a job and has received or is receiving one of a range of qualifying disability benefits. That is broadly similar to Regulation 9—it replicates the conditions for DPTC. The working tax credit will also include a 30-hour element to encourage people to increase their working hours. Again, that replicates what we currently do.

On childcare, Regulations 13 to 16 inclusive contain detailed rules for the childcare element of the WTC. That is an important part of the regulations—the childcare element is central to this Government's commitment to making work pay and builds on the success of the childcare tax credit in WFTC; it mirrors them. However, we seek to improve the circumstances under which we pay childcare tax credit in important ways. First, we extend under Regulation 14(2) financing of approved childcare that is provided in the child's own home. That is particularly valuable for a disabled child or when the parents are shift workers. We are also providing it in a more flexible way. At the moment, the 26-week rule can cut across people's entitlement to childcare. We have also set out the maximum rates for the various elements of the WFTC in Part 3 of the regulations, which can be adjusted under the Budget procedure.

I turn to the Child Tax Credit Regulations. That credit will be available to families who have the main responsibility for one or more children, whether the adults in that family are in work or not. Under the new tax credits, one need not have a child to be eligible to claim WTC and one does not have to be in work in order to claim CTC. We are producing instead a single continuous stream of income-based support that will sit alongside universal child benefit, whether the family is in work or not. It will be paid to any family who is "responsible for" a "child" or "qualifying young person". Each of those terms is defined by these regulations.

Regulation 3 sets out the circumstances in which a person will be regarded as being responsible for one or more children or qualifying young people and when they cannot be treated as being responsible for them. Noble Lords will remember that in response to the noble Earl, Lord Russell, I explained that we have put headspace into the primary legislation, not the regulations, to deal with the developing response to shared care in this regard, should we need to come back to this House in due course.

Regulations 4 and 5 define what is meant by a child or a young person respectively. The child tax credit will be available for a child up to 1st September following their 16th birthday. Beyond that date, support will continue up to their 19th birthday, provided that the young person continues in full-time non-advanced education.

Regulation 8 defines when a child qualifies for the higher disability elements. Regulation 6 rightly allows entitlement to continue for a period of eight weeks after the death of a child or young person to avoid unseemly hassle at an already difficult time. Regulation 7 sets out the rates of child tax credit, including the properly generous allowance for disabled children. I hope that noble Lords will be happy to welcome the regulations. I beg to move.

Moved, That the draft regulations laid before the House on 9th July be approved [35th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, the House is again grateful to the noble Baroness for her exposition of the regulations. A number of points that I was going to raise have already been covered by her.

As I pointed out earlier, we have had many opportunities in this House to discuss the whole issue of tax credits. As we have also stressed, those in another place were not quite so fortunate—they were rather more inhibited by programming Motions and so on. However, they debated these issues on 16th July in another place. At the conclusion of that debate Mr Bercow pointed out that there was an error in one of the regulations and the Minister, Dawn Primarolo, replied that there were another two errors: there were two paragraphs 14 and two paragraphs 5. She said that that was due to the "slippage rule". That was the only point in the entire debate that gave me considerable cause for concern. I am not the least bit clear about what the slippage rule is. When the following regulation was moved, Mr Bercow began—at least, according to Hansard—by saying that he was in a state of exultation and had nothing further to say. I think that that probably should have been: "I am in a state of exhaustion"! So far as the usual suspects around the Chamber are concerned, that might well be true in relation to tax credits.

I want to raise a few points with the Minister. The Child Tax Regulations, as has been pointed out, are in many ways to be welcomed, particularly with regard to childcare and so on. However, I am puzzled about one matter. It states: A child or qualified person shall be treated as not being the responsibility of any person during a period in which any of the following Cases applies". Case C concerns a custodial sentence for life, without limit of time, of detention at Her Majesty's pleasure, in Northern Ireland, and so on, and, finally, for a term or period of more than four months. I had not realised that children were receiving custodial sentences of life. In any event, it seems that one only requires paragraph (e)— for a term or period of more than four months". Once that is laid down, one does not need all the rather esoteric qualifications which existed previously.

As I said, the Minister dealt at some length with the 30-hour element and, again, that was a matter of subsequent discussion. However, I want to raise a point in connection with seasonal workers which partly reflects the matter raised earlier by my noble friend Lord Freeman. Does the qualifications side of the issue have to cope with the fact that some people may work during certain periods of the year and not at all during other periods?

I turn to my final point. I said earlier that these two orders relate very much to work and pensions, whereas the two previous ones were clearly Inland Revenue-inspired. Their terminology is very much that of the Inland Revenue. In Schedule 1 to the working tax credit order, which we are debating, there is a huge list of disabilities which place a person at a disadvantage in obtaining a job. I do not recall that happening previously. It seems to me that there is a danger that a list of that kind, which clearly seeks to be exhaustive, may exclude some perfectly good reason for a person being at a disadvantage in obtaining a job. Such a person should, therefore, qualify for a benefit. It appears that at present, if that reason is not included in the list, he will not qualify.

From my former constituency experience, I know only too well the extent to which people who are disallowed benefits under medical conditions become very upset if an attempt is made to define matters too precisely. I wonder whether the Minister will say a word about that. Other than that, the orders appear to implement what the Government intend, and I have no further points to make.

Earl Russell

My Lords, I offer a general welcome to the orders. I enjoyed the voice of experience which came across in Regulation 4. That regulation states that the work will be done for payment or in expectation of payment. I enjoyed that, first, because that will be of real help to people whose employers suffer bankruptcy and, secondly, simply because I like that note. It goes right back to Magna Carta. One could levy a feudal aid when the king married his eldest daughter, but Magna Carta specified that it could be done when he married his eldest daughter "once". There is a wealth of suspicion in that.

I also offer a very warm welcome to the 50-plus element in the tax credit order. The number of people between the ages of 50 and 65 who are not working represent a fearsome potential burden on the pension system, which, God knows, is carrying enough burdens already. Therefore, anything that may increase the appetite and opportunity to work for people between the ages of 50 and 65 is to be welcomed, and I am happy to do so.

I am also happy to welcome the provision for maternity leave. I am a little disappointed not to see in the wording of that regulation any provision for paternity leave. I thought for a moment that I heard the Minister speak the words "paternity allowance" but I could not find them in the regulation. I believe that, as we move towards gender equality, men will become more and more involved in childcare. Getting them involved in the very first few weeks is vital in setting habits. I say that only with the reservation expressed in the Committee stage of the Adoption and Children Bill by the noble Baronesses, Lady Gould and Lady Thornton, and by myself in cases where there is danger in contact with a violent or abusive father. With that reservation only, I believe that paternity leave might be included.

I welcome warmly Regulation 6 concerning the continuation of the tax credit during periods of statutory sick pay. For many people, such periods represent an abrupt journey. Occasionally, in moments when one thinks one is dying but is better two days later, I have wondered what it would be like to go suddenly on to statutory sick pay. It is not an attractive prospect.

Regulation 7 provides for school holidays and vacations. I accept the principle and the fact of what is done. But I wish that it had not contained the words—the Minister knows as well as I do that it is wrong— school holidays or…vacations during which he does not work". Any serious sixth-form teacher who does not work during the holidays is not doing his job. I wish it were possible to persuade those inside sanctuary buildings that that is not an accurate way of describing what is done.

In relation to that matter, another interface problem arises which needs to be addressed. The substance has been addressed but the thinking behind it has not. As I am sure the noble Baroness knows very well, the vacation is the time when one begins to do some work because one's teaching is over.

I am happy with the provisions relating to childcare in Regulation 14. I am also happy with the allowance in primary legislation for future progress towards shared care. But I am sorry that at present there is still the idea that one person always has overall responsibility for a child. That does not accord with practice, and it causes trouble when one tries to apply what is not in accord with practice.

I am very pleased with the extension of tax credit to children up to the age of 19 who are still in education. However, I should like to repeat a point first made with great eloquence in this Chamber by the noble Baroness, Lady David. Some people—one of my sons who is dyslexic is such an example, and therefore I should declare an interest—remain at school beyond the age of 19. I wonder whether it would have cost very much now or in future regulations to make the measure read, Up to the age of 19 or school leaving, whichever is the later". To cut off the credit half-way through a school term, possibly with exams coming up, could be a very grave shock and one which I do not believe this Government want to inflict.

I believe that the rates are generous and welcome and will do a great deal of good. I want to congratulate the Minister and her advisers on a job of work which has been well done and which, I believe, will do a great deal more good than the measure we discussed earlier this afternoon. I thank the Minister.

Baroness Hollis of Heigham

My Lords, I am very pleased that the final two sets of regulations have been so warmly welcomed. I shall be as quick as I can be in responding to the points raised. The first question raised by the noble Lord, Lord Higgins, concerned slippage. That simply means that the slip rule allows printing errors to be corrected when they are finally printed, but it does not in any way touch on the substance of the regulations. In other words, it allows for typos to be eradicated.

With regard to the issue of custodial sentences, I suspect that the matter is mentioned because one is dealing with children. One can think of cases such as this where the children could otherwise be in a hospital or detained until it is thought appropriate for them to be released. I suspect that, in some cases, that could be in less than four months. That is the reason that different categories are set out.

With regard to seasonal workers, which the noble Lord, Lord Higgins, asked me about—

Lord Higgins

My Lords, if the period is to be less than four months, that raises a separate issue. Other than that, if the period is a minimum of four months, then all the earlier qualifications in that paragraph seem to be completely unnecessary. If it is less than four months, perhaps one should consider that point.

Baroness Hollis of Heigham

My Lords, I am advised that the measure is included for the purpose of clarity and to ensure that, even though no period is specified so far as concerns the example that I gave to the noble Lord, it is made clear to claimants that certain types of custodial sentence which are handed down are still included as custody, which prevents the continuation of support. I believe that we both had in mind certain cases where youngsters have been under care and control or in custody for considerable periods and, while that is the case, their parents are not entitled to support, even though they may not come within the formal language of imprisonment. The intention of the measure is to specify that there are other ways to detain young people, which may not be classified as imprisonment, but which would deny their parents the ability to receive child tax credits. A hospital may be one such place.

On seasonal workers, notes accompanying the claim form—a point raised by the noble Earl. Lord Russell—will give clear guidance on this matter. People will be asked to state the number of hours per week that they normally work at the time that they claim tax credits. They will not be expected to work out their average working hours over a year. As a result, I believe we should be able to respond to their situation more helpfully.

The noble Earl also asked about disability tests. In the new tax credits we are continuing the existing arrangements for DPTC and WFTC. The main difference is that they are not disaggregated as they are at present, thus reducing any possibility of stigma in terms of payment to the disabled person.

The noble Earl, Lord Russell, welcomed the 50-plus element and asked about young people who stay on at school receiving benefit until their nineteenth birthday or until the end of the academic year. He will understand that that would bring about huge implications relating to child benefit and the like, but I take on board his comments and his criticism. We shall reflect on those but I do not believe that I can offer him any help.

However, where the noble Earl and the noble Lord, Lord Higgins, may rejoice is on the pertinent issue of paternity leave and adoption. We intend to extend Regulation 5 to cover statutory paternity pay and statutory adoption pay. At the time that the working tax credit regulations were drafted the Employment Bill had not received Royal Assent. Now that it has, we intend to amend the working tax credit regulations. I hope that your Lordships will find those regulations acceptable.

On Question, Motion agreed to.