Working Families Tax Credit

HC Deb 30 March 1998 vol 309 cc437-9W

Mr. Paterson

To ask the Chancellor of the Exchequer if he will set out the methods by which working families tax credit will be assessed, indicating who will carry out each stage of this task; what estimate he has made of(a) how long this will take in each case and (b) how much extra cost will fall on the employer in each case. [35891]

Dawn Primarolo

[holding answer 23 March 1998]: The detailed design of the Working Families Tax Credit—and plans for its implementation—will be developed in the next few months. Those involving payment through the wage packet will be the subject of consultations with organisations representing employers and other appropriate bodies. A regulatory assessment will be published when detailed administrative arrangements have been settled.

Mr. Webb

To ask the Chancellor of the Exchequer what methods he will employ to maximise take-up of the working families tax credit; and what level of take-up he is aiming to achieve once the system is established. [35770]

Dawn Primarolo

[holding answer 23 March 1998]: We will seek to ensure that as many families as are entitled receive the credit and we are considering how best to achieve this.

Mr. Webb

To ask the Chancellor of the Exchequer if the working families tax credit will make any distinction between married and cohabiting couples. [35769]

Dawn Primarolo

[holding answer 23 March 1998]: When the Working Families Tax Credit is introduced in October 1999, it will build on Family Credit which does not currently distinguish between married and unmarried couples.

Sir Teddy Taylor

To ask the Chancellor of the Exchequer if his estimate of the extra expenditure which will stem from the working families tax credit takes account of the consequential reductions in applications for housing benefit and council tax benefits; and if he will make a statement. [35936]

Dawn Primarolo

[holding answer 24 March 1998]: Estimates of the Exchequer cost of the new Working Families Tax Credit appeared in line 1 of table C.1 of the "Financial Statement and Budget Report" (HC 620). These represent the net cost of replacing Family Credit with the WFTC. They therefore take into account consequential changes to entitlement to Housing Benefit and Council Tax Benefit.

Mr. Lilley

To ask the Chancellor of the Exchequer if couples will be able to opt to receive child care tax credits paid direct by the Inland Revenue to the non-employed mother. [36358]

Dawn Primarolo

The child care tax credit will be one of the elements comprising the Working Families Tax Credit, and couples will be able to choose which of them is to receive the WFTC.

Mr. Kenneth Clarke

To ask the Chancellor of the Exchequer how payments made by the Inland Revenue under the working families tax credit scheme will be classified for public accounting purposes; how they will be classified for the purpose of calculating the PSBR and the control total; and if he will make a statement on the rationale and analysis behind the proposed classification. [36247]

Dawn Primarolo

The treatment of the Working Families Tax Credit (WFTC) in the national accounts is for the ONS who will be able to classify it once details are settled.

For the purposes of the "Financial Statement and Budget Report" (FSBR), in calculating General Government Expenditure and Receipts the scoring of the WFTC has been assumed to follow that of MIRAS, a scheme similar in some key aspects bearing on classification. Under this treatment, tax credit payments in excess of an individual's income tax liability are treated as part of General Government Expenditure. Regardless of their classification in the national accounts, WFTC payments will count to the PSBR.

The Control Total treatment of the WFTC has yet to be decided and the FSBR treatment should not be taken as an indication of future Control Total treatment. The projections of the Control Total in the FSBR implicitly include WFTC up to the level of the family credit expenditure that it replaces.

In Table B8 of the FSBR, WFTC is classified as an income tax credit and is deducted from gross income tax receipts in calculating net taxes and social security contributions. A corrected version of this table was published in the reply I gave to my hon. Friend the Member for East Ham (Mr. Timms) on 27 March 1998, Official Report, column 348.

Mr. Gibb

To ask the Chancellor of the Exchequer if the child care tax credit will be accounted for as(a) tax forgone or (b) public expenditure. [36309]

Mr. Lilley

To ask the Chancellor of the Exchequer if the amount paid by the Inland Revenue to couples who opt to receive working families tax credit paid direct to the non-employed mother will be classified in the public accounts as(a) public expenditure and (b) negative taxation. [36365]

Dawn Primarolo

[holding answer 26 March 1998]: All payments of Working Families Tax Credits (WFTC) have been classified as income tax credits in Table B8 of the "Financial Statement and Budget Report" (FSBR), and deducted from gross income tax receipts in calculating net taxes and social security contributions.

The treatment of the WFTC in the national accounts is for the ONS who will be able to classify it once details are settled.

For the purposes of the FSBR, in calculating General Government Expenditure and Receipts the scoring of the WFTC has been assumed to follow that of MIRAS, a scheme similar in some key aspects bearing on classification. Under this treatment, tax credit payments in excess of an individual's income tax liability are treated as part of General Government Expenditure. Most payments to couples who opt to receive WFTC paid direct to the non-employed mother are likely to be treated in this way.

Mr. Lilley

To ask the Chancellor of the Exchequer if he will estimate in each year to 2001–02 the total value of payments of working family tax credits and child care tax credits which will be classified as negative taxation in the public accounts. [36368]

Dawn Primarolo

[holding answer 26 March 1998]: Payments of Working Families Tax Credit (WFTC) are classified in the "Financial Statement and Budget Report" (FSBR) as income tax credits and are deducted from gross income tax receipts in calculating net taxes and social security contributions. Unfortunately, the figures for income tax credits were shown incorrectly in table B8 published in the FSBR. A corrected version was shown in the answer I gave to the hon. Member for East Ham (Mr. Timms) on 27 March 1998 Official Report, column 348. The sums included for WFTC in the income tax credits line in the corrected version are (£ billion):

Year	£ billion
Up to 1998–99	0
1999–2000	2.0
2000–2001	5.0
2001–2002	5.6

The treatment of the WFTC in the national accounts is for the ONS, who will be able to classify it once details are settled.

For the purposes of the FSBR, the national accounts scoring of the WFTC has been assumed to follow that of MIRAS, a scheme similar in some key aspects bearing on classification. Under this treatment, tax credit payments in excess of an individual's income tax liability are treated as part of General Government Expenditure. The FSBR projections assume that around 80 per cent. of WFTC will score in this way.

The childcare tax credit is an integral part of the Working Families Tax Credit (WFTC) and so has been included in the numbers above.