Clause 1 - Introductory
Tax Credits Bill
11:00 am
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I will first answer the question from the hon. Member for East Devon (Mr. Swire). The answer is obvious and I wish that I had realised that. Because it tapers away, the transition lasts for as long as it takes the increase in child benefit to reduce and cancel the child dependency income. One cannot say that the transition will last for five, six or seven years, as it depends on the interaction with the provisions that were introduced in 1992 by the Conservative Government. As child benefit increases, the child dependency allowance goes down.
With regard to the intervention made by the hon. Member for Hertsmere (Mr. Clappison), some people who receive child dependency increases are not entitled to income support, but will receive more from the child tax credit. Such people are not entitled to income support because they may have other forms of income.
When we discuss other clauses it will become clear that, because of the way that child tax credit is structured, it lasts longer. That would be true even if the tapers were the same as those of working families tax credit, because those tapers are lower. Obviously, all those who currently receive such benefit would continue to do so. Provision for industrial injuries and war pensions are dealt with under separate legislation that we do not consider it appropriate to remove at this time. Those are different types of payment. They are more about compensation than social security and
would therefore be treated separately. I agree with the child dependence increases, and hope that I have made what is a complex area as clear as possible.
There is also the issue of people who will float off income support. When child tax credit creates an income for the family—either in its own right or with other income—it could possibly take a person beyond income support levels. The hon. Member for Hertsmere will understand that I do not want to go down that route at the moment, because the issue will depend on thresholds and tapers.
That leads to passporting. Because the working families tax credit was far more generous, we were unable to use the credit payment as the flag for passporting. We worked out a value that protected all those who were in receipt of passporting at that time. We are discussing how to make passporting work in the simplest way within the new tax credit system—it is complicated because there are many issues, whether it is milk or more straightforward matters such as prescriptions—given that the new tax credit will support families further up the income scale when automatic passporting would not be appropriate. We want to protect the position of those on income support. Passporting issues have more to do with those who are higher up the income scale and we have to decide on an appropriate figure at which to put the flag. That is a matter that, as I said, we are discussing with several Departments.