Clause 2 - Functions of board
Tax Credits Bill
11:30 am
Professor Steve Webb (Northavon, Liberal Democrat)
I was startled by the hon. Gentleman's brevity.
With regard to amendment No. 3, and the issue of whether these tax credits should be regarded as negative tax revenues rather than as social security benefits, it is clear that a part of them offsets a tax liability. Therefore, regardless of whether they are listed as a reduced payment of income tax—on a pay slip, for instance—or as two separate entries, there is a meaningful sense in which they are tax credits, as they reduce someone's net tax liability.
However, some part of the expenditure that is being dealt with in this part of the Bill does not do that. If a family's tax liability is smaller than its combined tax credits entitlement, it is hard to see how the part of its tax credit entitlement that does not merely offset its tax liability but goes below zero—thereby exceeding its tax liability—can be regarded as a negative income tax yield rather than a social security payment.
I want the Minister to inform the Committee, either now or in writing—or in another way—about the breakdown of the total expenditure on tax credit, so that we can draw a comparison between the part that offsets people's income tax liabilities, and the part that takes them beyond zero and, therefore, is really only a social security benefit payment. I have no feel for whether that comparison will reveal a figure such as a quarter, a half—or whatever—and it would be helpful if the Minister could inform us. If most of the tax credit money is offsetting tax liabilities, it makes a certain amount of sense to regard it as negative income tax, but if only a small part of it is doing that, and most of it is taking people well beyond zero, it should be regarded as benefit.