Clause 5 - Period of awards
Tax Credits Bill
5:15 pm
Professor Steve Webb (Northavon, Liberal Democrat)
I want to respond briefly to Conservative amendment No. 15 and say a few words on the first three of the four Liberal Democrat amendments. I know that my hon. Friend the Member for Teignbridge (Mr. Younger-Ross) will seek to catch your eye, Mr. O'Hara, to say a few words on amendment No. 53.
Amendment No. 15 would not allow a claim for a tax credit in advance of the year in which it was to be paid. While I understand the concerns about forecasting incomes, which I am sure we shall return to, the amendment would prevent historic data being used as a basis for a subsequent claim, even on the day before the start of a new tax year. Given the strong case for using historic data, and that is the direction in which some of the poverty groups would want to go, it could be counter-productive to remove that power. I should be interested in the Minister's comments.
Amendment No. 64, which inserts the words
''or is treated as being made''
after the word ''made'', is intended to achieve consistency. Clause 4(1)(b) refers to a claim for a tax credit being made in prescribed circumstances
''to be treated as having been made on a prescribed date''.
Therefore there is a provision in the Bill that relates not merely to the date on which the claim is made but to the date on which it is treated as having been made. Our question is whether that terminology should run through the Bill, so that subsequent references to when claims are made should also allow for the possibility that the date on which they are treated as having been made might be the relevant one. We have tabled the amendment once rather than 65 times, to see whether there is any substance in the point.
Our amendments Nos. 45 and 46 go to the heart of one of the two key issues of the new tax credits—whether it is sensible for them to run for a whole year. Clearly it is a question of balance and there is a trade-off here. The amendments enable us to raise our concerns about paying people a sum of money for a year.
The first concern is that, although there is provision for reassessment during the year, it may not happen. I am not saying that it will never happen, but that, for a variety of reasons that are not too difficult to imagine, some of the people whose claims should be reassessed during the year may not apply for reassessment. Therefore, at the end of a year people could find that they had been substantially overpaid. In an extreme case, somebody who anticipated, in good will, that they would be working an average of 30 hours a week might find, when looking back at the year, that they had worked 29-and-a-half hours a week. Their whole payment, including working credit, might turn out to be invalid. We could be talking about hundreds, perhaps thousands, of pounds in overpayment and the longer the period of assessment, the bigger overpayments will be. Because we are talking about low-income groups—high-income people get their flat rate child credits, analogous to the children's tax credit, so this is not an issue for them—the burden of repaying overpayments is more acute. The purpose of the amendment is to say that if things are allowed to continue for 12 months, large overpayments could result and make life a nightmare. Just as there is a take-up issue with claiming credit, sure as eggs is eggs, there is take-up issue on reassessment. Those who have claimed money do not always realise that their circumstances have changed sufficiently to warrant a reassessment.