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Tax Credits

– in the House of Commons at 6:59 pm on 7th July 2003.

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Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions 7:17 pm, 7th July 2003

I beg to move,

That this House
condemns the Government for failing to pay the new tax credits on time to millions of entitled families, including those who applied before the January deadline;
is concerned that many families are still waiting to receive the money they are owed;
regrets the serious financial difficulties suffered by many of these families;
condemns the clumsy arrangements for paying overdue tax credits;
calls on ministers to explain why the Inland Revenue computer system has proved so unreliable;
shares the widespread concern that take-up of the new tax credits is likely to be low;
regrets the quality of information available on the new tax credits;
and calls on the Government to set up a system of emergency Social Fund loans to people who are still waiting for the correct tax credit payment.

This debate is not about the principle of boosting families' incomes through the tax or the benefits system. That has been a well-established part of British policy for a long time. Nor is it about helping families in low-paid work. Again, Conservatives have long been in favour of providing extra assistance for such families, which indeed is what the family credit, which we introduced, was all about. Those issues are shared ground, and invented disagreements on them need not detain us tonight. We have called this debate for the simple reason that 1 million families are still not getting the tax credits to which they are entitled. That is the scandal to which we are drawing attention through this debate.

Some of those families have applied, but have not yet been able to wade through the thicket of red tape to get their payments, while many others have not even applied in the first place. Ministers have given a range of estimates of the number of families affected, so I want to make the arithmetic absolutely clear. The Inland Revenue set it out in a very helpful poster, simply saying,

"9 out of 10 families with children are now entitled to tax credits".

As a result of a serious oversight in the Treasury, it gave a full and accurate answer to a question that I asked on the subject. I was told:

"The number of families with dependent children in the United Kingdom in November 2002 is estimated at 7.2 million."—[Hansard, 1 May 2003; Vol. 404, c. 440W.]

So we have 7.2 million families with children and 90 per cent. of them are entitled to the tax credits. That makes 6.5 million families with children who should be receiving those credits. That is the basic arithmetic—[Interruption.]—and I am pleased to hear that it is welcome on the Government Benches.

We have had a range of estimates from the Government. The Paymaster General has sometimes said that 6 million are eligible. In the pre-Budget report the Chancellor said that around 5.75 million families with children were expected to benefit from the child tax credit. In fact, as fears of a debacle loomed, the Treasury's official estimate of the number of children and families entitled to the tax credit miraculously started disappearing. The Treasury took the cautious and careful measure of reducing the target before being judged against it. In his Budget speech, the Chancellor said that for the first time from this month, 5 million families with incomes below £58,000 a year would receive the new child tax credit. However, not 5 million, not 5.5 million, but 6.5 million families are entitled to it.

What we know—the Paymaster General has made it clear again today—is that so far 4.2 million families are receiving the child tax credit and that a further 1.3 million families on income support or jobseeker's allowance will be moved on to that credit. That adds up to 5.5 million families: the gap between 5.5 million and 6.5 million is 1 million. There we have the 1 million families that are not receiving the help to which they are entitled. Those are the simple facts, and those are the families that we are representing in the debate tonight.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

The hon. Gentleman seems to have a good command of the figures, so can he tell us how many families are eligible for the credit in his constituency and what he has done to inform them about how to take it up?

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I can tell the hon. Gentleman that I have done considerable work on the Inland Revenue MPs' phoneline trying to help constituents who come to my surgeries in great distress about their inability to get the tax credits, and every Opposition Member—and, I suspect, Government Member—has been doing exactly the same. We all know what the problem is and why it arose. Part of the reason I have before me now—a 12-page claim form that every family is supposed to fill in. It is said that it could be a lot worse, but the reason that it is only 12 pages is that in order to fill it in claimants have to read the 47-page information booklet as well, taking them through question after question, so families have to wrestle through 59 pages in all in order to get the tax credits that should be theirs by right.

Let me quote an accountant from Grant Thornton:

"We fill in lots of forms for clients. From the point of view of the claimant, they can't fill them in because they are simply too difficult. The people who most need the help can't afford that advice."

The system has collapsed under the sheer weight of its own complexity and the last three months have been some of the blackest in the history of Inland Revenue, as millions of families have tried to make their way through the system.

I shall give the House some examples of the problems that people have encountered. My hon. Friend Mr. Clifton-Brown, whom I see in his place, mentioned his constituent, Mrs. Stocker, who received a letter from Inland Revenue stating that she had not

"signed and returned the award notice issued on"

—and the date was supplied in this way—"00/00/0000". That was the date with which Inland Revenue was working. As a result, it was said that the payment of tax credits had stopped. Inland Revenue was simply incapable of recognising the date from the start of the claim. To add insult to injury, my hon. Friend's constituent received a letter from Inland Revenue stating that she did not qualify for tax credits because she was part of another household for which an award was currently in payment. They meant her husband's household, in which she thought she had lived, with him, for many years. The husband received a similar letter explaining that he could not be paid because she was supposed to be in receipt of the tax credit. They were then separately told that their children lived in a third household. That is the sort of shambles with which many people have had to wrestle in the past few months.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

Mrs. Stocker, my constituent, originally applied for the tax credit as long ago as last September. Despite much correspondence and many telephone calls, she received an acknowledgement only in November. She eventually received the reply to which my hon. Friend referred, but does he realise that she worked for Inland Revenue, so they had all the details all the time? Even worse, when I rang the MPs' helpline I was told that, because she worked for Inland Revenue, I could not use the line because her details were confidential.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I am grateful to my hon. Friend for that extra twist in this extraordinary saga. Other examples abound. My hon. Friend Mr. Hendry cited a case of someone who did not receive the tax credit, despite earning only £10,000 a year, because Inland Revenue had placed the comma in the wrong place and believed that she earned £100,000 a year. She received a letter explaining that she would not receive the tax credit for that reason. There are many examples of families caught in that trap.

My hon. Friend Mr. Gale showed me a phone bill from one of his constituents who had made 325 phone calls to the hotline to try to disentangle his child tax credit claim. One of the constituents of my hon. Friend Andrew Selous, also in his place this evening, made 70 phone calls to the hotline. The man on that line eventually told him that someone would call him between 8 and 11 the next morning to sort out his problem. He then added, in a moment of truthfulness, that

"the chances of . . . getting that call were the same as winning the lottery without buying a ticket".

Having given the official answer, the man then gave the accurate answer—and, needless to say, no phone call took place the next morning. Those are the sort of problems with which hon. Members throughout the House have had to wrestle on behalf of their constituents.

Photo of David Cameron David Cameron Shadow Minister (Privy Council Office)

Is my hon. Friend aware that the problem with administration also affects the Pension Service and pension credits? My constituent, Mrs. Costar, received a letter from her mother's last address, saying:

"You will be pleased to learn that there is a new Government entitlement called pension credit, which could give you extra money each week."

The only trouble is that her mother died in 1972.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I am afraid that that is the sort of example that every hon. Member has encountered and the problem is that enormous personal distress is often caused in that way. Hundreds of thousands of people have received insulting letters about their personal affairs and suffered enormous financial problems as a result of their failure to get money that they expected and were entitled to receive.

Photo of Andrew Selous Andrew Selous Conservative, South West Bedfordshire

My hon. Friend rightly talks about the distress caused to people applying for the credits, but does he agree that those who work in Inland Revenue offices have themselves had to put up with an intolerable amount of stress because of what has gone wrong in the system? We should not forget them in this debate either.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

My hon. Friend is right and I want to make it absolutely clear that our motion is in no way an attack on the people working in Inland Revenue, who find themselves in desperate circumstances trying to wrestle with hundreds of thousands, if not millions, of inquiries from taxpayers throughout the country who are seriously worried about their financial circumstances. The source of the problem is not Inland Revenue, nor even software problems and computing systems—though they may be part of the problem. The real source of the problem is the policy decisions taken by Ministers.

To gain a measure of the shambles that people now face—some having to contend with months of delay before they receive their tax credits—let me remind Ministers of the speech given by the Prime Minister to his party conference on 1 October 1996. Those were the days when he could say, in a savage attack on the delivery of benefits under the Conservative Government:

"It takes two weeks to get your first Income Support payment and then one in seven will be wrong. It takes a month to get your first Child Benefit cheque".

Yet we know hundreds of thousands of people who would be delighted if they could receive their child tax credit within a month. They would look back on that period as one of halcyon days in which the benefit system actually worked. The Prime Minister then went on to say, because he was so shocked at people having to wait one or two weeks:

"We will introduce a programme to reform Government. Our aim is to co-ordinate services across government using the advantages of technology now available, to provide a modern and up to date service for the customers of the state. Government for the people, not Government for the Government."

That is what he promised in 1996. The gap between that rhetoric then and the reality now tells us everything about what has gone wrong under the Government.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is right to point to the administrative shambles of the tax credit, and we support his motion in that regard. He said that he is concerned about the actual policy, but the motion makes no positive proposals, apart from an emergency social fund. If he were in government, what policy would he adopt to make tax credits work?

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I have three practical proposals to try to make the system work better and I hope that Ministers will consider them carefully. I hope that I do not have to superglue my hand to the Dispatch Box to get Ministers' attention.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party

Has my hon. Friend noticed a pattern developing in recent debates? The Government make an absolute Horlicks of everything and then demand that we come up with the solutions to their mess.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

My hon. Friend is right and I am grateful to her for that point. If I give the House a short summary of the story so far, it will be clear why our system of tax and benefits has descended into shambles. In the four years since 1999, we have seen the abolition of the family credit, then the introduction of the working families tax credit, the disabled person's tax credit, the child care tax credit and the employment credit. [Hon. Members: "Hooray."] Then the Government abolished the married couple's allowance. Then they introduced the children's tax credit and then a baby tax credit. [Hon. Members: "Hooray."] Then the system needed further reform, so the Government abolished the working families tax credit, the disabled person's tax credit and the children's tax credit—some of the very tax credits that they have just been cheering. Labour Members are a bit behind, but some of the tax credits only lasted a year, so they have to be quick. Having introduced the baby tax credit, the Government abolished it after a year. Then they introduced the new child tax credit, abolished the employment credit and introduced a working tax credit. That is what they have done in the past four years, and they ask us why the situation has become such a shambles.

Photo of James Plaskitt James Plaskitt Labour, Warwick and Leamington

The combined effect of the changes introduced mean that for the first child in a low-income family the weekly support is now £54.25. How much was it when the Conservatives left office?

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

At least under our Government, we did not have 1 million families who were not getting any help. It does not matter what the theory is, because if families are not getting the money, they are not getting the money. That is the point.

I have three practical proposals for retrieving the situation. The first is to make better use of the provision that already exists in the social fund to make alignment loans.

Photo of Russell Brown Russell Brown Labour, Dumfries

I do not know what sort of working relationship the hon. Gentleman and his colleagues have with their local Inland Revenue offices, but I have had many people come to my office and had no problem in diverting them to the local revenue office for payments to be made within 24 hours.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

Sadly, many of us have found that the Inland Revenue emergency interim payments have not arrived to the timescale that many people have expected, and I shall give examples in a moment.

The social fund includes a mysterious provision for something called alignment loans. They are a special invention whose sole purpose is to tide people over when they are not receiving other benefits to which they are entitled. It is a sad reflection on our social security system that we have to have alignment loans to lend people money while they wait for other benefits. Indeed, alignment loans are an increasing proportion of all crisis loans made by the social fund. For the last year for which we have figures, alignment loans were £36 million of the £75 million paid out in crisis loans. So the social security system already contains provision to make loans to people who have not received money that they are owed by Government agencies. It would be right to use those funds in this situation.

I put that proposal to the Paymaster General, asking what discussions had been had with the Chancellor on that point. Her answer, in terms of sheer complacency, breaks even her record. She said:

"The Department for Work and Pensions is working with the Inland Revenue to ensure that there is a seamless transition"— a good, old seamless transition—

"to the new tax credits system and that there is good liaison between the two organisations to ensure that awards of both tax credits and social security benefits are made promptly to people in the most urgent need."—[Hansard, 18 March 2003; Vol. 401, c. 684W.]

That is what the Paymaster General claimed, but that is not the reality. If it were, we would not need the social fund loans. However, many people on low incomes have not received their money.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

We all know that hundreds of thousands of people have not received their money, and that is why the social fund loans are necessary.

Several hon. Members:

rose—

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I wish to make progress, because hon. Members on both sides wish to speak in the debate.

Secondly, the Paymaster General should lift the deadline, which falls tonight, after which people will no longer be able to apply for the child tax credit and receive the full year's payments. If one already has children and put in an application for the child tax credit from tomorrow, it will be backdated by three months and, therefore, it will not be for the full year. As every month passes, people will not be able to get the full year's value of the child tax credit. There is no reason why the Inland Revenue should have a rule on the backdating of payments of tax allowances within the financial year. Most tax allowances may be claimed even after the end of the financial year.

The same Inland Revenue and Treasury press officers who were briefing over the weekend that it would be impossible to remove the backdating rule were saying the opposite when it came to the baby tax credit. The baby tax credit is a special, double rate of tax credit, payable for children in the first year of life. It is a record-breaking tax credit—out of 500,000 families entitled to it, so far only 150,000 have received it. That 30 per cent. take-up rate is perhaps the lowest of any tax credit yet, although the Government may yet manage to improve on that performance. When we drew that to the attention of the Treasury, a spokeswoman did not see what the problem was because

"People have up to 2009 to claim for the baby element of the old children's tax credit."

So when there is a low take-up of the baby tax credit, people have until 2009 to claim, but the guillotine is about to drop for people who wish to claim the child tax credit this year. There is no reason for that and we believe that there is a strong case for flexibility.

Thirdly, there is a strong case for compensation. We hope that we will hear authoritatively from Ministers what their policy on compensation will be. People need guidance. They have suffered serious financial losses as a result of the failures of the system. For example, a constituent of my hon. Friend Sir Sydney Chapman found that the Inland Revenue was no longer sending payments directly to her account on the dates that it was supposed to. Instead, she was being sent giros irregularly. As a result, she could not be sure that the money would be in her account to pay her direct debits, and she has incurred £129 of bank charges because she has gone into debt because the payments have not been received regularly. In another example, a lady's bank charged her £320 in returned cheque fees after she had written cheques on a promise by the Inland Revenue that the interim payment would be made within 24 hours—as Mr. Brown claimed. She did not receive the money, the cheques bounced and she faces £320 in charges as a result. Those are the people who need to know whether they are entitled to compensation, and I hope that we will hear from the Minister on that point tonight.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

No, I want to move to a conclusion as other hon. Members want to speak and I want the Secretary of State, in particular, to talk about his responsibilities.

What is going on? This shambles of a tax credit system has the Inland Revenue, which finds it difficult enough to be a tax-collecting department, suddenly trying to become a benefit office as well. The implications of the shambles go way beyond the Inland Revenue and the child tax credit—although those are serious enough—and spread to the entire structure of the welfare state.

Will the Secretary of State comment on two problems? The first is the problem of unemployed people who are on income support and whom all of us, on both sides of the House, want to see encouraged into work. I shall report for the Secretary of State a conversation that a person on income support had with his new deal adviser recently. He wanted advice about how, under the new tax credit, he could be better off in work than out of work. The new deal adviser said:

"If you were to ask if there was any problem with registering for 'Tax credit', I would have to say no. I could not tell you that if you registered today you would not be able to feed your children in 3 or 4 weeks time. I could not tell you that we can't access the system on computer or phone. I could not advise you to wait until the backlog"— of hundreds of thousands of cases—

"is dealt with. Should you decide to wait I can't tell you that you will go into an unofficial file in order that we may notify you if and when the situation improves. I also can't show you an internal memo stating that the system has totally collapsed."

The memo was turned towards him.

In the light of that conversation, that person decided that the safest thing was to remain unemployed on income support. He was being advised by the new deal adviser that the tax credit system was such a mess that the only way to guarantee that he would continue to receive payments was to stay on income support.

I know that that is not what Ministers intended. I fully accept that that was never the purpose of their system, but I hope that they will have the honesty to admit that that is the consequence of the introduction of their policies.

Finally, may I ask the Secretary of State about pensioners and the pension credit regime? We are concerned that the Government are learning the wrong lesson from the child tax credit shambles, as they look to the implementation of the pension credit, which is supposed to start in October this year. They seem, above all to be concerned with minimising applications.

All Members have received a letter that states:

"We will be contacting about 20 per cent. of the pensioner population, selected at random, between April and September 2003...but the main telephone application service and the Pension Credit launch starts in October . . . We have introduced this special arrangement before October so that we have a controlled and measured build up of applications."

In fact, the letters do not even contain an application form. They are not intended to make it easy for people to apply for their benefit; they do not even contain details of the application procedure.

A Department for Work and Pensions spokeswoman was quoted as saying that the Department wants to

"minimise the number of paper applications".

I do not know how many pensioners will apply over the internet—no doubt, some will—but that is not the way that most of them want to apply for the pension credit—[Hon. Members: "Phone."] Before Labour Members shout about the phone, they should be aware of the experience of almost every phoneline introduced by the Government.

On the pension credit form, the answer to the question "How will I be able to apply?" was:

"We will be writing to people aged 60 and over between April 2003 and June 2004."

That end date is nine months after the supposed launch of the new pension credit. The Government have not been publicising the phoneline that pensioners can use. They do not want pensioners to know about it; it does not appear on the posters. The Government have concluded that the best way of ensuring that the pension credit does not have the same problems as the child tax credit is to give it such a low profile that not many pensioners will claim it.

If low profile is what the Govt want, the Secretary of State is the ideal man for the job. Low profile is not good enough, however. We want pensioners to receive the pension credit to which they are entitled. We want families to receive the child tax credit to which they are entitled. Instead, for the past three months, we have seen administrative failure, policy failure and distress for millions of families up and down the country. That is why we are moving the motion.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions 7:45 pm, 7th July 2003

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"notes that the introduction of the Child Tax Credit is the biggest single change in support for families since the Beveridge reforms of the 1940s, and a more radical change than the introduction of Child Benefit 25 years ago;
notes that the new tax credits represent the biggest ever investment in families with children, with no government ever having spent so much on children and families;
welcomes the fact that 90 per cent. of families with children are eligible for the Child Tax Credit;
further welcomes the fact that tax credits are now being paid to 4.2 million families;
notes that in addition 1.3 million families with children on Income Support and Jobseekers' Allowance are already benefiting from the increased level of support through their benefits;
welcomes the fact that 5.5 million families are therefore now benefiting from tax credits, with more and more being paid every week;
and believes that these figures belie the persistent criticism that people would not claim, and that those who said that families would not apply for the new tax credits, and that take up would be low, have been proved wrong."

I am pleased to move our amendment and to reject the claims of the Opposition. Their motion talks about low take-up, yet 4.2 million people are already receiving the new tax credits—[Interruption.]Mr. Willetts is nodding; and 1.3 million people are receiving new rates of benefit. That the Opposition try to brand tax credits a failure when millions of people are gaining from a system that has been going only for a few months shows how ludicrous the hon. Gentleman's claims are.

Even on the arithmetic that the hon. Gentleman set out at the beginning of his speech, take-up is about 84 per cent. He told us about the shared ground on helping poor families and helping people into work and how wonderful the family credit was, but does he know the take-up rate for family credit in its first year of operation? It was 57 per cent. at most. His is a classic case of "Do as we say", not "Do as we did". When the Conservatives had the chance, they got it wrong; family credit take-up was abysmal, so we shall take no lectures from them. Millions of people are already gaining from tax credits.

If people needed any convincing that today's Tory party has something to hide, a policy agenda that they dare not tell the British people, the hon. Gentleman's speech, bereft of any positive policy proposal—as Mr. Webb pointed out—will have persuaded them. I listened in vain for any idea of what the hon. Member for Havant and his party would do to replace the tax credits that they are so keen to run down. I am surprised by and disappointed in the shadow Secretary of State for Work and Pensions. We all know him to be a man of some intellect—

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

In one of those brains, there must be some thoughts about what the Conservatives would actually do in government.

I think that the hon. Member for Havant is being held back and gagged by the ever more extreme shadow Chancellor, who clearly did not relish conducting this debate himself. There is a sinister reason for that. The truth is that the shadow Chancellor has his eye on the £13 billion investment in children through the tax credits as part of his commitment to cut public spending by 20 per cent.

Photo of David Cameron David Cameron Shadow Minister (Privy Council Office)

I am not sure whether I regret interrupting the right hon. Gentleman's rant, especially after such a reasonable speech from my hon. Friend Mr. Willetts. My question relates to an e-mail that I received from one of my constituents, Mrs. Summers of Chadlington. She asked why the baby element of the child tax credit applies only to one child at a time. Why is not it payable for twins? That seems a reasonable point, given that the cost of bringing up twins is so much greater.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

It follows the rules for child benefit; they are applicable to the credit and I am sure that the hon. Gentleman wants them properly applied.

I was talking about the shadow Chancellor's designs on the £13 billion. We all know about his plans to cut the new investment that Labour has made in health and education. The last thing that he wants is for the hon. Member for Havant to apply his ingenuity to developing positive policies, and still less that he should tell people about them. The right hon. and learned Gentleman simply wants the hon. Gentleman to get on with undermining and trying to destroy the tax credits, without getting caught up in the arguments about the best way to tackle poverty, turn welfare dependency around and support children and families. The shadow Chancellor may not want to address those arguments, but that makes it all the more important for us to spell out why tax credits are the right approach—[Interruption.] Opposition Members do not want to hear why they are the right approach; they do not want to hear that tax credits are already benefiting more than 4 million people and why it would be so disastrous if the Tory party got the chance to do away with them.

Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health

It is a pity that the Secretary of State only took about 90 seconds to move from the Government's figures to discuss Opposition policy, but he referred again to more than 4 million tax credit payments being made. On 28 April, the Paymaster General told the House that there were more than 4 million applications, and the Government are now telling us that there are 4.2 million claims in payment. Will the Secretary of State therefore guide us through the relationship between those figures? More than two months ago, we were told that there were more than 4 million applications, but how many applications have now been made and how many are applications are awaiting a decision and not yet in payment?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

There are 4.5 million applications, of which 4.2 million are in payment, as we have already said. The hon. Gentleman accuses me of moving from the figures, but I shall come to the figures later; he has not heard the last of the success that the figures demonstrate.

As we all know, the new tax credits represent the biggest change in social support since Beveridge. They help people to move from welfare to work, bridging the gap between support for those who are not working and help for those who are. For the first time, they recognise in the tax system the extra cost of bringing up children, and they improve work incentives for second earners who work part-time at typical entry wages.

I listened to the hon. Member for Havant telling us his story about the new deal adviser and the tax credits. Does it not occur to him and his right hon. and hon. Friends that, if the Conservatives had won the last general election, there would be no new deal, no new deal adviser and no tax credits for them to talk about?

Tax credits are inclusive because they support people with children, whether or not they are in work, and people in work, whether or not they have children. They are more generous to working families on modest incomes. They give more flexibility over child care, enabling parents to change their arrangements to suit their needs and ensuring that those on maternity or paternity leave continue to receive the working tax credit. They represent a decisive break from a past in which there was one system of support for the poor and those out of work that was easily stigmatised, and another system of support for the better off, so the tax credits tackle stigma. Those are decisive advantages.

I heard nothing in the speech of the hon. Member for Havant to suggest that the Conservative party wants to do anything other than turn back the clock, making it harder to move from welfare to work, as it was when the Conservatives were in government, giving inadequate recognition to the cost of bringing up children, entrenching social division, denying parents choice, limiting child care options and stigmatising the poor. It is clear that they have learned nothing and would return the country to the high unemployment, welfare dependency and deepening poverty that was the hallmark of the Conservative years.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

A moment ago, the Secretary of State rightly pointed out that what is distinctive about the new tax credits is that, for the first time, they include people without children in in-work support, but we have heard no separate figures for childless people, who might be expected to have low take-up because they have never been in the system before. Will he tell us how many childless people are receiving the new tax credits? If he cannot do so off the top of his head, will he us assure that the Paymaster General will give us the precise figure for childless people when responding to the debate?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

I am sure that my right hon. Friend will give the precise figure, but what I can say—the hon. Gentleman is right to draw attention to that aspect of the tax credits—is that the gain for those on low pay can be as high as £50 a week. Whatever differences exist in the Chamber on the principle of tax credits and the resources that go into them, I hope that every hon. Member will join in campaigning not to run them down and discourage people from applying for them, but to claim their entitlement.

The motion and the debate show us that Conservative Members' real complaint is not the practical problems of introducing the new credit, but that we are introducing a progressive system. The whole aim of their campaign and today's debate is not to make the new tax credit work better, but to undermine them and the help that they provide to millions of people. If that were not their aim, they would go out and campaign for take-up, or they would come to the House with an alternative policy and tell us how they would tackle poverty, welfare dependency and the cost of bringing up children. They have done neither. We have heard no such case. Instead, they try to misrepresent the difficulties that there have been in implementation as a failure of the whole approach. Those claims are just as wrong as the predictions that they made when they said that families would not apply for the new tax credits. They said that take-up would be low.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

The House has been subjected to a few minutes of bluster of which Alastair Campbell would be proud. Let us now face the facts: there are decent, honest civil servants in the Paymaster General's office, for whom I personally have a high regard, who have cringed with embarrassment and then sent motor cycle couriers around the country with money, trying to bail out our constituents who have been left destitute and run up debts. Will the Secretary of State just answer one simple question—yes or no? Is he satisfied with the operation of his Department's national computer?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

I am not certain what my Department's national computer has got to do with the debate. The hon. Gentleman makes a fair point about civil servants' integrity and commitment. People throughout the country are committed to making a success of tax credits, as are the Government, and the Conservative party should be supporting that campaign and take-up effort, not using every pretext to run it down, make ludicrous predictions about what will happen and brand the whole thing a failure. Let us look at the facts: 4.5 million claims have been made already and tens of thousands more are coming in every week—and 4.2 million claims are already in payment, as we have said.

Photo of Ann McKechin Ann McKechin Labour, Glasgow Maryhill

Does my right hon. Friend agree that not only are childless workers now benefiting for the first time, but that the benefit is very valuable for disabled workers? One of my constituents, who is disabled and works part-time, will gain an additional £3,500 per annum as a result of the new tax credit system, so I am sure that hon. Members will agree that this Government, unlike the Conservative party, are making a real difference to disabled people in this country.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

My hon. Friend makes a very good point indeed. The extra help that the tax credits provide is of enormous value; it is helping our whole drive on welfare to work for people with disabilities and others.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does my right hon. Friend accept that, at 90 per cent., take-up is very high indeed, compared with the previous means-tested take-up, which was nearer 50 per cent.? Does he also agree that, given that the benefits apply to those with incomes of about £58,000 a year, it is very likely—the facts bear this out—that the people who are not taking up the benefits are those who earn more than £50,000? So there has been a terrific success in targeting and delivering money to families and paying benefits through people's pay, rather than through the old, stigmatised Tory system that did not work.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

My hon. Friend makes a very good point. Not only is the take-up higher than was the case with the measures taken by the Conservative party, but the benefits are very much more generous and they are transforming living standards and opportunities for people throughout the country. Millions of people have benefited in the first few months of the scheme. There have been practical failings in implementation, for which the Government have apologised, but the overall picture is one not of tax credits failing, but of tax credits succeeding.

As I have said, we acknowledge that there were problems in implementation, delays in payment, difficulties using the helpline and slow running of the IT system, and the Government and the Inland Revenue have apologised for the effect that that has had on the families affected. We have taken early action, putting in place a system of interim payments, and we have taken other steps to improve the system. The hon. Member for Havant advocated the social fund. I cannot understand why the system of interim payments that the Inland Revenue has operated does not commend itself to him as obviously more simple.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

The hon. Gentleman says that, but 200,000 people have benefited from interim payments, paid within 24 hours of their asking for them.

Photo of Mr Archy Kirkwood Mr Archy Kirkwood Chair, Work and Pensions Committee

The Secretary of State has captured in his last few sentences the fact that however well the policy was addressed and passed through the House, the administrative difficulties have been greater than anticipated. For that reason, if for no other, Mr. Willetts was on a strong point when he asked the Government to reconsider the window for backdating. A three-month period in normal circumstances is perfectly reasonable. Having regard to the difficulties with the administration of tax credits, will the right hon. Gentleman, working with the Inland Revenue, allow at least until the end of this calendar year to get people sorted out and to get the administration sorted out before the three-month travelling window of backdating kicks in?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

I understand well why such a case is made, and I listen to it with special care when it comes from the Chairman of the Select Committee. A real danger exists, however, that those who advocate it will contradict themselves. On the one hand, Conservative Members have argued that the system is too complicated, yet now they urge us to add further complexity. All Members will know people whose circumstances have changed and for whom several sets of information would have to be given. Conservative Members should consider again what their party did in office. When the Conservatives faced this issue with family credit, did they provide a year's retrospection? No; they operated normal backdating of a maximum of one month, and people had to show just cause to access it.

Photo of Ms Annabelle Ewing Ms Annabelle Ewing Scottish National Party, Perth

On that latter point, I find the Secretary of State's answer unconvincing. Surely it does not matter what the Tories did when they were in government. Surely it is up to this Government to do better. In any event, my key question concerns the admission by the Secretary of State a moment ago that errors were made. Can we have a statement on whether the Government will pay compensation to those people who have out-of-pocket expenses as a result of the errors that he admitted a moment ago?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

The hon. Lady said that we ought to do better than the Conservative party, and I certainly agree with her about that. Of course, we are doing better with the new tax credits, which are three times as generous as the family credit arrangements. On compensation, that is governed by an Inland Revenue code of practice, which must apply in this case as in other cases.

We acknowledge the difficulties that have been experienced, and we apologise for the effect on families. Let us also remember, however, that the overwhelming majority of payments were made to families on time and accurately. Performance of the system has improved. The Inland Revenue is clearing many more cases than it is receiving. I have certainly had more positive feedback from constituents and others who appreciate the real difference that the new credits are making to their standard of living and to their child care choices. Building on what has already been achieved through economic stability, 1.5 million more people in jobs, the new deal, the minimum wage, the increases in child benefit—which the Conservatives froze for nearly their whole period in office—the working families tax credit, improved child care and the new tax credits bring further help to families and those on low incomes. They carry forward our drive for a strong society in which everyone has the chance to make the most of their potential, and in which no one is left behind.

Photo of Michael Connarty Michael Connarty Labour, Falkirk East

I applaud the extra £2.7 billion that is going into help for families. Does my right hon. Friend accept, however, that some families—perhaps a larger number than we currently understand—who were on income support and who work for low wages received the tax credit and lost income support? They found themselves paying council tax and rent, and in one case in my constituency they found that they had £60 a week less for their children than previously because of bills coming in and because they had been taken out of income support by the tax credits.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

I recognise that the movement from welfare to work, which was very difficult under the Conservative party, and which we have improved substantially, involves withdrawal rates, tapers and additional costs. That is why, all the time, we are examining how we can improve the gains to work for those who make that difficult transition. I must say, however, that there is no comparison between the support and the extent of movement from welfare to work under this Government and the abysmal record of the Conservative party. It is the combination of the new deal help, which it opposed, the minimum wage, which it opposed, and the tax credit system, which it opposes now, that makes the difference. Let us remember that we started with the awful legacy of the Conservative years, inheriting a fractured society—[Interruption.] Conservative Members do not like to hear it because it is so true. It was a society riddled with divisions and plagued by poverty and social exclusion. Over 18 years, the Conservative party widened the gap between rich and poor, with millions being thrown into poverty.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

I am listening carefully to the Secretary of State's speech, as I did to my hon. Friend the shadow Secretary of State. Both of them have done a service to the people of this country. Will the right hon. Gentleman not admit, however, that one of the grave problems with the implementation of these tax credits, which I warmly support and with which I agree, is that people lose benefits that they have hitherto received before the tax credits were implemented? People are therefore left with much less income to pay large bills. Will he not only reply to that but indicate whether the Inland Revenue regulations relating to compensation might take that point into account, so that people can get redress for the huge debt that they piled up through no fault of their own?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

First, I thank the hon. Gentleman for his characteristically kind remarks. I recognise in him and in the spirit with which he addresses this matter a true one-nation Conservative. If more of his right hon. and hon. Friends would listen to him and to that approach, which is designed to build communality and strength in our society, and communality of interest—[Interruption.] I must be careful what I allege that he supports: a strong society in which our interdependence is recognised and in which we help people out of poverty by giving them a helping hand. If he can give me illustrations of the problem of the gap between benefits and tax credits kicking in, I will be pleased to look into them. I know of nothing within the design of the system that allows that to happen or should allow it to happen. Indeed, I know of many instances in which we are operating benefit run-ons to enable people to be assured that they are still getting their benefit income while meeting the costs of taking up a job.

We have been turning things round from the devastation and the division of those Conservative years—[Interruption.] Conservative Members groan, but millions of children grew up in neighbourhoods in which the odds were stacked against them and they were consigned to a life on inadequate benefits. Since 1997, we have started to turn that awful legacy around. For the poorest families in this country—as my hon. Friend Mr. Plaskitt asked and the hon. Member for Havant—was unable to answer earlier-child support was £27.70 a week in 1997. Through child benefit increases and the child tax credit, that will now be £54.10 a week for the first child: a near doubling of support since we took office. With economic stability and growth, we are helping to make work possible through the new deals, the investment in rolling out Jobcentre Plus, expanding child care and tackling the burden of child care costs. More than 180,000 families are receiving an average £41 a week to help with child care. We are helping to make work pay through the minimum wage and reform of taxes and benefits to improve the gains to work, to help with the costs of children and, for the first time, to raise the incomes of those in work without children. The Conservative party really cannot stand the fact that all of this is working. Our policies have got record numbers of people into jobs and have meant that 1.5 million fewer children endure the sort of poverty that was experienced during the Tory years.

If all our tax and benefit measures are taken together, an average family with children gains £1,200 a year and the poorest families gain £2,500 a year. We are determined to go further, which is why we have pledged to halve child poverty in a decade and to abolish it entirely in a generation. The British people know that when the Tories oppose the new tax credits, they are opposing the crucial next stage of making work pay and supporting families. It is clear from the debate that the Conservative party stands in the way of opportunity for all and a fairer Britain. We relish the opportunity to argue our case because with a Labour Government and the tax credits, Britain has more jobs and higher living standards. We do not leave the poor behind.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

May I make it clear to the Secretary of State that the purpose of the proposal to remove the deadline today is to allow more families to get the tax credit and be sure of the income that he is talking about?

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

That point would have been more persuasive if the hon. Gentleman and his party did not keep arguing and voting against the tax credits and trying to undermine and destroy them. The truth is that as we lead the country beyond the damage and division of the Tory years, our record on making inroads into poverty and raising incomes for all—for the poorest, most of all—is cause for confidence that we will complete our work of building a society of social justice and opportunity for all. That is what the debate is all about: we are in favour of opportunity for all and a fair Britain, but the Conservative party stands in its way.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 8:12 pm, 7th July 2003

It is quite right that we are debating the administrative shambles of the tax credit system. All constituency Members will have met and spoken to many people who have been unable to get through to the helpline and who have been deprived of money because one benefit has been taken away before the new tax credit has been introduced, leaving them in urgent need. I asked whether that will happen next April following additions for children. I am told that it cannot happen and that people will retain the child element of their income support until their child tax credit comes through. I hope that that happens in practice because it clearly did not happen this time round and many vulnerable people lost out.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

I am pleased that the hon. Gentleman raised that point so early in his speech because it was the point that I put to the Secretary of State. He denied that such things were happening, but, unless I have completely misunderstood the letters that I have received, it is happening. Benefit is being taken away before the new tax credit is implemented. Is the hon. Gentleman confirming that, because, if he is, it is the real issue about which I am deeply concerned?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman puts his finger on precisely what is happening. There should have been a guarantee that the most needy families who received the old top-ups to their wages—the old working families tax credit—would keep the money until the new money was on stream. That would have prevented a lot of the pain, but it did not happen.

We should set the context of the debate by pointing out that the Bill that introduced the system went through the House unopposed. No party objected to the principle of the new tax credit regime. I had the dubious privilege of serving on the Committee that considered the Tax Credits Bill and on the Committee that considered the previous Bill on tax credits. The Conservatives tabled many amendments on fraud, quite reasonably, but very few related to the issues that we are discussing. There has been an administrative failure to deliver a system of extra help for low-income families that was broadly endorsed by the House as a whole.

The schizophrenic relationship between the Treasury and the Department for Work and Pensions was beautifully summed up when Mr. Gale asked about the Secretary of State's computer. The Secretary of State said, in as many words, "Don't ask me, it's not my Department." The computer is not his at all—it belongs to the Treasury and the Inland Revenue. I am slightly puzzled that the Secretary of State is speaking in the debate at all, because the new regime is supposed to be part of the integrated tax system.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions

Does the hon. Gentleman accept that if the official Opposition had put up the shadow Chancellor to lead the debate—I suggested earlier that they should have done, but he clearly did not want to debate the subject—Treasury spokespeople would be speaking rather than Mr. Willetts, me and Mr. Webb? Why is he speaking?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The shadow Chancellor led the previous debate and I think that one debate in a day is quite sufficient for him.

Who is responsible for the system? The Secretary of State did not say that he knows nothing about it, so he clearly takes a close interest. The problem is that it is not really a system of tax credits at all because the Government have not integrated the measure in the tax system. The three-month backdating rule is a benefit rule, so the credit is really a social security benefit. There is a take-up problem because the credit is not integrated in the tax system. I recall that there was no take-up problem with the married couple's allowance, but the flat-rate child credit—the analogue of the old married couple's allowance—does have a take-up problem. Some people receive less money under the new system because they took up the married couple's allowance but do not claim the new tax credit.

Take-up is important. It is perfectly reasonable for the Secretary of State to point out that there was low take-up during the initial phases of family credit, but he cannot gloss over the fact that 1 million families are missing out. The baby credit take-up rate is extraordinary. Mr. Willetts read a quote from The Times on Saturday that said that the baby credit may be claimed until 2009—I suspect that most children will have grown out of baby clothes by that time. Indeed, the claim could probably be combined with claims for pension credit to save trouble. However, the idea that the baby credit may be claimed five or six years after children were babies demonstrates the absurdity of the entire system.

Take-up is a real issue, which is why my hon. Friend Sir Archy Kirkwood, the Chairman of the Select Committee on Work and Pensions, is absolutely right to say that we could put back the deadline without a problem. I did not understand the Secretary of State's response to that point. If people claim in August, the assessment is still based on their income during the whole financial year because that is the way in which the system works. Why must they supply more or different information if the claim is backdated only three months rather than to 6 April? The claim is still based on annual income, so payment must just be made for more weeks. The Secretary of State will reflect that his argument was specious, and given the deference that he properly paid to my hon. Friend, as we all do, I hope that he will revisit the point and either give us a more credible response or accept the point that we made over the weekend. Although that point is not detailed in the Conservative's motion, I am delighted that the hon. Member for Havant has come on board.

I also hope that the Paymaster General will answer my point about childless recipients, because they are the great forgotten people. The Institute for Fiscal Studies estimated that nearly 500,000 childless couples and single people with full-time, low-paid jobs would be brought into the new system for the first time. We have not received any separate figures showing the take-up among those groups—presumably because it is appalling. [Interruption.] I am happy to give way to the Paymaster General if she wishes to contradict my point.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I apologise for interrupting the hon. Gentleman's flow. It is not the case that there are no figures, and I shall answer his question when I wind up the debate.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I am bereft.

A second group of people with problems are not those who have not yet received their money but, bizarrely, those who have received too much. Now that people have started to receive money, some have received ridiculous amounts. The hon. Member for Havant mentioned a person whose income was entered as £100,000 rather than £10,000, but there are also people who are receiving far too much money because their income was entered too low. They are trying to give the money back but they cannot. I am worried because the maximum payments can be thousands of pounds. If such payments are made to people who are entitled to only the basic payment of £500, they will be thousands of pounds in surplus.

Will the Paymaster General tell us how the money will be clawed back? Small overpayments could be dealt with by reducing the following year's payment, but if people are entitled to £500 yet receive £5,000 will they receive nothing for nine years or, as I suspect, will the Inland Revenue ask for it back rather more quickly? People might hear the Government's rhetoric and think that the new system generously gives lots of money and, thus, spend the money on their children. What will happen if the Inland Revenue asks for it back? Will she run a scan on her computer, as I asked her to in a Westminster Hall debate on the same subject, on entitlement this year to the children's tax credit and entitlement last year to the working families tax credit to spot cases in which someone's entitlement has shot up tenfold, and investigate where mistakes have been made? That would help to pre-empt the problem and would be better than merely reacting to it when something goes wrong.

Much of what we have heard relates to problems with the IT system. A common thread runs through those problems. I understand that the company EDS is involved in the computer system for the tax credits. I also understand that it is involved in the computer system for the Child Support Agency, which is not going well. In addition, I understand that it has a hand in the pension credit system as well. How can we be confident that the pension credit system will not be even more of a shambles than the existing tax credit system? The same hands appear to be on the tiller in each case. There are some important questions to ask about the Government's IT projects, the management of those projects and whether the Government become beholden to one supplier when the contracts come up for renewal because no one else would dream of taking them on, in which case the taxpayer is not getting good value for money and the public are not getting good service.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

Does the hon. Gentleman accept that a fairly senior civil servant involved in the CSA told me this morning that there is no prospect in the foreseeable future of historical cases migrating to the new system because the CSA computer is in total chaos? As I said to the Secretary of State, who clearly does not have a clue what is going on in his Department, his computers in general are in chaos.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is right. Dealing with new CSA cases should be straightforward because they have been relevant only since March. If a small fraction of the caseload is in chaos, I am worried whether the whole system will work correctly. The addition of the tax credits and the pension credit means that we are heading for chaos. That has to be a worry for our constituents.

Mr. Connarty raised the important issue of passported benefits. That has also been a bit of a shambles. I hope that the Paymaster General can clarify the rules. When people who are not on the maximum rate of income support move on to the child tax credit, they could lose the income support element entirely. How will the passporting work in that situation? I visited the Department of Health website today to look at the health benefit scheme, which is important to low-income families because it includes measures such as free prescriptions. The website on low-income health benefits says, "If you are on working families tax credit", which was abolished four months ago, "these are your entitlements." There is then a little note that says, "This page will be updated." That shows the lack of joined-up thinking across the Government on passported benefits because, four months into the new system, the Department of Health has not got round to issuing new guidelines. Problems will be acute next April when the poorest families come across to the new system, because they really need the passported benefits. I hope that we have a coherent explanation of how passporting will work.

There is one aspect of tax credits on which I will court unpopularity with the public at large. I understand that the Inland Revenue has thrown resources at trying to sort out the problem of the tax credit backlog by putting people's tax returns in a corner in a room in Bootle. I am reliably informed that somewhere in Bootle there is a cupboard with a big pile of unopened tax returns.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I need to correct the hon. Gentleman. There is not a cupboard in Bootle, or anywhere else for that matter, with tax forms, filed in boxes or any other way. They have been processed; his story is incorrect.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I am grateful for that reassurance. Everyone will get their tax demands on time after all. I have succeeded in gaining another Liberal Democrat victory.

Mr. Cameron raised the small issue of twins. The Government could do some good on that without spending serious money. I am grateful that the Paymaster General indicated that some progress might have been made on that front. If twins are born, the child credit system means that the family receives one lot of child credit, because it is an amount per family, unless they are on a very low income, in which case there is an extra amount. However, the lump sum cost of twins is, potentially, double. For example, a family needs two prams; it is not possible to have a hand-me-down pram. I gather the cost of extending the family rate of the child tax credit to twins is £5 million—the Secretary of State confirms that by a hand gesture, and I do not think that he gestured £2 million. That would be a small thing to do. My hon. Friend Sue Doughty is campaigning for that and I hope that the Government do something about it.

The nub of the issue is what is the right thing to do about tax credits. I draw a distinction between the tax credit strategies for people of working age and of pension age. The Conservatives and the Liberal Democrats take the view that for people of pension age there is an alternative to targeting poor people, using age rather than income as a proxy. However, there does not seem to be an obvious alternative for people of working age. The only difference between people who are poor with kids and people who are rich with kids is that the former are poor. Using income to target support is probably the only thing we can do.

There are simple ways and complicated ways to do that and aspects of the system could be streamlined, but we must support giving extra help to lower wage families with children. That is why we did not vote against the Tax Credits Bill and we do not oppose the principle of tax credits. When I asked the hon. Member for Havant about his policy, he said that it was about undoing administrative problems. He mentioned social fund loans, which is one part of the motion that causes me a problem. We really have to get that sorted out. I should like the Inland Revenue to devote all its energy to sorting out the outstanding cases. By the time a new system is properly implemented, we could have dealt with the problem.

The hon. Gentleman said that the policy included extending the deadline, which is, of course, right, but that does not change the fundamentals of the scheme, save to compensate people when it has gone wrong, which is also right. Bizarrely, hon. Members do not differ on the fundamentals. Whenever I have pressed the hon. Gentleman, who is always a good sport and responds in debate, it is clear that we are talking about a difference of degree, not a difference of principle, however he may want to dress it up. He did not vote against the Tax Credits Bill either.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

The hon. Gentleman is right to emphasise that hon. Members on both sides of the House want to improve the administration of tax credits for our constituents, but in the weekend magazine of the Financial Times on 12 May 2001, Mr. Willetts said:

"But most of all I want an end to the ludicrous tax credit system Gordon Brown has introduced, which was a failed idea from the 1970s."

Does the hon. Gentleman really believe that the hon. Member for Havant has changed his spots?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I am intrigued by that quote. I will not leap to the defence of the hon. Member for Havant. We look forward with great interest to the Conservative party manifesto on that subject.

The key issue is where we go from here. Clearly, the system has been a shambles. The Department must take on board the serious point that the image of telephone-based claiming has suffered a huge dent.

Photo of John Barrett John Barrett Liberal Democrat, Edinburgh West

Does my hon. Friend agree that being advised on the telephone that a good time to call for advice is when "EastEnders" is on is not something that the general public should expect from a Department?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I am sure my hon. Friend is right. It may have been good advice, but it is not the sort of advice that we would expect.

It is a serious point. The image of telephone-based claiming has suffered a huge dent and the public will not trust the Government on it. The fact that that is to be the centrepiece of the pension credit strategy is worrying. I hope that the Secretary of State for Work and Pensions offers us better assurances that the telephone infrastructure for that credit will be quantitatively and qualitatively better.

Where do we go from here? Surely we need a period of stability. The Paymaster General and the Inland Revenue have apparently blamed the victims, criticising people for failing to claim before the January deadline—I am not sure how well publicised that deadline was—something that has changed its name half a dozen times in the last four years. It is hardly surprising if people cannot keep up with all the changes. That is why we need stability, with no major overhauls, no name changes and no complete rewrites. Let us give the system a chance to settle down and give people a chance to get familiar with it. Stepping aside from the point scoring about administration, which has been a shambles, I suggest that if we are to deliver a better system, the moral of the story now must be, "Leave it alone."

Photo of Anne Begg Anne Begg Labour, Aberdeen South 8:29 pm, 7th July 2003

Over the past few months I have been very critical of the administrative introduction of tax credits. I first raised the matter on 14 April at Work and Pensions questions, following many phone calls to my office by constituents whose money had not been paid into the bank at the end of the previous week, when they had expected it. I also took part in a Westminster Hall debate secured by Hywel Williams, and I was critical of the administrative problems that were being experienced. I have to ask the Conservative party, however, why it is having this debate now, just when things are getting better and the system is on the mend. Where were the Conservatives in the early days when there were serious problems with the introduction of tax credits, that the Treasury has been at pains to sort out?

Photo of Andrew Selous Andrew Selous Conservative, South West Bedfordshire

The reason for the debate, and its focus, is the deadline for claims, which has been referred to several times. If the Government would simply extend the time within which people can claim tax credits, many of the problems would be solved, so the timing of the debate is relevant.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

I am busy looking at the motion before the House, and I can see no reference to that. In fact, according to the motion, the solution would be for

"the Government to set up a system of emergency Social Fund loans to people who are still waiting for the correct tax credit payment."

The hon. Gentleman, who serves with me on the Work and Pensions Committee, is all too aware that the social fund is not held in high regard by anybody—apart from the Tory party, which is holding the social fund out as the solution to this problem. I was interested to hear Mr. Webb say that we should stay where we are and get this problem sorted out. He admitted that this is a good system, and that is what I want to say tonight.

This is an excellent measure. Tax credits were the right policy decision. Money is going into the pockets of families who desperately need it, and we should not be deflected from the system's importance to many of our constituents by the fact that it had a number of administrative hiccups in its early days.

I would like to know whether a Conservative Government would ever have undertaken such a huge anti-poverty strategy. In one fell swoop, this Government have tried to bring all families with children into a system that would give them a great deal of money. Perhaps even the Conservatives would have found that, logistically, it is difficult to introduce such a system, and hiccups are inevitable. I do not deny that there were hiccups—I know how many phone calls my office received. I have to say, however, that, rather than continuing or even slowing to a trickle, those phone calls have now dried up. After my last speech on this subject in the House, I wrote to all the constituents who had contacted me and asked them to get back in touch if they were still having problems, and none did.

Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

My hon. Friend and the House may be interested to hear that despite all the sound and fury on the subject, I have been contacted by only eight constituents who have experienced delays in their payments, and all those problems were fairly easy to sort out.

My hon. Friend will know that for years and years there has been much comment on the common sense in integrating the tax and benefits systems, and I note that the Conservative party has not said that it would reverse that move. On the point about encouraging people into work, my hon. Friend will be as mystified as I am by the Opposition's comments. I well remember their policy on incapacity benefit—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. The hon. Gentleman has made enough of a point.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

It is hypocritical and outrageous of the Conservative party to hold this debate, and some of its allegations are simply wrong. Mr. Willetts dismissed the comments of my hon. Friend Mr. Brown, who said that his local Inland Revenue office had been excellent in providing interim payments. My hon. Friend is absolutely correct. It is certainly true of the Inland Revenue office in Aberdeen. That has been far more effective in helping to get interim payments into the hands of my constituents than any new scheme for loans through the social fund would be.

Photo of Ms Annabelle Ewing Ms Annabelle Ewing Scottish National Party, Perth

The fact that interim payments have been made in some cases is extremely helpful, but in many cases, including those in which such payments have been made, my constituents and others have incurred out-of-pocket expenses. Does the hon. Lady agree that the Government should confirm unequivocally tonight that they will pay compensation where out-of-pocket expenses have been incurred?

Photo of Anne Begg Anne Begg Labour, Aberdeen South

I am not sure how easy it would be to prove that such expenses had been incurred, which may explain the Government's hesitancy. The important thing is to get the scheme sorted out. I am sure the hon. Lady will agree that it is a good system, putting large amounts of money into the hands of people who need it.

Therein lay part of the reason for the phone calls to my office. People who had been in receipt of the working families tax credit had got used to that level of income, and therefore found it distressing when payments were not made. If it had been a matter of a couple of pounds a week, or even £4 or £5 a week, they would not have been in such dire straits. But the sums in question were £60, £70 and sometimes even more a week. I had a constituent who qualifies for the disabled element of the working tax credit. For her as a single woman, that means £50 difference in her weekly income. Not receiving such a large sum created a gap in the income of the families affected. I am glad to say that those families are now getting paid and will continue to get paid. Once the scheme is up and running, it will be much easier to ensure that any new families coming into the system are paid correctly in the first place.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

A few moments ago, the hon. Lady referred to outrage from Opposition Members, and implied that it was synthetic. She must understand that the pain felt by our constituents was felt by us in representing them. I pay tribute again to the civil servants in the Paymaster General's Office, who tried very hard to sort out some extremely difficult cases. The fact remains that those people were out of pocket for a considerable time and ran up debts as a result. If the Inland Revenue is owed money by any Member of the House, it will charge interest on that. Does the hon. Lady seriously suggest that the people who suffered as a result of the introduction of the tax credit system should not receive compensation from the Inland Revenue?

Photo of Anne Begg Anne Begg Labour, Aberdeen South

I have not disputed the assertion that the introduction of the scheme caused difficulty for our constituents. I was one of the first to raise the matter in the House. However, I found it outrageous that the hon. Member for Havant said that he was not against the principle. He seems to have undergone a Damascene-like conversion and suddenly thinks that tax credits are the best thing since sliced bread. He went on to say that all the problems were the result of policy decisions made by Ministers, whereas in fact the problems have been administrative and logistical. There is nothing wrong with the policy. It is a good one that is putting money into the pockets of families in all our constituencies.

I suggested earlier that if the Conservative Government had tried to introduce as radical an anti-poverty strategy as the tax credits scheme, they too might have encountered difficulties. The more I think about it, the more I realise what a short memory the Opposition have. I remember the problems of the Child Support Agency at the time when I was elected in 1997. The CSA had been established the previous year, and it was not a case of a flood of complaints that tailed off to nothing as the system got sorted out. When I was elected in May 1997, the first thing that hit me was the number of CSA cases that I had to deal with, and that went on week after week. As my constituents realised that they had a new MP and learned my name, the number of complaints went up. It took some time before the parliamentary hotline was set up and helped to solve some of those cases.

I understand that there were also problems when the disability living allowance was introduced. I do not criticise the DLA—it is an excellent allowance which helps disabled people, but the National Audit Office was extremely critical, as was the Social Security Committee, about its introduction. What outrages me is the shortness of some Opposition Members' memories in thinking that it is always possible to introduce such major reforms completely hiccup-free. I wish that that were so and that we did not have problems with the IT systems. I suspect that anybody who could think up an IT system that could deal with such large numbers without such a hiccup would make a great deal of money. Obviously, EDS has not done that, but someone else out there might be in a position to bid.

I worry about the tone of debates such as this, which can undermine the good work that has been done in respect of the new tax credit. There are questions about take-up, but I do not think that it has been particularly bad. Unlike the hon. Member for Havant, I did not sit back and wait for the complaints to come to my office. I made sure that every parent in my constituency was well informed about the tax credit. I suspect that that is why I received more phone calls than many other MPs and did so more quickly; people had my phone number at the bottom of the letter that told them about the tax credit. Many hon. Members actively sought to ensure that the tax credit was promoted. I suspect that, as a result, take-up is higher in their constituencies than in those of the many Opposition Members who preferred to sit on the sidelines and complain rather than do something proactive that would have helped their constituents.

I share the views of the hon. Member for Northavon, as I believe that the system is right and that it is good, but that we need to ensure that it is delivering the money that is necessary for everyone. It is the right thing and I am proud that my Government have embarked on such a major anti-poverty strategy that has taken so many children out of poverty and will continue to do so in years to come. This one measure has probably taken more children out of poverty than any other measure introduced by any other Government. That is something to be proud of and we should not be nit-picking about it. The Government will have my wholehearted support in the vote.

Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health 8:42 pm, 7th July 2003

Unlike many speakers so far, I am not habituated to discussion of social security matters and tax credits in particular. I come to the debate mainly because of one issue of principle that I find surprising, which has been raised by my hon. Friend Mr. Willetts and Mr. Webb, and an issue of practicalities relating to one of my constituents that has again been raised by other hon. Members.

The issue of principle is the fact that, as my hon. Friend Andrew Selous pointed out, we meet today at the point at which applications for the tax credit will no longer be eligible for backdating for the whole year. Instead, a moving three-month window will be available. As the hon. Member for Northavon rightly said, that is a consequence of the transfer into the tax system of a benefit rule, and I find it very surprising.

My hon. Friend the Member for Havant and the hon. Member for Northavon made an important point in asking about that limit. I do not understand why it is necessary that that particular limit should be placed on claims. As my hon. Friend said, and as has been pointed out during the debate, on the face of it, 700,000 potential claimants have not made a claim. On the basis of the Government's figures, there are 7.2 million families with children, 6.5 million are reckoned to be eligible, 4.5 million have applied and 1.3 million will be migrated from income support and jobseeker's allowance. Thus, there are 700,000 potential claimants, so the question is: what will happen to those people as the three-month window moves on and their claims come in? What proportion will not have made the protective claims that people are advised to make? With the best will in the world, despite the £12 million that the Government spent on advertising and the efforts of Members of Parliament and others to encourage people to think about the potential of available family tax credits, it is clear that about 700,000 people have not made that claim.

The Government should recognise the difficulties that have arisen. Some of the administrative difficulties that are spoken of have not been overcome with the passage of time: they have had a deterrent effect on those who might otherwise have made claims, but felt—Conservative Members may be more prone to express it in these terms—that it was just another case of the Government putting a whole load of bureaucracy and administration in the way of people's ability to secure benefits.

What will be the situation of people who did not make claims, and why is it necessary for the three-month cut-off to be applied? If the tax credits system is genuinely part of the tax system, as we are told that it is, the year's income is the relevant consideration in relation to the application for credit, and particular circumstances should not necessarily be relevant. In that sense, it is not like the old family credit, which, like the benefits system, was geared towards particular circumstances at one time, as distinct from the financial year income of the family as a whole.

I want to join other hon. Members in pressing the Paymaster General not to attempt the rather curious argument that was advanced by the Secretary of State, and which had little basis. Anybody making a claim for family tax credit has to supply information relating to a change in circumstances during the year in any case. Only those who have made a protective claim and do not think that they have a chance of anything other than a nil award would have any reason not to make additional information available. People have to make additional information available in order to be able to update and carry forward their claim. I cannot see why the Government do not accede to the argument, which has been strongly put, that far from closing the door on applications and claims at midnight tonight, they should, as the Chairman of the Select Committee on Work and Pensions suggested, open the door to claims to the end of the year. The logic of the system is that it should be open right through to the point at which one makes a tax return for the 2003–04 financial year, since the claim relates to that income. That time scale is also logical for applicants who are self-employed.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Does the hon. Gentleman see any contradiction in the fact that he is calling for an extension to the deadline, while his party has, at best, an ambiguous approach as to whether it will support tax credits in its next election manifesto?

Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health

I do not subscribe to the hon. Gentleman's premise. As the hon. Member for Northavon made clear, the legislation passed through this House without a contrary vote on our part. We are all in favour of the application of the tax credits system. My point—here I speak entirely for myself—is that if it is to be moved it into the tax system, it should acquire the characteristics of the tax system. That is exactly the kind of question that arises in relation to independent taxation. A benefit has been moved into the tax system, with the consequence that, for a large number of families with two earners, what was previously independent taxation has been given away in pursuit of the structure of tax credits. In the past, children's tax allowances likewise depended upon the calculation of both parents' income, and we moved away from that in order to secure independent taxation. What is important is the structure by which objectives are delivered. I have no difficulty with the objective of trying to follow through the logic of the tax credits system in the way proposed.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The hon. Gentleman touches on an important point, and I am listening carefully to his remarks. He is now contradicting himself, however, and I want to bring him back to the purpose of the tax credits system. It was not created as a system to move social security benefits into the tax system: rather, it is a completely new framework that takes the best that both systems offer so as to integrate into the tax system the best way to support families.

Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health

The Paymaster General knows that I am keen to support families. Perhaps I should declare an interest, although I will not benefit from the structure that we are discussing. I have always favoured supporting families with children through the tax system. If we have found the best way of doing that, all well and good, but I have always favoured universal support through the tax system for those who are responsible for raising children. Child tax allowances had the advantage of not depending on means-testing. If my hon. Friends on the Front Bench and I were pursuing policy issues in the debate, we would discuss the extent to which the credit should be available either as a universal benefit—child benefit—or a tax allowance, which is not means-tested apart from being part of a normal tax return. The Government have chosen something in the middle. However, we are here to debate not the policy—the motion is not about that; Mr. Harris lured me down that path—but the way in which the system works. My hon. Friend the Member for Havant led the debate in that direction.

I want to consider the case of a constituent, to whom I shall refer as Mr. A to protect his privacy and that of his partner. If the Paymaster General wishes to pursue the matter, I can give the name and details later. I wrote to the chairman of the board of the Inland Revenue on 11 June about the subject, and the Paymaster General can find out about that later if I give her further details. I have not yet received a reply but I am happy to raise the case as a point of principle; I do not expect the Paymaster General to give a substantive response this evening.

The hon. Member for Northavon commented in detail on the way in which awards are made in the first place. Mr. A and his partner supplied information to support their claim. On 16 April, they received an award from the Inland Revenue. They were told that, in relation to the information that they had given—they had two qualifying children and an annual income of £22,316—they would receive a child tax credit of £3,436.74 and a working tax credit of £3,649.02. On 17 April, the first two payments of £139 arrived in their accounts. They thought that that was prompt. A further payment of £51 arrived a fortnight later and they were a little less sanguine about that. They did not know what would happen next because the figure did not appear to fit the pattern of payments that had been disclosed to them in relation to Mr. A's employers. Then everything went quiet.

At the end of May, after what they described as hundreds of attempts to get through to the helpline, they succeeded. They spoke to a helpful person who said that he would check the figures and send out a revised award because, in his view and on the information that he was given, the figures were clearly wrong. My constituents raised the matter with me and when I contacted the helpline, I was told that their award was £701.50. Hon. Members can imagine their dismay. If they had known more about the system, they would have realised that the original figure was untenable. It was clearly based on the assumption that Mr. A's partner had no income. She had an income, which had been disclosed and included in the figure that was cited in the original award letter to Mr. A. However, the computer did not take account of Mr. A's partner's income.

That example encapsulates some of the issues that hon. Members have raised in the debate. My constituents relied, perhaps unwisely, on large payments that they were anticipating on the basis of the award that they had received. They now find that they will not receive those payments.

More as a point of principle than in relation to that particular case, I want to know what will happen and what will be the structure for dealing with those people who have relied on information from the Inland Revenue. They have not received a large sum of money that will be clawed back, but they have incurred costs and in repaying them they will incur additional bank costs as they try to recover their position. They may have incurred debts on the basis of what they anticipated to be the case.

I do not want to delay the House any longer. I have raised the point of principle as I see it and a particular practicality on behalf of my constituents. The Secretary of State talked about administrative inconveniences and the like, while Miss Begg talked about administrative hiccups. In practice, as Members of Parliament we all know that things have been worse than that. My hon. Friend the Member for Havant set that out clearly.

The point is that there are things that the Government could do today to remedy the situation and there are issues that they must resolve now, which will help some of our constituents who are in difficulties. If the Paymaster General can tell us how she will help to resolve those issues, I will be interested to hear it.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart 8:56 pm, 7th July 2003

I am grateful for the opportunity to take part in the debate because the fight against poverty—the need to fight against it—was for me, as well as for many people of my generation, one of the primary motives for joining the Labour party 20 years ago. I am sure that that is the case for many of my colleagues.

When I found myself in the pleasant situation of becoming a father 11 and a half years ago, I suddenly realised that the fight against child poverty was probably the most important factor within a general fight against poverty. I am sure that other Members found that to be the case when they became parents and I feel very strongly about it, as do Members on both sides of the House.

Photo of Ms Annabelle Ewing Ms Annabelle Ewing Scottish National Party, Perth

The hon. Gentleman mentions the important issue of child poverty. Is he satisfied with his party's record over the past six years? We have had a Labour Government, but still one child in three in Scotland are brought up in poverty.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I am delighted that the hon. Lady has mentioned that. During the 2001 general election, there was some controversy, which she will remember, about the Government's claims for the number of children who had been lifted out of poverty. Opponents also made claims about that number. Last year, the Institute for Fiscal Studies pointed out that even if the lower estimate of 750,000 children lifted out of poverty as a direct result of Government policies is accurate—I am prepared to believe the Government's view that the figure is significantly more, but let us give our detractors the benefit of the doubt—that is a record high for any Government.

People have previously been lifted out of poverty simply because of economic growth, but that has never happened on such a scale as a direct result of anti-poverty policies. [Interruption.] Annabelle Ewing asked me a direct question, so I will give her a direct answer: I am extremely proud not only that this Government have done so much for poorer families, while she and some of her colleagues simply snipe from the sidelines, but that we have established an ambitious target for abolishing child poverty.

To the Opposition, that target is simply a hostage to fortune, as many Government targets seem to be. To me, it is not a hostage to fortune, but a constant reminder that we as elected politicians have a responsibility to deliver for the people we represent. If we still have some way to go 20 years on from the target being set or if we have not quite made it, I will still be proud of the fact that we made a bold statement and set a bold ambition to reduce and remove one of the most terrible blights on our society. The Labour party is the only party ever to have made that commitment.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

It is not just a question of the work that the Government have done in raising children out of poverty. Under the working families tax credit, one category of person—the single person—was left out, so that when in work, they were sometimes not any better off than if they had been on benefit. Does my right hon. Friend—my hon. Friend, rather—accept that the working tax credit closes that gap, so that work will now always pay for everyone?

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I am grateful to my hon. Friend for referring to me as her right hon. Friend, but I am also grateful to her for making that entirely accurate point. That is the exact point of this Government's tax credit strategy: to make work pay.

I am disappointed by the Opposition motion because, like the previous motion that we discussed, it is all about process: it is a way to enable the Conservatives to attack the underlying principle without actually saying as much. For example, they attack the policy of targets in the NHS when what they actually want to do, but cannot do, is to attack the NHS itself. On this occasion, what they really want to do is to undermine the whole principle of the tax credit system, but they do not want to do so overtly, so they attack the administrative errors and delays that have occurred since the child tax credit was introduced. That is a dishonest way to approach this policy.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

I should like to correct the record: our concern is more than just process, as the hon. Gentleman describes it. Does he accept that 1 million people not being paid is a question of more than just process?

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I am more than willing to point out to Ministers that I am of course unhappy with any delays that affect my constituents, but the hon. Gentleman must understand that the debate as presented by Conservative Members does not look like wholehearted support for the tax credit strategy; it looks far more like an attempt to undermine the principle of tax credits and of trying to fight child poverty, which should be—and is—a priority on the Labour Benches.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

The hon. Gentleman may not know that those of us who are sad enough to have been brought up on "Yesterday in Parliament", rather than on "Listen With Mother", can remember that it was in fact Anthony Barber, a former Tory Minister, who first mooted the possibility of negative income tax, which is in fact what this initiative amounts to. The Conservative Government of the day did not introduce it because the computer did not exist that could handle it. Since then, nothing much seems to have changed.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I disagree with the hon. Gentleman—quite a lot has changed, and I should also point out that I never listened to "Listen With Mother"; being of a slightly younger generation, I watched "Watch With Mother". What has changed is the nature of the Conservative party. I see very little support for the progressive tax policy that the hon. Gentleman refers to among today's members of the Conservative party.

I mentioned earlier that I share the concern of my constituents at delays in the payment of their child tax credit. I shall give the example of Mrs. A—I doubt whether she is the wife of Mr. A, the constituent to whom Mr. Lansley referred—who contacted me only two weeks ago. She gave a long explanation of when she applied for the tax credit and what her circumstances were, including that she was a working single mother. I rang the helpline for MPs and I discovered that she was about to be paid—a cheque was literally in the post—more than £1,000, and that she would receive £90 a week thereafter.

It is very rare that, as a Member of this House, one gets the chance to contact a constituent with good news. I did indeed ring my constituent, and it was interesting to note her reaction. She did not say, "Well, that's ridiculous. Why have I had to wait this length of time? The system is a mess." She was extremely happy that I had phoned to tell her the news, and she was delighted that the payment had finally been cleared. I apologised to her on the Government's behalf for the delay and for the inconvenience to which she had been put, and it was only right that I should do so. But as a recipient of this tax credit—she is extremely glad to be a recipient—she has every right to claim the money. It should have been paid much earlier, and I hope that we do get the system sorted out so that no more of my constituents have to suffer such delays.

Every hon. Member must surely recognise that one of the biggest problems that elected politicians must face is the benefits trap. That was especially true in the 1980s and early 1990s, but it continues to a certain extent. Politicians, think-tanks and Governments have tried for many years to figure out a way around that trap and how to make work pay. The combination of the new tax credits and the working families tax credit is the first realistic and serious attempt to find that way. I shall come later to the Conservative record in Government, but there certainly were not many attempts to circumvent the problem between 1979 and 1997.

Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

Before my hon. Friend gets round to the Conservative record, does he agree that they did not seem to give a damn whether people were trapped in benefits so long as they were kept out of the unemployment figures?

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Whether or not "damn" is parliamentary language, I have no idea, but that is absolutely true. We have to ask about value for money. Is it value for money to spend billions of pounds to prop up the unemployment figures, as the Conservatives did in the dreadful 18 years between 1979 and 1997 when social security spending increased by 90 per cent. in real terms—that is, after inflation? The Conservatives are always telling us that we should search for value for money. Is spending that kind of money on propping up economic failure a good use of money?

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party

It is a pity that the hon. Gentleman, and some of his hon. Friends, use these debates to attribute the worst of motives to people on the other side of the House. We are prepared to attribute the best of motives to those who sit on the Government Front Bench. It would be nice if the hon. Gentleman reciprocated. I remind him that one key objective of the social security reforms introduced in the mid-1980s was to ensure the abolition of what we called the poverty trap. If he regards an increase in social security spending as a failure, what does he call the increase in spending through the tax credit system?

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I disagree absolutely. If the hon. Gentleman wants to get into a debate about whether the Conservative party—in the past and perhaps not now, although that remains to be seen—was genuinely concerned about child poverty, I have to say that if something looks like a duck, sounds like a duck and walks like a duck, it probably is a duck. Under the Conservative party, one in three children lived in abject poverty and one in five households had nobody in full-time employment. In 18 years, the Conservatives did not come up with a single policy initiative. The reason, I must suggest, is that they thought poverty a price worth paying for the prosperity that a minority in the country were enjoying.

Before the intervention, I was asking about value for money and whether it was better value to spend billions on propping up unemployment or to use the same money to invest and encourage those on benefits to go into work. I should have hoped that the Conservatives would support that principle, and I should be happy if they prove me wrong to think otherwise.

We do not want the debate to go wider than the Opposition motion, but an anti-poverty strategy can include all sorts of measures. For example, the Conservative party, until a few years ago, opposed the national minimum wage. I find it fascinating to see the Conservatives trying, as we speak, to work out whether they support the tax credit agenda. I hope that Mr. Prisk will say categorically whether they do. He might add to the list of, I think, three policies that the Conservative party has. He could make it four by saying unambiguously whether or not they will support the child tax credit, even though I am sure that they would want to make all sorts of modifications. It is very important, if we are to take the Opposition motion seriously, that we know exactly where they stand on the child tax credit. I am sure that the hon. Member for Havant will be able to elucidate.

Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

Does my hon. Friend agree that it is hard to ascribe the best of motives to the Conservatives, as Mr. Turner suggests we should, when they opposed the minimum wage, which is a necessary guarantor of a decent income for families?

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Absolutely. With 5.5 million families claiming and benefiting from the child tax credit, it is outrageous that there is any ambivalence at all about it on the Conservative Benches. Shortly before the last general election, the hon. Member for Havant said that a Conservative Government would scrap the tax credit system. The House needs to know whether that promise still holds.

Photo of Andrew Selous Andrew Selous Conservative, South West Bedfordshire 9:10 pm, 7th July 2003

Like many others tonight, I have constituents who have had difficulty in accessing tax credits, but rather than dwelling on that point I want to consider some other aspects of this subject. It is the function of an Opposition to point out what has gone wrong in the implementation of a Government policy, and we have heard about some completely unacceptable situations in relation both to individual claimants and to staff in Inland Revenue offices. In Luton recently, where the main Inland Revenue office that serves my constituency is, there was a queue of about 600 people outside the building, because the staff were so frustrated at being unable to process claims that they had literally given up.

I raise this matter not merely to carp about the Government having got something wrong—we can all recognise that the implementation was not good—but because there is a huge and genuine issue about the implementation of vast new Government schemes involving complex information technology. Sitting on the Work and Pensions Committee, I heard with absolute horror last week about the new computer system for the Child Support Agency, which is going horribly wrong for the second time. Committee members of all parties would have preferred to hear that everything was going well, that the new system was in place and that the reforms could be implemented immediately, but that is very far from the case.

Mr. Webb spoke about what it will be like when the pension credit is introduced later this year, and he was right to do so, because our experience with tax credits, and now for the second time with the Child Support Agency, has been lamentable. He was absolutely right to mention the computer company EDS, which is a massive contractor to the Government. I believe that the Department for Work and Pensions and the Treasury are among its largest clients worldwide.

There are serious questions to be raised right across Government about the competence of Departments to handle such contracts. For example, do they employ senior members of the IT profession who have been involved on the other side of the fence in providing such contracts, who could spot what was really going on within these large computer firms as they pitch for projects to the Government? I hope that we will learn the lessons and that the Department for Work and Pensions will closely examine the role of EDS in particular.

We have also heard a lot from hon. Members of all parties about the additional costs incurred by our constituents when tax credit payments have not been received on time, but we have not had an adequate response. Several constituents have shown me their bank statements and the additional charges that they have incurred. Some have had to face penalty charges from their mortgage companies as a result of tax credits not being paid on time. Those are highly serious problems, which have put people significantly into debt, and it may take them considerable time to recover.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

If compensation is such an important issue, why have the Opposition not included it in their list of requests for the Government? Similarly, the motion does not refer to the deadline, which the hon. Gentleman raised in an earlier intervention on my speech. If those issues are so important, why come up with a silly motion on the social fund, which nobody believes is credible? Why do the Opposition not make their own suggestions?

Photo of Andrew Selous Andrew Selous Conservative, South West Bedfordshire

I thank the hon. Lady for her comments. One of the luxuries of being on the Back Benches is that I am not personally involved with the drawing up of Opposition motions. However, my hon. Friend Mr. Willetts dwelt at considerable length in his excellent opening speech on the problem of the deadline and on the question of compensation for those who are out of pocket as a result of additional charges incurred after the introduction of tax credits. It is highly relevant that we are conducting our debate today—and it is one of the reasons why my hon. Friend called for it today—because it enables us to highlight the fact that the deadline occurs at midnight tonight and that many people will lose out on months of tax credit claims by failing to submit their forms by that time.

I want us to think more about the philosophy underlying tax credits. I would certainly describe myself as a one nation Tory, and many of my hon. Friends are genuinely concerned to deal with the issue of poverty and low-income families. It is a common cause across the Chamber that those issues are important. However, speaking for myself rather than for Front Benchers, I want to raise a few questions about the philosophy behind tax credits. My worry is that the measure will be widely welcomed this year and in the immediate future as a result of the extra income that it puts into our constituents' and families' pockets, without taking account of a couple of difficult philosophical issues that relate to the question.

What, for example, will be the effect on the incentives of people in work, once they realise that there is virtually nothing that they can do by their own efforts to improve their financial position? That is a huge issue, which has not been touched on tonight and does not appear in the motion. People interviewed just after the announcement of the introduction of tax credits were understandably pleased about the boost to their incomes, but they were honest enough to say that they realised that there was nothing that they could do by the result of their own efforts to improve their family's position. I worry about that, because it amounts to an additional form of dependency, which will have a great effect on incentives and the working of our economy.

I also worry about the possibilities for fraud under the scheme. When family credit was introduced—under my Government—some firms set their salaries at a low level and in some cases employers drew out considerable amounts of cash. There was good evidence of collusion between the employer and the employee to ensure that the employer paid the minimum level of wages to staff: because of the payment of tax credits, the employer could then give a cash backhander to employees. There is a genuine worry that the system will be abused on a significant scale, but we have not heard anything from the Government about the plans that they have to prevent fraud.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

The difference between the introduction of family credit and today is that we now have the minimum wage, which acts as a floor. One of the ways of checking whether employers are paying the minimum wage is when the Inland Revenue calculates whether the figures add up. That is how it worked for the working families tax credit. Before the minimum wage, employers could pay any amount—and often paid very low wages.

Photo of Andrew Selous Andrew Selous Conservative, South West Bedfordshire

The points that I am making relate to tax credits in general and are not specific to family credit, the working families tax credit or the working tax credit. The possibility is that unscrupulous employers, in collusion with their employees, will be able to work the system.

We need only look back at the introduction of housing benefit for an example. Members on both sides of the House widely and rightly welcomed the introduction of housing benefit. No one foresaw some of the unintended results of its introduction, which are now universally recognised. They included rising rents, increased corruption and hugely escalating housing benefit bills. Unintended consequences often occur. An innovation looks good from a short-term point of view and may be done for the best of motives—unlike some Labour Members, we at least impute good motives to the Government's actions—but it may run into the same problem as housing benefit did.

Perhaps we need a more universal system that is applied regardless of savings. We should consider a universal child allowance, and there are other ways to cope with poverty in low-income families. It is good that we have considered the issues tonight. A proposal may look good now, but we may have to revisit it in a few years' time because it has not been fully thought through.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon 9:23 pm, 7th July 2003

I am grateful for the opportunity to put on record my support for an important and substantial measure that the Government have introduced, which has already benefited many thousands of my constituents. In particular, it has helped to lift my poorest constituents, especially those with families, out of poverty. Although my constituency also has many people from the professional and managerial classes, I have been struck by the wide consensus that I have found, even among the small portion of the population who are not eligible for tax credits, that they are the right thing to do.

It is true that we have had some initial teething problems in introducing the new system, but in some ways that is to be expected when a major restructuring of the welfare state is undertaken. Those problems are being, and will be, resolved. While we must never lose sight of the human dimension of the early difficulties with the administrative system and the bureaucracy—behind the statistics are real people facing real difficulties—the system, even in its early stages, is delivering enormous and substantial benefits to many millions of people. We should remember that this Government introduced the system in the teeth of widespread opposition from the Conservatives, not when the Bill was introduced but at the last election.

Photo of Ms Annabelle Ewing Ms Annabelle Ewing Scottish National Party, Perth

The hon. Gentleman said that teething difficulties were to be expected. If that was the case, why was the system introduced in such a way that benefits were stopped on time yet top-up payments were not received on time?

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I do not know whether hon. Lady made that point in an earlier contribution to the debate. I am sorry that, owing to another commitment, I have been unable to hear all the speeches. I was making the point that we should not lose sight of the enormous benefit that tax credits are already bringing to millions of people.

We are all concerned with the welfare of our constituents and we all take up, daily or weekly, the difficulties that they may face in accessing their rights and entitlements. That is something on which we can agree in a cross-party spirit, as has been said. However, we must not forget that there are grave and deep policy differences. Whereas my point of view, and that of many Labour Members, is that administrative difficulties—inasmuch as they exist—should be ironed out as quickly as possible so that everybody benefits from the new tax credit, some Opposition Members would quite like those difficulties to remain unresolved. Their agenda is to undermine support for the tax credit system and to take us back to the old ways.

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party

Can the hon. Gentleman tell us who those Opposition Members are?

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

Let us start with Mr. Willetts, who led for the Opposition. As I pointed out earlier, in the Financial Times weekend magazine of 12 May, the hon. Gentleman commented:

"But most of all I want an end to the ludicrous tax credit system Gordon Brown has introduced, which was a failed idea from the 1970s."

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

I think that that remark was made before the election of 2001. May I explain it to the hon. Gentleman, as that may help him? It was about our proposal that the working families tax credit should be delivered as a benefit to families rather than being delivered via the employer. That policy was in our last manifesto and, if I may so, that proposal, under the structure that existed then, would have ensured that no working family lost out and that the benefit was delivered better. I am pleased that the hon. Gentleman has given me the opportunity to make that point.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I hope that the hon. Gentleman is sincere in his support for tax credits.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Mr. Willetts made an interesting clarification, but when the current Leader of the Opposition was the shadow Social Security spokesman he was much clearer. He said:

"We would cut the working families tax credit."—[Hansard, 19 October 1998; Vol. 317, c. 951.]

The right hon. Gentleman did not say that they would pay it in another way; he said that they would cut it.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I am grateful to my right hon. Friend for that intervention. I am sure that she, like me, will need much more convincing about the sincerity of Opposition Members, including the hon. Member for Havant, in their new-found support for such measures. What I remember, and what my constituents remember—

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

The hon. Gentleman has mentioned me for a second time, so I am grateful to him for giving way again. We introduced the family credit in 1988. If I may say so, I played a modest role in its creation—[Hon. Members: "It was not modest."] Okay, it was a very important role—it was central. The family credit of 1988 was a device precisely aimed to boost the incomes of families in low-paid work. It was the great Keith Joseph who introduced the original family income supplement, which was the first example of such a scheme, so I do not know why the hon. Gentleman is so baffled that Conservatives believe in it. We have a solid track record of proposing such arrangements.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

It is very clear to me that, however many times I mention the hon. Member for Havant, it will never top the number of times that he mentions himself.

At least one other hon. Member is waiting to speak, so I shall conclude by saying that the Conservatives would be a lot more credible if they told the House how they see their support for tax credits as part of the wider vision, which the Government have, for improving the condition of people in this country, alongside the national minimum wage and many other measures that have been opposed by the Conservatives. If the Conservatives want to be more credible in their support for tax credits, which they say that they would continue if they were ever returned to power, they also have to explain to the House how they would pay for them. That has not been mentioned in the debate. The tax credits involve a major redistribution of wealth and income, but the cost to the Exchequer is £13 billion, and the Conservative party has to explain where it would find the money to continue with the current tax credits, given that it aims to cut expenditure on public services by 20 per cent.

Photo of Tim Loughton Tim Loughton Shadow Minister (Children)

The hon. Gentleman said that there was a teething problem with the child tax credit. What does he have to say to one of my constituents, who has had to give up her part-time job working for a local authority, because there was a complete Horlicks over the payment of her child tax credit, which had an impact on her child minder, who also did not receive her child tax credit and did not get paid by the original person, so there was a double whammy? That does not sound like a teething problem to me; it sounds like serious root canal damage, courtesy of the Government. Will he apologise for it?

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

If the hon. Gentleman's constituent is in receipt of tax credits, I would invite her to consider whether her tax credit would be safe if the Conservative party were ever returned to power.

In the brief time remaining to me in the debate, let me explain why I support tax credits. First and foremost, tax credits are already transforming people's lives; lifting families, especially those with children, out of poverty; and lifting the stigma of benefits by integrating credits with the tax system, thus rewarding and incentivising work. Secondly, as well as being better in principle, tax credits will represent a better way to deliver benefits in practice. More money will go to more families. The system will be more flexible and more likely to generate the kind of dynamic gains that we want in our economy, by rewarding work.

When I was first elected in 1997, social security spending in this country had increased from £45 billion to £90 billion; child benefit had been frozen for three years, cutting it in real terms; and record numbers of families and children lived in poverty. The damage done by that economic and social policy will take many years to repair, but I am proud to support the Government and the introduction of tax credits, under which, today—six years later—families with children are £1,200 per annum better off in real terms; households with children in the poorest fifth of the population are £2,500 a year better off in real terms; and a single-earner family on half average earnings, with two young children, is £3,400 better off.

We will overcome the difficulties. There is always a human side to any administrative problem. We all want to fight for our constituents, but tax credits are already making an enormous difference to people in this country, and I am delighted to speak in the debate to show my support for them.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health) 9:34 pm, 7th July 2003

We know that millions of people have been awarded tax credits and that it has been a great help to them. I have no problem with commending the Government for that, and nor do I have a problem with commending them for the operation of the Welsh language call centre, which has been a great boon to my constituents. But many people, through no fault of their own, are not getting the tax credits. Real hardship persists, which has been caused, let us be clear, by the botched introduction of the system. It was a botch foretold.

Like all hon. Members, I have come across many tax credit cases, some of which I outlined in the debate in Westminster Hall on 4 June. I will be brief, but those cases concerned such familiar matters as simple mistakes as to material facts, mistakes in the level of awards and applications disappearing from the electronic records. When EDS was mentioned earlier, I wondered whether it might stand for "every decision a shambles," although that would be unkind and probably untrue. There have been difficulties with mechanical reading of forms, extreme difficulties in getting through on the helplines, and, interestingly to me, a claim held back because the address was "wrong"—in fact, the address was in Welsh.

I will not elaborate further; rather, I refer hon. Members to the debates of 4 June—although perhaps you will indulge me, Mr. Speaker, if I repeat just one short anecdote. I wrote to a constituent about her problems with a straightforward claim for tax credits. That letter was in Welsh. When I printed it out, I pressed the spell checker by mistake—the English spell checker. The first correction suggested to me was to replace the Welsh word "credyd"—credit—with the English word "cruddy". That was indeed a flash of brilliant insight by an inanimate object, and an insight that sometimes seems to elude the Government.

The proof of the tax credit system to my constituents is that it is got right for 4.2 million people but that it is got wrong for many others. We want to know what is the extent of getting it wrong. What is being done to get it right? Who is responsible for the mistakes? Are they being held to account? If they are external to the Revenue, are they making recompense for their mistakes? What lessons are being learned for the introduction of the pension credit?

For some people at least, the tax credit system is not proving to be a means of getting back into work: it is proving to be yet another obstacle to getting back to work and staying in work. Those people have not been getting the money on which they depend. In effect, they are having to subsidise the Government's failings, which they should not have to do. They cannot afford to subsidise the Government's failings. Children in lower-income families cannot afford to subsidise the Government's failings. I have asked the Paymaster General how many claims are still pending that were submitted before 4 April. I have had no answer.

Briefly, on compensation, the Inland Revenue publishes a code of practice entitled, "Putting things right when we make mistakes"—fascinating reading.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health)

Both. It states that it will pay back reasonable costs that a taxpayer or tax credit claimant incurs as a direct result of its mistake or unreasonable delay. The document also says that extra compensation will be paid for distress, and states:

"If our actions have affected you particularly badly, please let us know"— if can get through. It continues:

"We may be able to pay you an amount of compensation to acknowledge and apologise for the way we have treated you. These payments, which are not intended"—

"not intended"—

"to put a value on the distress you have suffered, will usually range from £25 to £500."

An amount of £25 is not enough. We want the upper limit extended, and my party and my hon. Friends are also calling for a fast-track system to handle such complaints.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General 9:39 pm, 7th July 2003

It is fair to say that after an excellent speech by my hon. Friend Mr. Willetts, we have had a useful and instructive debate. Despite what Labour Members have said, we have of course been trying to review the implementation of the tax credit system and consider how it works in the real world rather than in the minds of some Labour Members.

Despite the entertaining though largely irrelevant rant from the Secretary of State at the beginning, we had a number of positive contributions. As usual, Mr. Webb brought his forensic approach to complicated subject, and he was accurately supported by my hon. Friend Mr. Lansley. Miss Begg made a typically positive speech, although it was disappointing that her colleague, Mr. Harris, was untypically churlish.

The way in which my hon. Friend Andrew Selous tried to describe the problem from a constituent's point of view was especially accurate, and we heard a typically loyal speech from Roger Casale. [Interruption.] I am delighted that the hon. Member for Glasgow, Cathcart has finally joined us in the Chamber. We heard a strong and amusing yet important speech from Hywel Williams. It is important to know about the way in which the system works on the ground—that is the real issue. The theory, statistics and the attempt to distract us from the real issue are not important because we need to know how the system affects real people.

The Chancellor boasted in a speech last year how the new tax system would "modernise welfare". The Paymaster General promised us a "seamless system" that would "respond to people's needs" and provide "continuous support". Indeed, a fascinating tome from the Treasury, which I suspect that J.K. Rowling would regard as being as fictional as her own, says that the Government would

"facilitate a smooth transition to the new system".

Perhaps the most bizarre claim was that they would

"minimise the disturbance caused to families".

How bitter those words must sound to the millions of families who have been short-changed by the Government's incompetence.

We have heard about the gap between the Government's words and actions and how the gap has become a chasm. Instead of a seamless system, the whole policy has unravelled causing heartache and distress to millions of families. Of the 6.5 million eligible families, more than 1 million have not claimed or been paid. According to Sir Nicholas Montagu, even eight weeks on, up to 250,000 families have applied yet are still waiting for the money that they are owed. Where is the seamless system for them? Where is their continuous support?

Hon. Members will know of many constituents who have lost out and, indeed, several examples have been outlined in the debate. I have received letters from dozens of worried families who live in my constituency who found that the system and the Government failed them. One of my constituents, a working single mum from Bishop's Stortford, made a correct claim on 5 September 2002 but received an incorrect award notice on 18 February 2003—a nought had been added to her income. She wrote back and she wrote again. She started calling the hotline and had to call again. Two months later, she had still not received an answer. She wrote a letter to me on 17 April and explained her situation in this straightforward way:

"As a working single parent . . . I have no financial cushion to see me through until my next Tax Credit claim is processed. I am unable to pay my childminder and have had to terminate the contract . . . Without child-care I am unable to work and continue my studies. I am therefore unable to pay my mortgage and maintain house and home for my two children and myself."

That is only one story from one constituency but it is typical of many that hon. Members throughout the House have raised in this debate and previously.

The roots of the fiasco lie not only in poor administration but bad Government policy. Motivated in part by a desire to massage away the welfare budget, the Chancellor forced the tax credits policy forward without thinking through how it would work in practice. The first set of credits failed, so they had to be replaced—not once but twice. Indeed, since October 1999, the Government have introduced five new tax credits, scrapped four and introduced two new ones. That is an average of one new tax credit for families every six months. Given the appalling failure rate, did it never occur to the Paymaster General that there might be something wrong with the policy?

The way in which the Government have failed on implementation has affected most people. It is increasingly clear that the Government have dumped the overly complex operation on to the Revenue with too little time and too little thought. Why did the Revenue fail to anticipate the scope or pattern of claims? What training was provided for staff? Why did the Paymaster General go ahead with a system when the computer software had not been fully tested?

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

I will not because I want to ensure that the Paymaster General has plenty of time to answer the questions.

What of the infamous telephone hotline? Four weeks before the credits were due to become available, no one could get through. Indeed, one man reportedly made 2,400 attempts, only to be put on hold and then told that the form he needed would take 15 days to arrive. When that hotline was clearly collapsing, why did the Paymaster General persist with an £11 million advertising campaign encouraging even more people to call?

In a written answer on 12 March the Paymaster General advised me that the Treasury had spent a staggering £53 million just to set up the hotline. That is an enormous amount of money for a telecentre, far more than most large commercial centres. Yet with all that money, it could cope with only 500,000 calls a week. [Interruption.] Let me tell the Parliamentary Private Secretaries, Tweedle-Dum and Tweedle-Dee, that 6.5 million families are eligible. Anyone, perhaps with the exception of the hon. Gentlemen, could have predicted that the majority would want to call in the last couple of weeks. Is it any wonder that the system broke down? Did the Minister think to ask why the capacity was so inadequate?

What makes things worse is that Ministers were warned of the risks right from the beginning. Mr. Field said as far back as 1998 that the whole tax credit system was "fraught with great dangers". At a practical level, even the Office of Government Commerce, the Government's IT procurement experts, cautioned that the project was very ambitious. Last December, it said that the project was of a large and complex nature and would require unprecedented co-operation between Departments, and we know that that does not happen in this Government. As such, it says that the new system ranks as

"among the highest across Government for assessed risk".

It was quite right, yet the Paymaster General turned a deaf ear to all the warnings.

What did the Paymaster General do to satisfy herself that those risks were being addressed prior to 6 April this year? What steps did she take to ensure that the unprecedented departmental co-operation would be forthcoming? Now, after all the stories that our constituents have told us about the difficulties that they have encountered, what steps has she taken to ensure that it will not happen again?

For some people, insult has been added to the injury. Most people would expect that as they are out of pocket, the Revenue would pay them back in full, but that is not the case. Instead of a single cheque, people are paid in instalments. One family in the constituency of my hon. Friend Mr. Maples is reportedly owed nearly £1,500. Instead of a single cheque, the Government are generously going to give them £37.66 a week until they get the money back in total. Given that the family had to borrow to make up the shortfall, they are, not surprisingly, less than happy. Apparently, that is possible because of a little rule, tucked away in the details. As the family claimed on 28 April, the procedure is in order, but when we check that information, we discover that it has not been provided to the public. According to a member of the Revenue staff, the reason for the staged payments is that the computers and the giro system cannot cope with paying out such a large amount at once. That is the truth of the matter.

Did the Paymaster General sanction that rule? Will she now rescind it? Does she agree that bank charges and other penalties caused by the Revenue's incompetence are reasonable? Will she confirm that the Government will compensate such claims? Given the confusion over the deadline for making claims, will she scrap that arbitrary hurdle and let people continue to claim their money throughout the tax year?

In its manifesto for the 2001 general election, the Labour party said that the welfare state would help people but that Labour "demands responsibility in return." Well, that works both ways. We and those we represent demand that Ministers take responsibility for their policies and for the running of their Departments. Denying knowledge is not good enough, as the Chairman of the Treasury Committee told the Paymaster General only last week. Ministers have responsibility and Conservative Members intend to hold them to it.

The Paymaster General is responsible. She is responsible for the failure of a policy that clearly is not working, for the failure to listen when others warned, for the failure to act on those warnings and for the failure to lead on this issue rather than just follow. Above all, the Paymaster General is responsible to the millions of families who trusted this Government and who have been so badly let down. She has failed them; she has failed in her ministerial responsibilities; and it is now time that she answered for that failure.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 9:50 pm, 7th July 2003

Until the last contribution, the debate, including the remarks of Mr. Willetts, had been a thoughtful one. As my hon. Friends the Members for Aberdeen, South (Miss Begg) and for Glasgow, Cathcart (Mr. Harris) said, the tone of the debate needs to be carefully balanced. Until the last contribution, the tone in the Chamber was one of support for the tax credits scheme. There was an acknowledgement of the need for an anti-poverty strategy, and Opposition Members expressed their support for such a strategy. Suddenly, however, we had the synthetic anger of Mr. Prisk, who simply confirms the thoughts of my right hon. and hon. Friends that the true intent of some Opposition Members is to undermine, and eventually destroy, tax credits.

Tax credits are being claimed by families in their millions, contrary to the predictions of Opposition Members before the system came into effect. We have about 4.5 million claims, in addition to the 1.3 million families who receive increased support for their children through income support and jobseeker's allowance. Each week, tens of thousands of claims are being made, and the number of claims in payment is steadily rising. We now have more than 4.2 million awards.

The take-up of tax credits is a huge success, and in their first three months we put 4.2 million claims into payment. This is a major achievement in enhanced family support, which reaches far more people than the old tax credit or the other systems did. The point of these reforms is to raise children out of poverty—a proposition that Opposition Members, or at least some of them, claimed to support. However, we can see that when they were in power, Britain had the fastest rising levels of child poverty in the European Union.

I come now to the points made during the debate. First, I want to say where we stand as of 7 July. So far, 4.5 million claims have been received. More than 4.25 million are in payment, and 186,000, awaiting further information, are still being worked on. Sixty per cent. of those claims have arrived since 1 June, and almost 50 per cent. arrived in the past two weeks. The hon. Member for Havant continues to make the accusation about the missing million. He knows full well that nine out of 10 families are eligible, which means that 5.7 million families can receive the child tax credit in 2003–04. That is no secret. The rest will receive the working tax credit, which gives us a figure of 6 million. There is no secret about the figure; it was in the Budget book—5.75 million families eligible for child tax credit and 250,000 for working tax credit only. Even if we accept the hon. Gentleman's figure of 6.5 million claims, 84 per cent. are in payment in three months.

The hon. Member for Havant said that he had played a modest part in the introduction of the family credit. It had a 57 per cent. take-up in its first 12 months. Let us be clear—on 28 April I said that more than 4 million claims had been received and 3.2 million claims were in payment. Today, there have been over 4.5 million claims and 4.25 million are in payment.

The hon. Gentleman also mentioned the most vulnerable groups. Let us be clear about that, too. The most vulnerable of those on income support and jobseeker's allowance are already receiving the benefit of the tax credit increases in their child premiums, and they will not be transferred to the new system until next year. There is no question of delay. Families previously claiming working families tax credit and disabled person's tax credit were all contacted to encourage them to apply. When they applied, their claims were given priority. Almost nine out of 10 of those receiving working families tax credit in March have already claimed and are being paid. Many others are among the more recent claims on which the Inland Revenue is working as fast as possible.

Mr. Webb and the hon. Member for Havant referred to the new framework. Tax credits are an entirely new framework, building on tax and social security rules to create an integrated system of tax and benefit. Three months' backdating strikes the right balance between allowing time to claim and not requiring people to build their history over a longer period. That is the system that will remain in place. It is better than the working families tax credit, which allowed no backdating, and it is better because the new tax credits are more generous. They strike the right balance with child benefit and in the time allowed for people to claim.

The issue of compensation has repeatedly been raised, and rightly so. I have told the House the position. For those who have not received the service to which they were entitled on commitments from the Inland Revenue, the Inland Revenue has a process for dealing with the appropriate compensation.

The hon. Member for Northavon asked about families without children. We expect 250,000 families without children to claim during 2002–03, in addition to the 1.1 million families with children whom we expect to receive the working tax credit as well as the child tax credit. I cannot give the hon. Gentleman a breakdown of the 4.25 million claims in payment, but the figures will be available in late August or early September, as we start to publish the figures for claims and who receives them.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I should like to answer the questions that have already been asked.

The hon. Member for Northavon asked about passporting. The Inland Revenue has been in discussion with all Departments for several months, and has published a leaflet on passported benefits covering all the main passports and giving contact details for the Departments. I heard what he said with regard to the Department of Health website and I will look into that.

On the hon. Gentleman's question about over-payment, we discussed the matter at length in Committee. Where over-payment is known now and the claimant identifies that to the Inland Revenue, we should be able to adjust payments in-year and recover it in-year. Where over-payment is identified at the end of the year, there are several ways of recouping it—through continuing payment with safeguards, or through the PAYE code from 2005—

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 186, Noes 329.

Division number 276 Tax Credits

Aye: 186 MPs

No: 329 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 325, Noes 179.

Division number 277 Tax Credits

Aye: 325 MPs

No: 179 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House notes that the introduction of the Child Tax Credit is the biggest single change in support for families since the Beveridge reforms of the 1940s, and a more radical change than the introduction of Child Benefit 25 years ago; notes that the new tax credits represent the biggest ever investment in families with children, with no government ever having spent so much on children and families; welcomes the fact that 90 per cent. of families with children are eligible for the Child Tax Credit; further welcomes the fact that tax credits are now being paid to 4.2 million families; notes that in addition 1.3 million families with children on Income Support and Jobseekers' Allowance are already benefiting from the increased level of support through their benefits; welcomes the fact that 5.5 million families are therefore now benefiting from tax credits, with more and more being paid every week; and believes that these figures belie the persistent criticism that people would not claim, and that those who said that families would not apply for the new tax credits, and that take up would be low, have been proved wrong.

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Children)

On a point of order, Mr. Deputy Speaker. You and your colleagues have frequently deprecated the practice by Ministers of making policy announcements outwith this House. I understand from her published agenda that the Minister for Children is due to make a speech tomorrow to the Local Government Association on the specific subject of the Green Paper on children at risk. The Prime Minister's office announced last week that this Green Paper will not be presented to the House before the autumn. Can you use your influence to require the Minister for Children to bring her Green Paper proposals here, to be discussed by Members of Parliament, before she takes them to any outside body?

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

I was unfamiliar with this case until the hon. Lady raised it. She is aware, as is the whole House, that Mr. Speaker would expect policy announcements by Government to be made in the House. Whether a Green Paper, which presumably initiates a period of consultation, is to be seen in quite the same way, is a matter of judgment, but, generally speaking, Mr. Speaker has made it clear that he expects, as far as possible, announcements to be made in this House rather than elsewhere.