Tax Credits Bill

Part of the debate – in the House of Lords at 4:00 pm on 12 June 2002.

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Photo of Lord Higgins Lord Higgins Conservative 4:00, 12 June 2002

My Lords, this amendment deals with a somewhat similar point. I have great trouble with this part of the Bill. We are suggesting an addition to subsection (3):

"For the purposes of the Inland Revenue Regulation Act 1890" in this case—we are making progress!—

"the definition of 'inland revenue' in section 39 of that Act is to be taken to include tax credits".

That section of the 1890 Act lists a series of things which are to be taken as "inland revenue"—for example, taxes and so on. But they are all items where the Government receive revenue. Clearly, in the case of tax credits, the Government are not receiving revenue; they are paying out benefits—in 90 per cent of cases, as my noble Lord, Lord Saatchi, points out—or are deducting the tax credits from the revenue that they would otherwise receive. Therefore, one cannot include, with any sense at all, in the definition of "inland revenue" a tax credit. It is not revenue; it is expenditure—or, at the very least, it is a reduction in revenue. Therefore, to rely again on the 1890 Act is quite wrong.

There are other means of getting round this point in terms of the drafting. As I understand it—and the Minister wrote me a most helpful letter—the purpose of all of this is to ensure that the responsibility for tax credits is transferred to the Inland Revenue. That is what it is all about. In that case, all that has to be said is that the Inland Revenue should be responsible for tax credits, but one should not get into this convoluted, and in my view totally wrong, way of drafting the subsection.

There is no problem in dealing with the basic point that the Government apparently seek to achieve; namely, that the responsibility for these matters will not be with the Department for Work and Pensions but with the Inland Revenue. We are running into trouble here because, of course, the traditional function of the Inland Revenue is not to give money away. That is not what it is there to do. It is now being asked to fulfil a function which it has previously not fulfilled; namely, to give hand-outs or, at the very least, to reduce the amount of money that it receives from people. If that is so, then the matter ought to be dealt with in the way I have described and not by means of this convoluted idea that the definition in the 1890 Act should be perverted—that is the only word that I can use—or reversed, or turned upside down to meet the point that the Minister is trying to achieve. I beg to move.