Guardian's Allowance Up-rating (Northern Ireland) Order 2006

Part of the debate – in the House of Lords at 1:03 pm on 24th March 2006.

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Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip, Government Whip 1:03 pm, 24th March 2006

My Lords, we shall debate the four related regulations and orders together. Tax credits, together with child benefit, deliver financial support to the vast majority of families with children in the UK and are vital in our commitment to tackle child poverty. I am pleased to introduce these regulations and orders, which increase certain elements and thresholds of tax credits, and raise the main rates of the child benefit and guardian's allowance. In my view, the regulations and orders are compatible with the European Convention on Human Rights.

First, I turn to the Tax Credits Up-rating Regulations 2006. Tax credits play a major role in ensuring that work pays and in helping people to move up the employment ladder. Overall, 5.9 million families containing 9.9 million children are benefiting from tax credits. These regulations increase the child element of child tax credit by £75, in line with earnings, to £1,765 a year from 6 April 2006. The tax credit has increased by £320 since its introduction in April 2003 and it benefits 6.7 million children. In addition, the regulations increase the disabled child elements of child tax credit in line with inflation.

The elements of working tax credit will also increase in line with inflation. The working tax credit provides support to low-income working families, including people who do not have children. The tax credit system has been designed to offer support to people as they move between jobs and as their circumstances change. Building on the lessons from the first two years of tax credits, the Pre-Budget Report announced a package of measures to improve the system. These measures will ensure that the system strikes the right balance between providing a stable award and maintaining the ability to respond to changes.

To reflect changes in annual income, a tax credit award can be revised during the tax year and is finalised at the end of the tax year. Currently, the first £2,500 of any rise in annual income is disregarded. However, incomes have been much more volatile than expected, with short-term fluctuations making it difficult for people to give an accurate estimate of annual income. Therefore, these tax credit regulations increase the disregard for income rises to £25,000. For almost all families, this ensures that a rise in income will not lead to a fall in tax credit entitlement in the first year of the rise. The Pre-Budget Report package has been widely welcomed, by, for example, citizens advice bureaux, the National Council for One Parent Families and the Child Poverty Action Group.

I turn to the Child Benefit (Rates) Regulations 2006 and the guardian's allowance orders. Child benefit benefits almost all families in the UK and these instruments will increase rates in line with inflation. From 10 April 2006, child benefit will be worth £17.45 per week for the first child and £11.70 for each subsequent child. For the first child, this represents a 25 per cent increase in real terms since 1997. Guardian's allowance will increase to £12.50 per week. The Child Benefit (Rates) Regulations also have the effect of replacing and consolidating the Child Benefit and Social Security (Fixing and Adjustment of Rates) Regulations 1976.

With the increases effected by these instruments, we will be delivering even more support next year. We remain committed to the Government's long-term aim of eliminating child poverty within a generation and halving it by 2010, and tax credits and child benefit will remain a key part of this. Indeed, in his Budget, my right honourable friend the Chancellor of the Exchequer made a commitment to increase the child element of the child tax credit at least in line with average earnings until the end of this Parliament. I commend these regulations and orders to the House. I beg to move.

Moved, That the draft order laid before the House on 13 February be approved [19th Report from the Joint Committee].—(Lord McKenzie of Luton.)