Clause 2 - Functions of board

Part of Tax Credits Bill – in a Public Bill Committee at 11:30 am on 15 January 2002.

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Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 11:30, 15 January 2002

Perhaps I could move on to how the Inland Revenue will account for its expenditure, and how it differs from DWP. That may well assist us in our discussions.

Subsection (5) requires Inland Revenue to set forth accounts for the tax credits and to distinguish between the amounts of each tax credit. That is a more rigorous procedure than that taken in respect of voted ones, as the estimates—they are only estimates—are put forward for the vote by DWP or other Departments. At the end of the year, reconciliation for social security benefits is done on a sample basis to ensure that nothing has gone wrong overall. That does not match Inland Revenue's accounting system, which is necessarily more thorough, given the range of issues that it deals with, as it needs to track payments.

The Government have made it clear that Inland Revenue will account for all tax credit payments in the same way. At the time that a payment is made, the exact tax liability for that year will not be known. That can be determined only at the end of the year. It would not be possible to break down the payments into different parts and fund each part separately. Expenditure must be shown, and that now relates to how much was paid out in the tax credit. The Inland Revenue's care and management responsibilities and the way in which the Department operates make it necessary to identify expenditure on tax credits.

I envisage lots of questions, either now or over the coming months and years, about breakdowns of those figures, and I shall have to pay careful attention to that and be as helpful as possible to hon. Members. However, they will be able to see more clearly what is spent on tax credits, because they will see at the end of the year the actual amounts involved and how they fit into the overall budgets. However, the amount will also be dealt with as negative tax and will be deducted from tax receipts. I believe that that will give better and more transparent access to the exact expenditure on the tax credits. Although the hon. Member for Arundel and South Downs does not necessarily agree with how we account for that in the Red Book, I hope that he will appreciate that it is clearly shown.

The amendment is fundamentally flawed. I know how difficult it is to draft amendments, so I do not criticise the hon. Member for Arundel and South Downs for that, but I ask him to withdraw it on that basis. If he feels unable to do so, I shall have to ask my colleagues to oppose it.