Clause 6 - Notifications of changes of circumstances

Part of Tax Credits Bill – in a Public Bill Committee at 6:15 pm on 15 January 2002.

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Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 6:15, 15 January 2002

Opposition Members have made their points fairly and succinctly, and they contain a great deal of force. I say immediately to the hon. Member for Arundel and South Downs that there will be no onus on employers to report changes in claimants' circumstances, and I hope that he feels reassured by that. I see no obvious manifestation of unease—[Laughter.] Perhaps I should not tempt fate.

The hon. Member for Northavon has tabled a question for the Paymaster General, to which she will doubtless reply shortly. I do not doubt that she will want the draft regulations to be completed as soon as possible, that her general approach to such matters is to consult and to involve people, and to share as much information as possible, so that we can get matters right. Indeed, that is what we are here to do. None the less, I hear what the hon. Gentleman says, and I will ensure that, so far as is possible, his comments are taken into account in timetabling these matters.

There is probably a measure of agreement among all hon. Members on the substance of the amendments. As we have said, the new tax credits are designed to respond to the changing needs of claimants. It is important that awards be able to adjust to changes as they occur. If awards are to adjust to changes in circumstances during the year, it will of course be necessary for claimants to tell the Inland Revenue about those changes as they occur. The clause deals with that notification process. Broadly speaking, it is equivalent to notifications under clause 4. As with deciding how long a period to allow for claims, deciding how long a period to allow for notification involves striking a balance. The provision must be flexible and recognise the practicalities of people's lives.

We accept that changes that may affect entitlement could occur when people are particularly busy and tax credits are not at the forefront of their minds. The example of the circumstances surrounding the birth of a baby has already been given. Similarly, as the hon. Member for Northavon said, when a relationship collapses, people do not think clearly about the consequences. It does not necessarily become immediately apparent that the change is permanent. Often, one or both parties harbour unrealistic expectations that are not met.

We need to have flexibility and a recognition of real life. At the same time, people need to be encouraged to report changes as soon as practicable so that they receive appropriate support. Allowing people three months to notify changes is the right balance. We have alighted upon that figure because we believe that it gives claimants a reasonable time to identify that the change may affect their award, and to submit notification. Opposition Members may disagree among themselves. Some may prefer 28 days, some may agree with three months, but the consensus will probably be around three months.

Amendment No. 83 would write that into the Bill. Although I happen to agree that three months is appropriate, the amendment would not be the correct way in which to proceed. It should not be written into the Bill and would be better dealt with in regulations.

Amendment No. 77 is evidence, if it were needed, that it is possible to reach a different view. That is all the more reason for matters to be dealt with in regulation. I do not share the view that 28 days is appropriate, although I understand the reason for the amendment. We want to monitor closely how the system works in practice to see whether three months strikes the right mark. It would be unwise to limit our ability to learn from that experience by including in the Bill a deadline as specific as the amendments urge. I hope that that argument will be accepted by Opposition Members, whether they favour 28 days or three months. We will carefully look at the practical impact of the regulations, just as we will reflect on their content. I hope that hon. Members will not press their amendments.

I cannot stress sufficiently the importance of developing a culture in which people are encouraged to report changes, rather than one in which they have an interest in not reporting them. We must get them to see the system as an aid rather than a hindrance. The efforts of the Government, the Inland Revenue and those with whom it works to make advice and information available to those claiming the credit will be focused on that end.