Clause 8 - Entitlement

Tax Credits Bill – in a Public Bill Committee at 11:00 am on 17 January 2002.

Alert me about debates like this

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 11:00, 17 January 2002

I beg to move amendment No. 66, in page 6, line 19, leave out from 'who' to end of line 21 and insert


(a) has not attained such age (greater than sixteen) as is prescribed and satisfies prescribed conditions; or

(b) is aged less than 20 and is engaged in a course of full-time non-advanced education and began that course before the age of 18.'.

Clause 8 deals with entitlement to child tax credit, and that raises the question: What is a child? The amendment is designed to probe further the grey area of children who are past the end of compulsory schooling, but may be in full-time education. I should like to flag up for the Minister, in anticipation of our later debate on entitlement to working families tax credit, that I shall then deal with children at the other end of the age scale—the position of pregnant mothers, new-borns, maternity leave and that set of issues. The issues may be related as it could be argued that pregnant women should be brought into the scope of child tax credit. We have not tabled a specific amendment to that effect, so I shall deal with it when we debate clause 10. I just wanted to forewarn the Minister.

The current children's tax credit applies only to 16 and below. One cannot receive it in respect of a 17-year-old, whereas the working families tax credit provisions broadly mirror those for child benefit in applying up to the age of 18. In bringing the two systems together, which road should we go down? The Bill states that the money can be obtained in respect of a child—youngsters in school presumably fall into that category—but then refers to ''qualifying young persons''. What does that term mean? Is a 17-year-old at school a clear case of a qualifying young person? What about an 18-year-old or someone who takes two years resitting GCSEs? Those are grey areas. One wonders how far the tax credit system should be doing the job of educational maintenance, or do the Government believe that that should be dealt with through a separate system?

The amendment is designed to probe who precisely is covered by the clause and, in particular, by the term ''qualifying young persons''. Are 17 and 18-year-olds, and perhaps even 19-year-olds coming to the end of A-levels included? Will the Minister clarify the Government's intentions?

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

The tax credit will run normally in the same way as working families tax credit and child benefit now—up to the year in which the child becomes 16, although slight variations in the rules obtain in Scotland, Wales and Northern Ireland. We are following the child benefit rules—with the exception that the child remains in full-time statutory education—and current WFTC rules.

The hon. Gentleman is right to point out the interaction with the educational maintenance grants that are still being piloted. He mentioned the scenario of someone who was 18 years old or nearly 18 who had left school without completing their GSCEs, and asked whether we could include them in the scope of eligibility. That is confusing, and we do not believe that we could do that. We would need to determine that that was what they were doing previously. The qualifying trigger would be 16. The pilot is still running and we are awaiting the results. When we drafted the legislation we wanted to state that this was currently the appropriate way to deliver support to this group. However, it may be necessary to reconsider the issue when we see the results of the educational maintenance grants pilot.

The hon. Gentleman also made a point about a young person who leaves full-time education for a year or more and then returns. That young person appears to fit squarely within what is currently happening with the educational maintenance grants. There is also an issue about the purpose of the two payments. The Bill continues the practice, but it would be wrong of me not to flag up that we are not seeking to anticipate the outcome of the results of the educational maintenance grants pilot. If it turned out that Government policy was that that way was more favourable, it might be necessary to reconsider the extent to which the tax credit was paid once we passed the September in the year in which the qualifying child was 16. So long as the young person is in full-time education, as is the case with child benefit and WFTC, they will receive the tax credit up to their 19th birthday. That is nice and simple. Parents understand that provision in child benefit and have got used to it in WFTC. Until a policy change is made, that is how the tax credits will work. I hope that that answers the hon. Gentleman's questions.

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

Am I right that a couple who earn £25,000, which is beyond the scope of WFTC, and have a 17-year-old sixth-former are not entitled to the children's tax credit because the child is 17?

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

But they will be brought within the scope of the new tax credit, as the Minister has just said that we will use the WFTC decision. Is that a category of gainers that I had not thought of?

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

The hon. Gentleman is getting ingenious. In theory, the couple may qualify for the new tax credit, whereas the children's tax credit, which is essentially tax relief, ends at 16 regardless. They could have a child in full-time education and, depending on where the rates and tapers are set, could be entitled to some or all of the tax credit. An example was given of student nurses. We do not define eligibility on the basis of someone being in or out of work; we are looking at family circumstances. The hon. Gentleman identifies one group whom he fears will lose out, but many others are potential gainers. We need to see how that will map out.

That is a sensible way to draft the legislation, but whether we revisit it will be triggered by any decisions that are subsequently taken on educational maintenance grants. I cannot envisage a situation in which people will be entitled to both. The hon. Gentleman identified people who would not come under the new tax credit; they may be the specific people who will be covered by educational maintenance grants. However, I do not know how the evaluation is going; I know only that I must keep that in consideration.

I hope that the hon. Gentleman's probing amendment has delivered the clarification he wanted and that he will withdraw it. Otherwise, I will have to ask my hon. Friends to vote against it, which I would regret.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 11:15, 17 January 2002

That has been helpful in clarifying my understanding of how the system works, and I have no problem with there being gainers. I take the point that the Government are considering support for this age group and how it interacts with policy about staying on at school and so on. My only plea would be for more joined-up government. The Minister clearly knows that studies are taking place; perhaps she could ask the relevant officials to keep her regularly informed on progress. We have established some useful information, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I want to raise with the Minister a point of principle that was raised with me by the Child Poverty Action Group. Would it be either necessary or more appropriate for child tax credit to be paid on a pro rata basis where parents share responsibility for children? Even where the balance is not equal, both parents have considerable responsibilities. The consultation document assumes that there will be a main carer. Where responsibility is shared, only one parent will count and, if the parents cannot agree who that is, the Inland Revenue will make a judgment based on whether the child normally lives with one parent. It is unclear who receives the child benefits.

I do not know whether this is correct, but the Child Poverty Action Group told me that the restriction to one parent may arguably be in breach of the European convention on human rights and our Human Rights Act 1998. Treating the child as the sole responsibility of one parent to the exclusion of the other could be judged discriminatory unless there is a clear argument that the discrimination is objective. The Government appear to have considered that, given the reference in the consultation document, but I would appreciate an explanation of policy and whether it is likely to be reviewed.

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

We considered whether the tax credit payment should be split. When working out the proposals for the Bill, we examined where practice was working clearly and parents were used to working with a particular system. I am uncomfortable about what

point we as legislators enter family arrangements to say what should happen, because that should be for the family to settle themselves.

In the vast majority of cases—someone is bound to describe different family circumstances—only one family could have the main responsibility. The award is then calculated on the family's circumstances and income and there is no provision for it to be split, because the principle behind the Bill is that it is conceivable that a family may receive less if we cannot determine the main carer. The family unit must decide, if, for example, the parents are separated. That applies now to child benefit, which is paid to the parent who has the main care responsibility; the parents must determine which of them has that responsibility. The same arrangements will apply to the new tax credits.

If the hon. Gentleman thought that clause 7 options (a) to (e) were complicated, I hesitate to think how complicated it would be if we tried to determine the arrangements for households with combinations of payments. We gave the matter careful thought, listened to what CPAG and others had to say, and decided that the proposal was too complicated and would not apply in the vast majority of cases anyway. Hon. Gentlemen may ask what happens if the matter cannot be settled. In such circumstances, the Inland Revenue would consider the facts of the case as it does now and determine who had the main responsibility. If that was challenged it could be settled at an independent tribunal.

When there is a family break-up there is often a great deal of contention and points of dispute become magnified. We want to ensure that the Bill does not inadvertently provide another point of contention because it would become a matter not only of whether the payment should be split, but by how much—would it be a third, two thirds, a tenth, 2s 6d and so on? It would become a nightmare. Nevertheless, this is an important point. As we learn and understand more about how households arrange their income, we will be seen to have taken the right decision. I hope that that deals with the hon.

Gentleman's point. As I said, we considered the proposal and its implications very carefully.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.