Clause 175 - Foster carers

Finance Bill – in a Public Bill Committee at 2:45 pm on 17th June 2003.

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Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury 2:45 pm, 17th June 2003

I beg to move amendment No. 290, in

clause 175, page 111, line 18, at end insert—

'(1A) The provisions of Schedule 36 have effect in relation to adult placement carers with the modifications specified in subsections (1B) to (1G) below.

(1B) References to the ''provision of foster care'' are to the provision of services under a placement agreement as an adult placement carer.

(1C) The expressions ''placement agreement'' and ''adult placement carer'' have the meanings given to them by subsection (1H) and (1J) below, and paragraph 4 does not apply.

(1D) References to a ''foster care arrangement'' are to arrangements by which an individual provides services under a placement agreement as an adult placement carer otherwise than as part of a trade, profession or vocation carried on by that individual.

(1E) References to ''foster care receipts'' and ''total foster care receipts'' are to receipts in respect of the provision of services under a placement agreement as an adult placement carer.

(1F) References to a child are to a service user under a placement agreement.

(1G) The weekly amount for a service user for the purposes of ascertaining the individual's limit is £270, and paragraph 8(2) does not apply.

(1H) A ''placement agreement'' is an agreement between a service user, an adult placement carer and the local authority or other agency that manages an adult placement scheme (see subsection (1K)), which makes provision for the terms under which the service user is to be accommodated, cared for or supported by the adult placement carer under the adult placement scheme.

(1J) An ''adult placement carer'' is a person approved by an adult placement scheme (see subsection (1K)) who provides short or long term accommodation, care or support in their home to vulnerable adults placed with them through and supported by the adult placement scheme.

(1K) An ''adult placement scheme'' is a scheme managed by a local authority or independent (profit or non-profit making) agency, and working to government guidelines and standards in England and Wales, Scotland and Northern Ireland, which is responsible:—

(a) for recruiting, assessing, training and supporting adult placement carers;

(b) for taking referrals, matching and placing service users with adult placement carers; and

(c) for supporting and maintaining the placement.'.

Clause 175 brings in parallel arrangements to ensure that financial support for foster parents is similarly free of income tax. Our question is why foster parents have not been made totally exempt from tax in this respect, as is the case with adopters. I understand that the arrangements have, to some extent, been requested by local authorities, which are in a rather unclear position at present. It is obviously necessary to tidy up the situation, but we cannot see that there will be any material tax revenue resulting, and there is some danger that the record-keeping burden that the arrangements impose will have a negative motivational effect in terms of stimulating the recruitment and retention of foster carers.

Currently, foster parents are regarded as realising a profit only to the extent that the local authorities identify such payments as a reward. It is that inexact arrangement that the clause tides up, but it replaces it with a kind of micro-management of the situation. As I understand it, if foster carers keep detailed records and can prove what they have been paid in excess of £10,000, there will not be any tax liability. The bottom-line question is why have any tax liability at all? People are hardly likely to make fortunes out of fostering children, and there remains a huge need for more foster parents to come forward.

The amendment would extend the arrangements for fosterers and adopters to carers for adults who are, essentially, in the same situation as the fosterers of children. There is a clear fairness case here. Quite often, adults who need a carer are individuals with considerable problems and just as much work is involved in caring for them as in fostering children. There are also practical issues. If a person being fostered reaches the age of 18, the foster parents potentially lose out on net income. The amendment is designed to cover Scotland and Northern Ireland as well as England and Wales.

We hope that the Government will look kindly on our objectives, even if for technical reasons they do not choose to adopt the amendment.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury 3:00 pm, 17th June 2003

We support the clause, which introduces a sensible new tax relief for foster carers, and the amendment, which the hon. Member for Arundel and South Downs (Mr. Flight) has explained clearly. It would extend the exemption that the Government propose for foster carers to adult placement workers. Covering a group of people who are in a similar position to that of foster carers seems a sensible extension of the Government's intention. As I understand it, the amendment has wide support from not only the Chartered Institute of Taxation but the Low Incomes Tax Reform Group and the National Association of Adult Placement Services. Those groups have asked whether the Government could consider extending the exemption in the clause, in identical terms, to adult placement workers, who fulfil a similar function to foster carers but in relation to disturbed or vulnerable adults.

The Low Incomes Tax Reform Group has also raised as a concern, if the Government's proposals

remain unamended, potential hardship if a foster carer continues to care for someone after his or her 18th birthday, when they presumably lose the favourable tax treatment accorded under the clause to those who care for children, rather than adults.

Photo of Meg Munn Meg Munn Labour/Co-operative, Sheffield, Heeley

I am listening very carefully to the points that the hon. Members for Arundel and South Downs and for Yeovil (Mr. Laws) are making, and I am a little confused at the equating of young people who have been in the care of local authorities and reach the age of 18, and are then entitled like any young person to go their own way in the world, and adults who are in placement schemes, perhaps because they have learning difficulties, mental health problems or physical disabilities, and are being cared for by someone in a home-like environment. It is a false and unhelpful comparison between a child in care, who has been looked after by the local authority and reaches the age of 18, and an adult in a placement scheme.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I am grateful to the hon. Lady for her intervention, not least because she points out that the circumstances in which many vulnerable young people and individuals over the age of 18 find themselves are different. She can probably envisage circumstances in which a young person is in the care of a foster carer, whose tax position will be favourably affected by clause 175, but who then finds that after the young person turns 18 the relief for the foster carer is taken away. That concern has been raised by organisations such as the Low Incomes Tax Reform Group.

I want to raise two other issues with the Paymaster General in respect of amendments Nos. 290 and 175. First, will she state—I suspect that she will in her response to the debate—the cost of amendment No. 290, which would extend the provision to adult placement workers? Secondly—this point has been raised by some of the groups that have commented on clause 175—is it possible to simplify the supporting arrangements? They occupy 10 pages of schedule 36, which we will debate in a moment.

Clause 175 seems sensible, but surely the Government can consider not only the position of adult placement workers but whether the tax legislation could be introduced in a simplified form, particularly for people who will not have professionals to help them with their tax returns?

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

I accept that the amendment is well intentioned. I am grateful for the opportunity to set on the record what the Government are doing about adult placement carers. I am sure we all greatly respect the tremendous service that those individuals provide and that we want to encourage and support them.

Individuals who provide accommodation and personal care to adults are in a similar position to foster carers and, like them, ought not to be taxed on any payments received that merely reimburse expenses. We intend to ensure that those individuals are treated fairly. The issue is one of means, not ends. I will share with the Committee how we want to proceed in respect of the problems.

The threshold system we have used for foster carers works because there is a reasonable degree of consistency in the type and amount of expenses that foster carers incur. From the evidence that we have seen to date, however, we are not convinced that such a simple arrangement would work for adult carers. There are fewer adult placement carers than foster carers, but their circumstances are much more varied. Where adults have been placed in care, it is because they have special needs.

The degree of personal care provided to the service user and the expenses incurred in providing that care range over a wide spectrum. At one end of the spectrum, adult placement carers can provide a limited degree of personal care to the service user. There is a thin dividing line between such schemes and supported lodging schemes, which in turn are similar to ordinary commercial lodging arrangements. The foster care relief would be too generous for such schemes. At the other end of the spectrum are adult placement carers who provide substantial physical or medical care or management of behaviour. For those carers, the foster care relief is unlikely to be generous enough, even at the rate suggested in the amendment. However, there is a further complexity in that the host family may not take on all care duties and day care is often provided separately.

The diversity of adult care is reflected in the regulatory framework. In England, individual adult placement carers who provide personal care are effectively regulated as care homes. In Scotland and Wales, the scheme is regulated rather than the carer. Northern Ireland has yet to decide; the legislation would allow either approach. The amendment defines ''adult placement carer'' without referring to the regulatory framework, which is unsatisfactory and would potentially include arrangements that do not merit a special relief. For those reasons, the Government do not believe that a statutory relief for adult carers would be appropriate.

Instead, the Inland Revenue is reviewing its treatment of adult carers under existing legislation. It is in discussion with the NAAPS about revised guidelines, which will enable carers to take credit for their full expenses with the minimum of record keeping for 2003–04. Those arrangements will address specific concerns that NAAPS has raised about short-term carers and young adults who cross over from foster care, which is an issue that has been raised in Committee. The Revenue expects to be able to reach an agreement on that shortly.

I hope that the Committee now understands that the Government must proceed with great care to ensure that the appropriate support is delivered to adult carers. Not only will an agreement be reached shortly, but I promise that we will keep this matter under review. If further evidence emerges indicating that a statutory approach for adult placement care would be workable, then I shall look at it very carefully and try to bring it forward in a subsequent Finance Bill.

I am grateful to the hon. Member for Arundel and South Downs for giving me the opportunity to put on the record my views on a service in our communities that we all value and support and that we all want to develop. I hope that he will accepts that the Government are proceeding in a sensible fashion and that we address the points that he has raised. On that basis, I hope that he will withdraw the amendment. If he does not do so, I would reluctantly have to ask my hon. Friends to vote against the amendment if he were to put it to the vote.

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

I thank the Paymaster General for her response, which addresses the underlying issue. All I would add is that, given that clauses 174 and 175 contain several changes, it would be useful if clear and comprehensive guidance were issued to carers associations and local authorities covering the Revenue's solution on adult carers, which would allow everybody to have clear guidance on the arrangements. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 175 ordered to stand part of the Bill.