Clause 43

Finance Bill – in a Public Bill Committee at 6:15 pm on 20 May 2008.

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In-work and return to work credits and payments

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

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The clause relates to the tax treatment of in-work credit, return-to-work credit, in-work emergency discretion funds, and emergency fund payments. A pilot scheme was rolled out nationally, and although that pilot scheme benefited from being exempt from income tax, that would not be the case for the national scheme but for this clause. How wide were the pilot schemes, what percentage of the country was covered by them, and when will the national schemes be introduced?

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

As the hon. Gentleman said, clause 43 exempts in-work credit, return-to-work credit, the in-work emergency fund and the in-work emergency discretion fund from income tax. Such schemes are designed to encourage lone parents and incapacity benefit claimants to take up, and stay in, employment. The income tax exemption will apply to payments made on or after 6 April. In-work credit and return-to-work credit are weekly in-work payments for up to a year, to help the transition into work for lone parents and people with a disability or health condition. Lone parents in work can also receive discretionary payments from the in-work emergency discretion fund in Great Britain, and the in-work emergency fund in Northern Ireland, to help overcome unexpected financial barriers to work. The income tax exemption will ensure that payments under the scheme provide a clear, simple and transparent boost to income, ensuring the greatest possible impact on work incentives.

The hon. Gentleman asked about the effects of the pilots. The scheme was piloted as part of the pathways to work programme, which was piloted in 21 Jobcentre Plus districts. We announced in January 2006 in the welfare reform Green Paper that pathways to work would be rolled out nationally by April this year and we believe it will lift around 9,500 children out of poverty each year.

Question put and agreed to.

Clause 43 ordered to stand part of the Bill.