Clause 1

Finance (No. 2) Bill – in a Public Bill Committee at 11:00 am on 19th October 2010.

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

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am sorry that we had such a brief debate on the sittings motion. I was surprised that many Government Members did not express their views. Hopefully, we will hear more from them during the meat—the substance—of the Bill, as we proceed through it. I was hoping that the Minister would take the opportunity to set out to the Committee the substance of clause 1, but I will make my few brief points first in the hope that he will respond to those and that the Committee will then be able to ask the Minister questions if further issues arise.

As I understand it, clause 1 amends the Income Tax (Trading and Other Income) Act 2005 to modernise and update the arrangements for adult placement care and to ensure that the various expenses and tax exemptions are relevant to contemporary circumstances, including the short-term nature of foster care and adult placement care.

As all hon. Members will know from their postbags and constituency work, being a carer is an enormous commitment requiring a great deal of patience, understanding and hard work. It offers young people and adults who need support because of their health or disability a valuable opportunity to live with people who can give them the help that they need. They can share their hobbies and interests with them, enjoy family life and fulfil their potential to the full.

Of course, given the rather circular nature of the time frame in which we are considering the Bill, the measures have their origin in a Labour Administration. I am proud of the fact that there are measures to clarify and simplify the tax treatment of both foster care and shared lives care, to ensure that the costs, expenses and capital allowances are recognised more fairly by the tax system.

The care, support and accommodation for people who need help owing to a learning, physical and/or sensory disability, or perhaps mental health problems, can be costly. Carers are specially recruited, particularly in respect of shared lives care, to provide services in their own homes. That is a positive initiative because not only does it result in less institutionalisation of those in care but it provides respite breaks for families of carers—or, perhaps, cover that would otherwise cause great strain on families and carers during emergencies.

The arrangement also helps to prepare individuals for independent living and independent lifestyles, so it is proper for the Government and Parliament to support and encourage such arrangements. I want to place on the record my own tribute to those among my constituents and across the country who give their time and efforts to be a carer, either for an adult in the shared lives placement or in foster care. They make an incredibly important contribution.

The definitions are set out and we will discuss the first schedule to the Bill later; that sets out some of the arrangements. My points to the Minister are as follows. Can he tell the Committee how many shared lives care arrangements the reliefs will apply to? It was not clear to me, either from the explanatory notes or from associated discussions on the Bill, how many people and families might be falling underneath those particular taxation arrangements. A bit of context would be useful, if the Minister can gather some inspiration.

In a similar way, I wonder whether any work is being done in the Treasury, the Department for Work and Pensions or other Government Departments to project trends in future volumes that might also exist. It is all very well having a snapshot of how many people we are talking about at one particular time, but given the complexity of the tax relief arrangements, I hope that there will be some methodology or way of predicting what the trends in such arrangements might be. We know from the 1980s care in the community arrangements that over the decades care arrangements can change and evolve. I would expect that this more pioneering form of care—the shared lives placement arrangements—might burgeon and grow in future, so I wonder whether there is facility for that in the Government.

On a technical point, can the Minister say whether the provisions relate to the UK as a whole or only to England? Again, it was not clear to me how the provisions relate. Obviously, certain matters are devolved, but that was a specific point that I thought the Minister might know. I wonder whether the Minister has had any other representations from organisations about associated issues related to the costs of foster care, adoptive care, shared lives placements and so forth. In that respect, there is a series of clauses to the Bill, which are probably some of the most substantive of the legislation.

Hon. Members have made a number of points. I was talking to my hon. Friend the Member for West Ham, for instance. She highlighted casework that she had dealt with about anomalies for parents who are involved in foster and adoptive care. For example, statutory adoption pay is available only to people in full-time employment and not to those in casual or self-employment. There is a whole set of anomalies that needs to be addressed in respect of the treatment of reliefs and the grants available to carers. I will be interested to hear the Minister’s comments on such matters.

Photo of David Gauke David Gauke The Exchequer Secretary 11:15 am, 19th October 2010

I am sorry if I caught the hon. Member for Nottingham East by surprise, but I am sure that the Committee was anxious to hear from him in full early on. It is a pleasure to respond to the points and questions that he has raised.

Clause 1 introduces schedule 1, which extends the existing relief for foster carers by replacing it with broader qualifying care relief. The changes simplify the  computation profits for tax purposes by allowing carers to apply a notional amount of relief rather than having to keep track of all the expenses of providing care. That is done by calculating the relief by reference to the number of people who are placed with the carer and it is a simple and clear way of calculating profits for tax purposes.

The changes will greatly assist those who operate on a small scale. Using qualifying care relief will encompass many carers who have benefited from the approach on a concessionary basis. The hon. Gentleman asked how many people will benefit as a consequence of the changes, or how many will fall within the category. The answer is about 8,000 carers. We are ensuring that their tax affairs are on a firm statutory basis.

The measure may be familiar to some Opposition Members. As with many of the other provisions in this “housekeeping” Bill, it was announced by the previous Government at last year’s pre-Budget report. Draft legislation was then published for comment. I believe that the change is worth while and welcome, so I have proceeded with it.

As part of this Government’s work to improve tax policy making, however, the clause—like all the others—was published in July to allow for additional consultation, which has been helpful. The measure has been received favourably by carers and their representatives, including The Fostering Network, and National Association of Adult Placement Schemes.

One change has been made to the schedule, to clarify its meaning, that also relates directly to the subject of consultation. In its draft form, the relief might have been construed as applying to other sources of income, so two commas were added to ensure that it can be applied only to income received from caring. I am sure that the hon. Member for Nottingham East will have spotted that, so I have saved his having to highlight it in the debate on the schedule. The change demonstrates some of the benefits of consultation.

The clause has been welcomed by both sides and will offer greater certainty to many carers. At the Budget, we announced that the rule change will take effect this tax year. The relieving clause has retrospective effect to 6 April 2010, which I am sure will not be too much of a problem.

I am sure that the hon. Gentleman will understand that the trend in the number of carers is not a matter for Her Majesty’s Revenue and Customs. Local authorities hold data on the number of carers; HMRC, which administers the relief, deals only with the tax effects and the payments. In answer to another of the hon. Gentleman’s questions, I should say that the measure covers the whole of the UK. I hope that that clarification is useful.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am relieved to know that the measure applies to the whole of the UK. However, it begs the question, especially given the Minister’s answer that it is not for HRMC to project future volumes or look at such issues, whether he and his officials have been in consultation with local authorities across England and with the Scottish Executive, for instance. With whom in those particular organisations has the consultation taken place to make these arrangements?

This all implies that there is a potential burden being moved in the direction of local authorities to make planning arrangements, even though, as I understand it, the revenue implications will certainly fall on the Treasury. If he was not undertaking projections in-house, at least there would be some ongoing dialogue with the people who he says are responsible for the day-to-day running and projections of these issues.

Will the Minister return to the issue about the statutory adoption arrangements and the anomaly through which it applies to those in paid employment, but not to those in casual employment or self-employment? The point is quite important, and I wonder whether he will write to the Committee further about it. The matter has been of concern to hon. Members who, when looking at these particular clauses, thought that it was relevant, given the substance of what we are discussing.

Photo of David Gauke David Gauke The Exchequer Secretary

I do not think that that last point is directly relevant to the clause, although I always welcome the hon. Gentleman’s raising such matters. I will happily write to him, even though it is not directly related to the clause.

The hon. Gentleman was right to ask about consultation with local authorities. Of course HMRC consults local authorities as appropriate, and as I mentioned in my remarks, the legislation has been out for consultation. It was first published at the time of last year’s pre-Budget report and it was republished in July, when we published the draft Bill. It was out for consultation for eight weeks. So there have been plenty of opportunities for local authorities to make their views clear.

It is also worth highlighting that the matter is one that simplifies the process and makes it easier to run for both carers and, I dare say, local authorities. I think the hon. Gentleman should feel reassured that the clause will not impose an undue burden on local authorities.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.