Clause 31 - Power to disqualify tax credit claimants from obtaining top-up payments

Childcare Payments Bill – in a Public Bill Committee at 9:25 am on 28th October 2014.

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

Photo of Anne Main Anne Main Conservative, St Albans

With this it will be convenient to discuss clauses 32 and 33 stand part.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It is a pleasure to serve under your chairmanship, Mrs Main, on the final day of the Committee. Whereas clauses 29 and 30 provide for tax credit or universal credit awards to be terminated automatically if parents claim top-up payments, clauses 31 and 32 make similar provisions, but the other way round. They deal with scenarios where parents might attempt to move from top-up payments to tax credits or universal credit. If a person or their partner is receiving top-up payments following a valid declaration of eligibility, but then goes on to make a successful claim for tax credits or universal credit, clauses 31 and 32 state that they will be automatically disqualified from claiming top-up payments through disqualification notices.

The clauses allow for some exceptions. For example, if a parent experiences a change in circumstances, they will receive a warning or subsequently a disqualification notice. They will therefore continue to claim top-up payments for the rest of the entitlement period. Regulation 18 of the draft statutory instrument on eligibility conditions, which we have published, lists those circumstances, including all the changes that might affect a person’s ongoing eligibility. Given those allowances and exceptions, can the Minister confirm that if a parent’s or their partner’s circumstances change within an entitlement period, they will be able to receive top-up payments until the end of that period, while potentially claiming tax credits or universal credit at the same time? Is that correct? If so, can she confirm that there will be short periods when parents could find themselves entitled to more than one scheme if their circumstances change within the entitlement period?

Presumably, the exceptions will allow parents to move between schemes and not be punished for the complexities in them, which is an issue that we have raised on a number of occasions and that is of huge concern to a number of Committee members. Any measures to mitigate the difficulties that parents might face when moving between the schemes would be welcome. It would be helpful if the Minister confirmed that that is what is being provided for here.

Clause 33 sets out the rules for when and how disqualification notices can be issued. Her Majesty’s Revenue and Customs can issue them only after it has issued a warning notice, and they can remain valid for a maximum of three years. Subsection (7) provides that a disqualification notice can be revoked by HMRC. Can the Minister set out a scenario in which HMRC might revoke a disqualification notice?

Are those notices deemed to be punishment? I know we do not like to talk in those terms, but if parents attempt to move between schemes when they are not allowed to, as set out in clauses 31 and 32, I would be surprised if HMRC did not want to retain some ability to give them a penalty. Could disqualification notices be revoked if a person’s or their partner’s circumstances subsequently changed again and they then became eligible for top-up payments? I appreciate that I am touching on a number of complexities, but it is key that HMRC has thought through all the potential scenarios. It would be helpful to have some clarity on how HMRC will deal those circumstances.

Photo of Priti Patel Priti Patel The Exchequer Secretary

It is a pleasure to serve under your chairmanship, Mrs Main. Clauses 31 to 33 put in place safeguards against cases where a person may seek to abuse the scheme. We want to ensure that parents can receive the support with their child care costs that best suits their circumstances in as straightforward a manner as possible. That will include cases where a family’s circumstances change, as the hon. Lady said, such that they qualify for tax credits or universal credit instead. Where that is the case, such families can leave the scheme when their need is greatest; they will not have to wait until the end of the entitlement period.

We recognise that families’ circumstances can change—sometimes unexpectedly. The scheme has been designed with sufficient flexibility to support families as they move off benefits and into work, and vice versa. I can confirm that as such changes occur, parents will be able to move to tax credits or universal credit without having to wait until the end of their entitlement period. They will therefore have a period of support in both schemes. Specifically on the hon. Lady’s point, however, there will be no gap in support.

I emphasise again that the aim of these measures is not to have a draconian scheme or to penalise anyone, but to ensure that, when people are motivated to abuse the scheme, such abuse is prevented. There should be no unintended consequences that cause hurt to people who are moving from the scheme.

The rules are not open to deliberate abuse and, for that reason, clauses 31 to 33 put safeguards in place to prevent cases in which a person seeks to abuse the scheme by repeatedly switching between it and either tax credits or universal credit for financial advantage when they have had no change in circumstances. Clause 31 provides for circumstances in which a person makes a successful claim for tax credits during an entitlement period when they have not had a genuine change in circumstances. If they return to the scheme within 12 months, HMRC may issue a notice that warns them that they may be disqualified from the scheme if they do that again within four years.

Clause 32 permits HMRC to give a parent a formal warning that they could be disqualified from the new scheme if they claim universal credit while receiving  support under the new scheme having had no change in their personal circumstances. That is a counterpart to clause 31.

Clause 33 allows HMRC to disqualify from the scheme a person to whom it has given a formal warning under clause 31 or 32. When a person has been disqualified in that way, they will be unable to open a child care account, receive top-up payments or make a declaration of eligibility. The length of the disqualification cannot be more than three years.

Those rules are necessary to protect the scheme against a small minority—I emphasise that it is small—who might seek to receive multiple sources of Government support to which they are not entitled. Should we get information about any mitigating circumstances, it will be within HMRC’s territory to revoke the disqualification notice.

The Committee will agree that the Bill is about supporting families who need financial support. These clauses are specific: when a person repeatedly switches between schemes without a change in circumstances, we will attempt, within HMRC’s parameters, to prevent that minority from abusing the scheme.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Clauses 32 and 33 ordered to stand part of the Bill.