Child Benefit

Debate between Baroness Hollis of Heigham and Lord Sassoon

Tuesday 30th October 2012 Lords Chamber

[Lord Sassoon]

My Lords, this idea, which is one of a number of ideas to meet the very big affordability and fairness challenge that we have, responds to concerns that, while working families have to consider affordability before having another child, those who are out of work do not, for the reason that I have already given—that their benefits will increase. My right honourable friends, the Chancellor and the Work and Pensions Secretary, are working together on ideas, of which this is but one.

[Baroness Hollis of Heigham]

Leaving aside issues of decency—and there are real questions behind that—how does the Minister reconcile two apparently conflicting government views? The first will come from his department; no doubt, with the arrival of the Pensions Bill in this place, he will say that we need more, younger workers to help to support an increasingly elderly population. But he will also say, no doubt, in support of his right honourable friend Iain Duncan Smith, that extra children are for the poor a luxury while for the rest of us they are a burden. How does he reconcile these two statements—that we need more young people to support pensioners but we cannot afford to have them as taxpayers?

[Lord Sassoon]

My Lords, that is a complete misrepresentation of the position of my right honourable friend the Work and Pensions Secretary, so the question becomes completely redundant.

Wales: Barnett Formula

Debate between Baroness Hollis of Heigham and Lord Sassoon

Wednesday 20th June 2012 Lords Chamber

[Lord Sassoon]

Yes, indeed, I would agree with my noble friend that that should be the objective of any replacement for the formula.

[Baroness Hollis of Heigham]

My Lords, the Minister said that his priority was to seek to reduce the deficit. Given that under the Barnett formula, which has not stood the test of time, Scotland is over-funded by £4 billion at the expense of English taxpayers, would that £4 billion not be a useful contribution to the deficit—or is the Minister so casual about our finances?

[Lord Sassoon]

No, my Lords, the Treasury is not remotely casual about the national finances, and what the noble Baroness says about the Scottish funding situation might well be challenged by others in other devolved parts of the nation.

Welfare Reform Bill

Debate between Baroness Hollis of Heigham and Lord Sassoon

Monday 14th November 2011 Grand Committee

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the purpose of the government amendments in this group is to correct an omission in secondary legislation which was made to implement changes to the working tax credit withdrawal rate announced as part of the June 2010 Budget. I apologise for the fact that these amendments are required.

Any award of working tax credit or child tax credit is reduced or withdrawn by a prescribed rate for every pound of income that a claimant has above a specified threshold. One of the changes announced in my right honourable friend the Chancellor’s June 2010 Budget in relation to tax credits was to amend the withdrawal rate for both child tax credit and working tax credit. The intention for the tax year 2011-12 was that the withdrawal rate would be set at 41 per cent, so that for every pound of income above the threshold, the amount of tax credits payable would be reduced by 41p. HMRC accordingly amended the tax credits IT system and since 6 April 2011 has implemented the increase in the withdrawal rates for both working tax credits and child tax credits and thus has applied a withdrawal rate of 41 per cent in relation to both tax credits for 2011-12 awards. Although the secondary legislation was amended correctly for the child tax credit withdrawal rate, unfortunately the working tax credit withdrawal rate was not. This new clause will correct the technical omission and will ensure that the withdrawal rate for working tax credit from 6 April 2011 is 41 per cent and not 39 per cent.

Let me be very clear for the record. HMRC is paying claimants the right amount of money as announced in the June 2010 Budget. It is applying the 41 per withdrawal rate and has been since 6 April 2011. In practical terms, the implementation of this correction will not impact tax credit claimants as it simply aligns the legislation with the announced and currently effective practice. I beg to move.

[Baroness Hollis of Heigham]

Does that mean that as a result we have been paying people less than they were entitled to by law and are retrospectively correcting that?

[Lord Sassoon]

My Lords, claimants are being paid what they expected to be paid based on the announcement made by my right honourable friend the Chancellor in the June 2010 Budget. If the legislation goes uncorrected, HMRC will be paying at a rate that is not covered by the law, so it is necessary to amend the legislation to bring into alignment the law and what claimants expected to receive and are receiving.

[Baroness Hollis of Heigham]

So I think the answer to my question is yes. In other words, between April and December, HMRC has been withdrawing money at a taper that was not legitimised by legislation?

[Lord Sassoon]

My Lords, there are a lot of things where HMRC starts in practice, and the law, whether primary or secondary legislation, comes afterwards. If the law does not come in, adjustments will subsequently have to be made. The result of doing this now is that there will be no adjustments and people will have been paid what it was intended they be paid.

[Baroness Hollis of Heigham]

My Lords, I will not say that the noble Lord is wriggling—I am looking for a more courteous word—but it is something like that. He keeps saying, “If we didn’t do this, it would get worse”. That is quite right. However, will he not confirm that between April and December he has withdrawn money at a rate not approved, legitimised, permitted or allowed by legislation?

[Lord Sassoon]

Clearly—

[Baroness Hollis of Heigham]

Could we have a yes or no?

[Lord Sassoon]

As the law stands, HMRC is giving people less money than the law says that it should.

[Baroness Hollis of Heigham]

Thank you.

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[Baroness Hollis of Heigham]

It is worse than that. Money has been taken from people. The thrust of the noble Lord’s argument suggests that it should be repaid until it has been appropriately legitimised.

[Lord Sassoon]

It is certainly the case that if the law were not brought into line with what the Chancellor intended, at some point HMRC would have to make adjustments to the incorrect clawbacks that were calculated. We can discuss this for as long as we want. The fact is that there was a clear policy announcement. It should have gone through in the original statutory instrument—I think it was 2011/1035—and a claimant can at any stage ask for an appeal and ask to have their payments recalculated. However, clearly it would be pointless to do so if they expect that the amendment we are now debating will be agreed and will get the position back to where it ought to have been all along.

[Lord Sassoon]

The technical position is that what is paid during the year is only an interim award. Of course, HMRC seeks to pay all entitlements on a correct basis. However, the final calculation is done at the end of the tax year. Therefore, at the moment HMRC is quite properly paying what it believes will be the position once we get the legislation lined up with the original policy intention.

[Baroness Hollis of Heigham]

My Lords, if the tax system changes half way through the year, we do not say that it is retrospectively applied to the previous six months and rely on an end-of-year adjustment, which is what the noble Lord seems to be doing. He has illegally underpaid people for something like nine months. The fact that tax credits are done at the end of the year and as an adjustment is neither here nor there. For that period he has illegally underpaid and he cannot retrospectively go back and claim money from them which he was not entitled to do.

[Lord Sassoon]

My Lords, as I understand it that is not the position. The position for all taxpayers and claimants has to be finally calculated at the end of the year—and in many circumstances it can be done only then—because all sorts of circumstances may have changed. The issue is to get the legislation right in respect of this tax year. HMRC has calculated everything to date on the basis that there will be no further adjustments required at the end of the tax year once we get the legislation back into alignment with what was originally intended.

I appreciate the intention of noble Lords opposite to make hay out of this. It was a technical error in a statutory instrument that should not have happened. The amendment we are considering today is not to change anything midway through the year but to change the law with effect from 6 April 2011. There is going to be no unfairness and everything will be in line with exactly what my right honourable friend the Chancellor announced in the first place.

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[Baroness Hollis of Heigham]

He is of course speaking for the whole Government.

[Lord Sassoon]

My Lords, I always speak for the whole Government, of course. The first point is to re-emphasise that we are talking about an adjustment that will apply, as was always intended, from the beginning of this tax year—6 April 2011—so the issues of what happens to people whose circumstances change during the middle of the year are not relevant. The policy was announced as taking effect for the tax year 2011-12, which is precisely what the amendments are intended to achieve.

There is nothing magic about the amount of money and the juxtaposition. I know that June 2010 seems a while ago now but this was the emergency Budget in which we needed to do a number of things, not least set out a very clear plan to deal with the inherited deficit.

Devolved Administrations: Financial Flexibility

Debate between Baroness Hollis of Heigham and Lord Sassoon

Tuesday 8th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, would I ever be so bold as to criticise the Barnett formula? The Barnett formula has been widely questioned, not least by the noble Lord, Lord Barnett, himself. However, the Government’s priority has to be stabilising the public finances. If, in due course, the formula is to be superseded, the challenge is that there is no consensus on how to measure needs, which would be required to bring in some needs-based formula.

[Baroness Hollis of Heigham]

My Lords, on the contrary, I would suggest to the noble Lord that there is plenty of research on how to bring in a needs-assessed formula, given that both devolved Administrations distribute their money down to local authorities on precisely that basis. Would the noble Lord therefore accept that Wales is indeed underfunded, that the Barnett formula effectively misspends and overspends by £4 billion and that a rectification of that would surely help the Minister to address the deficit?

[Lord Sassoon]

My Lords, what I said was that there was no consensus. Of course there is plenty of research but there is no consensus, and that is what is needed in this area.

Savings Accounts and Health in Pregnancy Grant Bill

Debate between Baroness Hollis of Heigham and Lord Sassoon

Tuesday 7th December 2010 Lords Chamber

[Lord Sassoon]

My Lords, we have had an interesting debate. I am grateful to all noble Lords who have contributed to it. We have covered a range of topics. I shall start with one or two of the wider points raised and then move on to some of the important questions of detail in the Bill.

I start where I started in opening this debate; that is, by saying that this action is necessary. We have had to make some tough choices. I am grateful to my noble friend Lady Noakes for pointing that out and to my noble friend Lord Newby who pointed out that the Opposition had come forward with no alternative policies for cutting the deficit. I had rather hoped from the build-up from the noble Baroness, Lady Hughes of Stretford, that we would get some ideas, but there was nothing. We then had a very long build-up and an economic essay on the story of the previous Government seen from one perspective—that of the noble Lord, Lord McKenzie of Luton. Even though he and I would disagree about the path that got us to the present predicament, he seemed to acknowledge the need for dealing with the economic situation. I hoped that we would get some alternative ideas, but sadly not. Of the other speeches that touched on this point, the speech of the noble Earl, Lord Listowel, put the context of this Bill in a sensitive and well considered way. I did not get any of that from the Opposition Benches. We need to acknowledge that the deficit has to be reduced and that that requires difficult choices.

I stress again that in the overall process of deficit reduction we are, as a Government, prioritising groups that need the most support. Disadvantaged children will benefit from our pupil premium and in the spending review we made sure that there will be no measurable impact on child poverty in the next two years. At the other end of income and wealth distribution, we are making sure that everybody makes a fair contribution. Those on the highest incomes will contribute more towards the entire fiscal consolidation. We are making sure that we get more tax revenue in. We are providing additional resources to combat tax avoidance to raise an estimated additional £7 billion of revenue annually by 2014. Of course, we have also introduced a bank levy that will generate £2.5 billion a year. We are making sure that we raise revenue from every source and that the pain is shared equitably.

Before I turn to some specific points on the Bill, I should say something about the question of the money Bill status of this Bill. I was somewhat surprised not by the relatively measured terms in which the noble Lord, Lord McKenzie, talked about this, but by one or two of his colleagues who surprised me very much, particularly former Ministers both here and in another place. They probably know the processes for money Bills: they would certainly know them better than I do. First of all, it is a certification of the Speaker that cannot be challenged. Even if football managers are getting into the habit of questioning the judgments of referees, which is not entirely a desirable thing, there are limits. I am not sure that it is appropriate for noble Lords to challenge the judgment of Mr Speaker. He is under a statutory duty to certify a Bill as a money Bill if in his view it falls within Section 1 of the Parliament Act 1911. In answer to these extraordinary suggestions that he might have been given advice or been leant on—I do not know what the suggestion is—by the Government, he takes advice from the Clerks in another place and not from the Government. The Government do not offer him any advice.

In respect of mischievous suggestions that somehow the process was different on this Bill from previous money Bills, all of the previous money Bills were certified at the end of their Commons stages. Certification cannot happen until the Bill has completed all of its stages in another place.

[Baroness Hollis of Heigham]

To go back to the process on the money Bill, chapter 33 of Erskine May does not refer to the Clerks but says that the Speaker should call on the advice of at least two chairmen from the panel of committee chairmen in the House of Commons, and that on their advice also he should respond. There is no reference to the Clerks in Erskine May. Was that procedure followed in this case?

[Lord Sassoon]

I can give noble Lords my understanding of what the procedure is, but I certainly cannot and would not presume in any way to go into what process Mr Speaker went through. That is a matter entirely for Mr Speaker and not a matter for us in this House to question.

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[Lord Sassoon]

My Lords, I cannot promise today that all looked-after children will have a junior ISA opened for them and I certainly cannot provide any assurance about government funding. I have said that my honourable friend is looking into all this and, if and when there are proposals, the Government will indeed come forward with them.

I turn to some other important points on child trust funds and their effects on savings. A number of points were made by the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie of Luton. Have child trust funds had a positive effect on savings? There is currently no robust evidence about whether the child trust fund has increased savings for children. While some parents are using child trust funds, not all are. I have it that 22 per cent of child trust funds received contributions in 2009-10, marginally down on the 24 per cent in the previous year. In any case, we do not yet know whether any of that saving is additional or would have happened anyway. For lower-income families, only 12 per cent of CTF accounts received contributions. I take my noble friend Lord Newby’s points to heart about the untargeted and, certainly, the unproven nature of the effect of child trust funds.

Several noble Lords, including the noble Baroness, Lady Thornton, and the noble Lord, Lord McKenzie, raised the question of the gap before the introduction of junior ISAs. I must go back to the need for us to move quickly to tackle the budget deficit. I realise that this will leave a gap before the junior ISAs are available. However, we are working hard with the industry and other stakeholders to make sure that the gap is as short as possible. We intend to publish draft secondary legislation, setting out full details of the new accounts, in the spring and for them to be up and running in the second half of 2011. We will ensure that eligibility for the new account is backdated to ensure that no child born after the end of the CTF will miss out on the chance of having one of these accounts.

Concerns were raised by the noble Baroness, Lady Hollis of Heigham, and others about the suitability of junior ISAs for children from families on lower incomes, and whether they would benefit only the rich. I certainly do not believe that this will be the case. These accounts are not just about offering people a tax-free option for children’s savings; they will also offer a clear and simple way of saving for children and of ensuring that the money is locked up until the child reaches adulthood. This will prove attractive to many families on lower incomes. Of course, saving issues are difficult for us all, particularly those on lower incomes, but I remind the noble Baroness and the noble Baroness, Lady Drake, that already more than 12 million people with incomes below £20,000 have an ISA. It is penetrating lower-income groups.

I am grateful to the noble Lord, Lord McKenzie of Luton, for drawing attention to the annual financial health check. That was also welcomed by the noble Baroness, Lady Drake. There are questions about advice turning into action but we should start somewhere. I am grateful to noble Lords for drawing attention to that important initiative.

On the question of the Bill’s equality impacts, an initial assessment of these was published on 15 September, when the Bill was introduced. Although we do not say that there are no impacts, the impact assessment shows that those that have been identified are proportionate, given the need to reduce the UK’s budget deficit.

I should say a little about the health in pregnancy grant, which the noble Lord, Lord Northbourne, raised first. I assure him that we have another scheme, the Healthy Start scheme, which targets and supports pregnant women on lower incomes, providing vouchers for fruit, vegetables and milk from the 10th week of pregnancy. This very much goes to the heart of the point that my noble friend Lady Browning made from an expert perspective. It did not look as though the health in pregnancy grant was achieving its original target of reducing the incidence of low birth weights. The Healthy Start scheme is much better targeted towards that.

[Baroness Hollis of Heigham]

Does the Minister agree that the Healthy Start scheme gives something like £3 a week for, at best, around 30 weeks, which is a smaller sum than is being lost?

Housing: Mortgages

Debate between Baroness Hollis of Heigham and Lord Sassoon

Wednesday 10th November 2010 Lords Chamber

[Lord Sassoon]

My Lords, it is certainly not for government to make judgments about the right terms on which mortgages should be advanced by individual banks. There is a rebalancing going on from an excessive household leverage which built up in the past decade. There is also a necessity for the banks to price all their products, including mortgage products, at an appropriate margin, because it was quite clear that they were extending a whole range of credit products, including mortgages, at submarket rates before the crisis. The Government’s interest is to make sure that we have a sustainable balance, which means that people, including first-time buyers, can get mortgages on appropriate terms, but also that it is sustainable and does not lead to another bubble. We are following very keenly the work of the FSA in this regard.

[Baroness Hollis of Heigham]

My Lords, as the noble Lord, Lord Naseby, said, many prospective owner-occupiers are unable to afford a deposit and will therefore linger for a decade or more in the private rented sector, therefore increasing the demand and rents in that sector. The Government’s policy is to cut housing benefit to reduce private sector rents, but that cannot and will not happen. Instead, will it not increase the misery for thousands of people?

[Lord Sassoon]

My Lords, I do not accept the premise that there will be a raft of people somehow prevented from getting on the mortgage ladder for a decade. I have no idea what the basis is for that rather broad and sweeping assumption. The Government are ensuring that we keep interest rates low and that the banks can access the funds they need to underpin a good flow of mortgage lending, as well as other lending, particularly to SMEs. It is for the FSA in that context to ensure that the affordability criteria are appropriate. In particular, we have extended the support for mortgage interest by a further year to January 2012.

Comprehensive Spending Review

Debate between Baroness Hollis of Heigham and Lord Sassoon

Wednesday 20th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful to the right reverend Prelate for drawing our attention to the question of children, which I shall come back to. In respect of his question about poorer families, I draw the House’s attention to the new section at the back of the document, which for the first time lays out the effect on the deciles and quintiles of the population of all the measures that we have taken in the spending review and the Budget. It confirms the fairness of the overall construct—namely, that those who can afford to pay more will do so and that the poorest in society are protected.

The spending review will provide additional support to the most disadvantaged children at every stage, particularly in education, and will support social mobility. As I said when repeating the Statement, free early years education will be extended to 15 hours and care will be given to the most disadvantaged two year-olds. Critically, we will introduce a £2.5 billion pupil premium. There will be more generous maintenance provision and a scholarship fund of £150 million to underpin higher education funding for disadvantaged children. The entire spending review has taken fully into account the needs of children, particularly in education. The coalition Government have taken action to protect families. Overall, there is no measurable impact on child poverty from all the model changes for the next two years.

[Baroness Hollis of Heigham]

My Lords—

[Lord Bilimoria]

My Lords, the Minister has confirmed that public expenditure will go up in actual terms. Historically, 40 per cent was deemed to be the sensible level of public spending expressed as a percentage of GDP and a sensible balance between the private sector and the public sector. Is the Government’s aim to get back to that 40 per cent figure on a regular basis? In this environment, one would need to do that anyway regardless of the budget deficit. In that sense, I welcome the reductions in the welfare budget, which were badly overdue. Although spending on the National Health Service has been ring-fenced, the efficiency savings there are also very welcome and I think that the whole public would agree with them. However, in the coalition Government’s spirit of the transparency, the Chief Secretary revealed to us yesterday that 500,000 jobs would be lost in the public sector, a figure that the Minister has confirmed today. How confident are the Government of those jobs being replaced in the private sector? How confident are they that they have done enough to stimulate growth in the private sector, particularly against a backdrop of increased capital gains tax and higher rates of tax in every area? How difficult will it be?

[Lord Sassoon]

My Lords, I am grateful to the noble Lord, Lord Bilimoria, for drawing our attention to the important question of the balance between the public and the private sectors, which had got completely out of kilter under the previous Government. I repeat that this is not just an exercise in cutting back expenditure, necessary and unavoidable though that is; it also entails a critical rebalancing of the public and the private parts of the economy. What we have announced today will take the public sector part of the economy back towards that 40 per cent figure. In answer to the question about the absorption of the inevitable job losses in the public sector, I draw the noble Lord’s attention to the fact that, in the past quarter alone, the private sector generated 178,000 new jobs. That was in one quarter, so we should be confident, when the Office for Budget Responsibility believes that overall employment in the economy will rise year by year, that that indeed will be the case and that the inevitable reduction in public sector jobs will be more than absorbed.

[Baroness Hollis of Heigham]

My Lords—

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[Lord Sassoon]

My Lords, I am grateful to my noble friend Lord Higgins. I will relay to my right honourable friend the Chancellor and to all the very hard-working officials in the Treasury his generous words, which confirm that this is indeed a radical, fair and comprehensive spending review. In answer to his question about demand, clearly, with the independent projections from the Office for Budget Responsibility and all the other commentators of consistent growth going forward, demand will indeed increase. The question of what role the aggregate increase in the money supply plays is one on which, as we know, the Governor of the Bank of England continues to be very much focused as he leads on the conduct of monetary policy.

[Baroness Hollis of Heigham]

My Lords, the devil is in the detail, as has been said before. The Statement says that pension savings credit will be frozen for four years, saving in total—on page 11 of the Red Book—£1 billion from pensioners. The state pension will rise with earnings, so that pensioners not in need of pension credit will be better off, which is good, but poorer pensioners dependent on pension savings credit will find that the income and the increase in state pension will be offset by the freeze in the savings guarantee and they will be worse off. Better-off pensioners will be better off, while poorer pensioners will be worse off. Is that fair?

[Lord Sassoon]

I understand that the amount affected by the freezing of the credit approximates to £1.50. I think that it is important to consider this in the context of everything else that we have done for pensioners and elderly people in this spending review—

Housing: Lettings

Debate between Baroness Hollis of Heigham and Lord Sassoon

Monday 26th July 2010 Lords Chamber

[Lord Sassoon]

My Lords, what I have said today represents the views of the coalition Government.

[Baroness Hollis of Heigham]

Following the question of the noble Lord, Lord Best, can the Minister inform the House what the cuts in housing benefit, particularly the cut after 12 months for those on JSA, will do to the private residential letting sector?

[Lord Sassoon]

My Lords, I am not sure that any assessment of that has been done, but I shall find out and write afterwards.