To ask the Chancellor of the Exchequer what accounting convention underlies the treatment of working families' tax credit as a tax reduction; and when the Government adopted that convention. [79088]

The Working Families Tax Credit will be part of the income tax system. It will be administered by Inland Revenue as a credit of income tax. And it will be perceived by recipients, who will receive a higher post-tax pay packet as a result, as a credit of income tax. Accordingly, in the presentation of Government receipts in the Financial Statement and Budget Report and elsewhere, the Working Families Tax Credit is treated as an income tax credit, and netted off from gross income tax receipts in the calculation of aggregate net taxes and social security contributions. This treatment of the Working Families Tax Credit was adopted in the March 1998 Financial Statement and Budget Report, and was explained in paragraph B59.