Examination of Witnesses (Questions 80
- 99)
WEDNESDAY 25 APRIL 2001
MR NICK
MONTAGU CB, MISS
ANN CHANT
CB, MR JOHN
YARD CBE, MR
WILLIAM THOMAS
AND MS
ELISABETH ASTALL
Mr Williams
80. Coming back to this issue of the pay as
you earn, have you had a chance to look at the figures again?
(Mr Yard) Very generally the figures come out that
there are approximately 114,000 cases where there is tax that
has been overpaid, and 114,000 into 22 million would give £190
on average.
81. That is a bit better, is it not? A bit different
from your figure.
(Mr Yard) I said 134,000 which took into account not
only the overpayments but the underpayments as well.
82. But that is ludicrous. That is absolutely
ludicrous. Those are completely separate cases. How on earth can
the same person be down as having underpaid and overpaid? In terms
of the overpayments you are only entitled to divide by the 114,000.
Where did you get the original figure from?
(Mr Montagu) Again this is territory that from my
previous discussions with the Committee I am aware I need to tread
carefully on. I have accepted the Comptroller and Auditor General's
findings. There was a difficulty in the sense that my statisticians
used a different methodology. I do not resile from accepting what
the Comptroller and Auditor General has said in his report. I
think the figures that we came up with may reflect our actual
individual sampling whereas the global figures represent the inferences
drawn from them. If the Committee would find it more helpful to
have a detailed note on the figures I would be very happy to provide
it[9].
83. Why bother with sampling when you have got
the global figures? If you know that 87 per cent were probably
correct out of the million, that leaves 130,000, including the
people who have underpaid. I generously included those which improved
the figures from your point of view. Now very quickly you can
produce a figure of £190. When I challenged the £170
I was told that it was too high. Now we are told it was too low.
Which figures are you using? Do you stand by the figure you just
gave me?
(Mr Montagu) When I said the global figures, Mr Williams,
I was talking about the figures that equate to the 22 million.
I think this is a difficult area. It is one in which we did some
sampling work and I think it would be easiest for the Committee
if I gave them a note setting out the detailed workings, and they
have obviously agreed with Sir John, taking the 22 million because,
as I say, that is a figure that as Accounting Officer I have accepted.
84. You see, it is all well and good saying
that because you are pushing the inquiry off. By saying you will
put the figures in in writing that means we now have to wait to
see those and you escape this hearing without having to explain
why you came here with the wrong figures, which you have done.
I do not see how you have arrived at them.
(Mr Montagu) On the substance of what we should be
doing, what is it you would like us to be doing? Perhaps I can
help on that. The scale of the figures in one sense does not affect
the case for action or non-action or whatever.
Mr Williams: We will come to that in a second.
You see, having given Mr Rendel a figure of—what was it
originally?
Mr Rendel
85. Fifty? The average underpayment was said
to be £70, was it not?
(Miss Chant) I was saying that from our sampling figures
the median, the typical payment, could be about £74.
Mr Williams
86. We started off with £74; I threw in
£170, now you have come back and said even I under-estimated
and now it is £190. This is not exactly filling the Committee
with confidence. You see, you then, Mr Montagu, said you were
using a median figure. But if you have a median that suggests
you have rather a detailed knowledge of the statistics because
you cannot draw up a median without knowing a maximum and a minimum,
so what is the range? What is the top of the range you have estimated
then in devising your median?
(Mr Montagu) I do not have the detailed extremes of
the range with me, I am afraid, which is why I offered the Committee
a note on this. The median, as I say, was produced by my statisticians
on the basis of a sampling exercise.
87. But you understand statistics as I understand
statistics. I lectured in statistics at one time. A median can
only be drawn up if you have a range.
(Mr Montagu) Yes, indeed.
88. Have you not got a statistician with you
who can—
(Mr Montagu) No, I do not have a statistician with
me. That is why I am offering the Committee a note.
89. It is not good enough to come to this Committee
with utterly inadequate figures.
(Mr Montagu) What would you like, Mr Williams?
90. The accurate figures.
(Mr Montagu) I have said I will provide those in a
note.
91. We cannot ask our questions now, can we?
We are now stranded. Here we are: we have taken the trouble to
come here, we have done our homework to come and ask you questions,
and one of the most fundamental questions you have got wrong twice
and you now say you cannot give accurate figures anyhow and you
will write to us. That is not good enough for the Public Accounts
Committee.
(Mr Montagu) Mr Williams, it seems to me we can still,
if you would like, have a productive conversation about action
on the basis of whichever of the figures you want and the action
that we are taking.
92. Let us say I regard it as an enormous improvement
that you have gone up from the original figure of £74 to
£190, so we are getting somewhere. That means that in terms
of the range some of these people could be owed very substantial
sums of money. That raises then the question you were alluding
to about what you intend to do about it. According to the National
Audit Office, they tell us that the Department had not intended
to alert the taxpayers affected to the risk of an overpayment
or underpayment. That is astonishing to the extent of being outrageous.
What statutory power do you have to withhold from taxpayers the
fact that they might be entitled to a refund?
(Mr Montagu) Let me take the first part of that question.
93. As long as you come to the second part as
well.
(Mr Montagu) I will certainly come to the second part
as well. The whole point of this is that, as Sir John's report
makes clear, we originally thought that the total sums involved
broadly balanced and were lower than the sums that we believe
are involved now. I wanted to know more detail about this and
this was why I commissioned, in advance of this, the Head of my
Internal Audit Division to look at a sample of cases with his
auditors and with the statisticians. This suggested that larger
sums were involved, both individual sums and globally, and it
was on that basis that we decided that we should look again at
the 1.04 million cases which we had listed for no further action
on the assumption that smaller sums were involved, and that we
should write to the taxpayers involved. The second part of your
question is that we have, as any Department has, in every year
to decide what relative priority to give tracing and posting action
on contributions and on tax. Where is our effort most likely to
yield results for the taxpayer in relation to the sums of money
involved? As I indicated to Mr Steinberg, these are not cases
where we are just saying, "Let us do nothing". They
are cases where we would have tried to take matching action, where
we would have failed and where we felt that, since clerical action
on the 1.04 million would have an opportunity cost for the work
we were doing for taxpayers on other aspects, we took it as a
normal administrative decision in the light of what we believed
to be the figures at the time. I changed that decision when my
auditors came up with different figures.
94. So what you are saying is that you have
a right, in your opinion, if you discover that there is an error
in the way in which you have been calculating tax, if the sums
are small and if it is going to cost you money to put it right,
to deprive the taxpayer of a refunds to which they are entitled?
(Mr Montagu) No, Mr Williams, I am saying nothing
of the kind.
95. That is exactly what you are saying. Cost
benefit you said.
(Mr Montagu) Perhaps I might explain what I am saying
in that case with rather greater clarity. What I am saying is:
first of all I am not saying that these are sums which have been
overpaid or underpaid because of an error on our part. What I
am saying is that there is a limit to the administrative effort
that it is worth expending in terms of value for money to the
taxpayer in tracing action. We apply tolerances in all areas of
our work in common with other departments. What I am also saying
is that we are simply not taking further action ourselves. If
new information comes to light or if the taxpayer contacts us,
they can claim the money back from us at any time.
96. So if I as a taxpayer write to you and say,
"I have done a personal cost benefit analysis and I work
out that it is not worthwhile my calculating the exact figures
I should pay you in tax", would you write back and say, "That
is exactly the way we work and we understand that and therefore
we will not require the figures"?
(Mr Montagu) No, Mr Williams.
97. I thought not.
(Mr Montagu) If I said to you as a taxpayer that it
would cost me one pound to track down every 50p of money due to
us or money due back, this is precisely the sort of thing that
this Committee has examined me hostilely on in the past.
98. There is an important difference between
the two which you do not seem to understand. Fifty pence which
is owed to you, you can come here and explain to us why you have
written it off, but 50p you owe to someone else is 50p you owe
to another taxpayer and they do not have any reason whatsoever
to subsidise you for any sum of money, so I do not accept this.
If this is the way in which you operate, I must say it has come
as a great shock.
(Mr Montagu) I have to say, Mr Williams, that I am
surprised, with you having been a Minister and a long-serving
Member of this House, that you should find that. Obviously, if
the taxpayer contacts us and says, "You owe us this money"
and can support it, we will pay it. If we are able to allocate
an overpayment we will repay the difference. What I am saying
is that any Government Department has, as a matter of good administration,
to decide the point at which we balance obligations to the taxpayer
and value for money to apply tolerances; and we do so, as do other
departments, in a number of areas of our activity. I would not,
as Accounting Officer responsible for the sensible spending of
money in my Department, countenance limitless spending in order
to return every last small penny regardless of the administrative
effort involved.
99. That is interesting. I am sure lots of people
will read that with fascination afterwards.
(Mr Montagu) But I doubt with surprise, Mr Williams.
9 Note: See evidence, Appendix 1, page 14 (PAC
00-01/182). Back
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