Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 60-79)


MONDAY 20 MAY 2002

  60. I will not split hairs. The issue is whether they can go along or not.
  (Sir Nicholas Montagu) We are very happy to talk to Sir John about the best way of delivering that assurance to him.

  61. What percentage of tax credits which should be taken up are taken up at the moment?
  (Sir Nicholas Montagu) Until we have the Family Resources Survey, we have no way of knowing. Take-up at the moment is of the order of 1.3 million, which is getting on for half a million more families than receive family credit.

  62. How many people should be taking it up? How many are eligible?
  (Sir Nicholas Montagu) Until we get the Family Resources Survey, and we do not have the results of that yet, we shall not know.

  63. Do you have any idea what the range is? Is it in the range of 1.4, 1.5, 1.6, 1.35, or what?
  (Sir Nicholas Montagu) We do not know.

  64. No idea at all?
  (Sir Nicholas Montagu) Dave has just passed me a note saying that the Family Resources Survey has just come in. We certainly have not had time to analyse it.

  65. Not even a top line estimate of the global figure?
  (Sir Nicholas Montagu) No. I know that this Committee likes evidence-based figures from me. I do not have them yet.

  66. No; I just want a range. I do not want to pin you down. You have no range, no idea at all.
  (Mr Hartnett) Maybe I can help. We just have the Family Resources Survey. We have a dedicated team of analysts working on tax credits and we would expect to have information in order to answer your question later this year, but it will be later this year.

  67. Which half of the year?
  (Mr Hartnett) Towards the end, I am afraid.

  68. I look forward to that. Moving on. The issue of the reconciliation of awards to employers and payments made. You explained that in terms of timing and tax year and cycle. I understand that there are other reasons, namely that there are discrepancies between the employers' return, the P45, and the aggregation of the P14. Is that correct?
  (Sir Nicholas Montagu) We are all of us looking blank here. That is unfamiliar as a problem.

  69. This is something I picked up from our NAO brief. I shall move on. I have here that there are errors in identifying the employers' schemes when authorising individual tax credits.
  (Sir Nicholas Montagu) That is certainly right. One of the things in my letter to the Chairman that we had found and which was unwelcome was the apparent discrepancy between our records and payments. There is an important proviso. There is nothing to suggest from these discrepancies that people are getting tax credits who should not, or that people are not getting tax credits who should. What it does suggest is a training need for our own people who are sometimes getting the employer's reference number wrong and a training need for employers on what they should and should not put on the P35.

  70. Looking to the future, clearly we are moving to this new child tax credit, working tax credit. Of the current universe of those who apply for these benefits, and the current benefits will be translated into these new formats, what proportion of the people who are currently taking it up, do you expect to fall out of the system or do you not expect any of them to?
  (Sir Nicholas Montagu) I do not know. If we have more detail Dave will give that in a moment. Remember that what is happening is this. What is at present the working families' tax credit will be split so that you will have a work tax credit and separately there will be a children's tax credit. The work tax credit will be paid through the wage packet as the working families' tax credit is, and also people on low earnings without families will be eligible for it.

  71. I know there will be this new work tax and child tax credit. What I want to know really is whether you envisage that in moving from the current system to that system a couple of percentage points of those people who are currently getting benefit and who will therefore be eligible for benefit under the new system, because of the complexities and the change and all the rest will fall out of the system?
  (Sir Nicholas Montagu) I do not think so.

  72. So the answer is zero. Just for the record.
  (Sir Nicholas Montagu) I think so. You will have seen the figures Mr Brown gave in the recent Budget, which I think will mean that people will not fall out of the system.
  (Mr Hartnett) We certainly do not expect any material number to fall out of the system. At this stage I cannot tell you that it is absolutely zero. What will change is that there will be a smaller number—again I cannot tell you precisely—who are actually paid by the employer. That is one change.

  73. Who will they be paid by?
  (Mr Hartnett) They will either be paid by automatic credit transfer to a bank account or through—

  74. That should increase take-up and accuracy presumably, because you do not have an intermediary to make mistakes. Is that right?
  (Mr Hartnett) I would hope so, but we cannot guarantee that until we have had a good look at it.

  75. Assuming, on the figures you do not know, a difference between those people who are allowed to take up and those who do take up, the figures you are about to evaluate, what action are you going to take to bridge that gap, whatever it might be?
  (Mr Hartnett) We are doing a number of things. There have already been advertising campaigns; there will be more. We are working with employers to help them raise awareness of the new tax credits and we are working with various representative groups such as the Low Income Tax Reform Group, the Citizens' Advice Bureaux, a charity called Tax Aid, to raise awareness far and wide of the availability of the new credits.


  76. Sir John, you were mentioned quite a lot in that previous line of questioning about access to employers. I should like you to comment, please. My predecessor took this very seriously. He said in a letter to the Financial Secretary, Dawn Primarolo, ". . . I remain concerned that the proposed changes associated with the tax credits initiative will diminish Parliament's current role in sanctioning public expenditure" and he wanted to draw attention ". . . to the fundamental principle of Parliamentary control of public expenditure". I think it is quite an important point. In previous centuries we have had calls to civil war on these things. Would you like to comment?
  (Sir John Bourn) My comment would be that essentially tax credit is a form of social security. If you look at the other forms of social security which are paid by the Department for Work and Pensions, the external auditor, myself and my colleagues, have access to the books and records of the organisation which makes those payments. Under the tax credit system, the impact on the lives of citizens is the same. They get more money than they otherwise would have had. They receive a benefit from the State. However, I do not have the same access to the people who pay that benefit, because they are employers, as I have to the Government Department which pays it. There is an asymmetry there. That is what your predecessor Chairman took up with the Government. Naturally enough I see the public sector auditor as providing assurance to Parliament, not as a burden on the private sector firms. If I had this power, I should of course apply it with circumspection and care, but nonetheless I should hope with effectiveness in terms of reporting to Parliament.

Mr Osborne

  77. Do you agree with the Comptroller and Auditor General that tax credits are essentially a form of social security payment?
  (Sir Nicholas Montagu) I have already indicated—

  78. I know you have, that is why I am asking the question.
  (Sir Nicholas Montagu) I am not going to express a view different from the Chancellor of the Exchequer's.

  79. Do you not agree with the Comptroller?
  (Sir Nicholas Montagu) I have cited the view of the Chancellor of the Exchequer, who takes a different view from Sir John.

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