Examination of Witnesses(Questions 60-79)
SIR NICHOLAS
MONTAGU KCB, MR
DAVID HARTNETT
AND MR
STEPHEN BANYARD
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.
Chairman
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.
| 
