Tax Credits Bill

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Mr. Webb: I understand exactly what the Paymaster General is saying. Let us suppose that, having been given a revised assessment, the board got the sums wrong in taking one entitlement away from the other,

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and that a query arose not about the assessment but about the calculation of the overpayment. Could one appeal against that?

Dawn Primarolo: Yes, because that would be part of the entitlement assessment. I think that the hon. Gentleman is talking not about a case where a mistake on actual entitlement is made, but where the error is produced by bringing together the facts of the entitlement. If the facts are disputed, that is a matter of appeal. Again, perhaps it would be helpful to write to the hon. Gentleman and other members of the Committee on the matter, as I have a feeling that we are talking about technicalities and the meaning of words, rather than the intention behind the provision, which the hon. Gentleman wants to clarify.

Mr. Webb: I am grateful for that helpful response to the issues that I raised. I am talking about a circumstance where everyone agrees with the new entitlement and with the board, including up to the point at which a new assessment is made, but where the assessment implies that an overpayment has arisen and the board makes an error in calculating the overpayment. I understand the spirit of the Paymaster General's explanation but I am not absolutely sure that the clause under discussion deals with this issue. I look forward to her written explanation.

Dawn Primarolo: I will look closely at the matter before I reply to the hon. Gentleman. If he has identified what is politely called a lacuna, I shall consider whether it needs to be addressed.

Mr. Webb: I am grateful for that explanation and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 ordered to stand part of the Bill.

Clause 37

Exercise of right of appeal

Mr. Clappison: I beg to move amendment No. 54, in page 23, line 17, at beginning insert—

    'Subject to subsection (1A) below'.

The Chairman: With this it will be convenient to take the following: amendment No. 55, in page 23, line 19, at end insert—

    '(1A) The General Commissioners or the Special Commissioners may allow notice of an appeal under section 36 to be given more than thirty days after the date on which notice of the decision was given if it appears reasonable for them to do so.'.

No. 56, in page 23, line 29, leave out from 'notice' to end of line 30.

4 pm

Mr. Clappison: It may be helpful if I point out that I do not propose to press amendment No. 56 in view of the nature of it, and of the fact that some important issues have yet to be debated and we are running seriously short of time. Perhaps we can deal with the amendment in very short order.

The clause sets out the framework for appeals. Subsection (1) provides that notice of appeal must be given within 30 days of notice of decision. However,

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the amendment would allow notice of appeal to be given more than 30 days after a decision if it appeared reasonable to the commissioners to do so. In other words, it would give commissioners the discretion to allow appeals to be brought out of time where that appears sensible. The purpose of the amendment is simply to introduce some flexibility into the system and to avoid the risk of injustice, or of a potential appellant's feeling a sense of injustice. We appreciate the desirability of timely appeals, and members of the Committee will observe the requirement of reasonableness that we have placed on bringing an appeal out of time.

We should also bear in mind, however, that those who bring such appeals will be ordinary members of the public who are finding their way round the tax credit system. The Bill as drafted appears to make no provision for allowing notice to be given out of time, but the matter can be dealt with in short order if it transpires that there is in fact a way for commissioners to allow an appeal to be brought more than 30 days after a decision. I await the Paymaster General's explanation.

Dawn Primarolo: I hope that I can deal with this quite quickly. The hon. Gentleman is seeking to allow a period of more than 30 days after the notice of decision is issued, but the amendments are not necessary because the points he raises are already covered, and I shall explain why.

Section 49 of the Taxes Management Act 1970 permits a person to ask the Inland Revenue to accept a late appeal where there is a reasonable excuse for not making it within the time limit. Under that section, the commissioners decide the matter if the Inland Revenue does not agree that the appellant has a reasonable excuse. Section 49 is in part V of the 1970 Act, and will be applied to tax credit appeals by virtue of clause 37(6). Therefore, the rights that the amendments seek to add are already in the Bill and I hope that the hon. Gentleman feels able to withdraw his amendment.

I think that the hon. Gentleman said that he does not want to pursue amendment No. 56, so I need not reply to it. I am tempted to do so as he has spoken for longer than I have this afternoon, but I will not because I know that he wants to move on.

Mr. Clappison: I accept the Paymaster General's explanation. There is no reference in the Bill to a discretion as such, but clause 6 does refer to part V of the Taxes Management Act 1970, within which one could doubtless find the relevant provision buried. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Webb: I beg to move amendment No. 75, in page 23, line 21, leave out subsections (3) to (7) and insert—

    '(3) An appeal under section 36 shall be to an appeal tribunal constituted under Chapter 1 to the Social Security Act 1998, and the provisions of sections 12 to 16 of the Social Security Act 1998 (and Regulations made thereunder) shall apply with like effect to appeals under section 36.'.

The Chairman: With this it will be convenient to consider amendment No. 106, in page 23, line 21, leave out from 'be' to end of line 23 and insert—

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    'to a Social Security Appeal Tribunal'.

Mr. Webb: This important amendment seeks to ensure that appeals against decisions on tax credits are made to a body akin to a social security appeal tribunal, rather than to the tax commissioners. Again, we have a strange hybrid—a measure that is not really a tax and not really a benefit—and we must decide which way to go. The Bill proposes that appeals be made to tax commissioners, but the most striking point is that the One Parent Families Association, the National Association of Citizens Advice Bureaux and the Child Poverty Action Group have all, independently, expressed concerns to us about that proposal.

I would like to set out several reasons why it concerns us.

The key issue is the suitability of the tax commissioners as the people to go to. There are various reasons for that, which I will touch on briefly. Clearly, we need some scope for minor review. Clause 18 offers some scope for decisions to be re-examined, but it is not clear how a decision that has been made not to make an award at all can be looked at informally. Clause 18, as I understand it, gives powers to re-examine awards that are not quite the right amount. To some extent that mirrors the new social security appeals process, where something can be informally re-examined, without having to go through the paraphernalia of an appeal.

It is not, however, apparent to me how a case can be re-examined when someone has been turned down altogether, and it is clear that something has just been misunderstood or misread, and that minor mistake should be able to be rectified without going through a complex appeals process. Can the Minister clarify how that would happen? Clause 18 does not appear to cover cases in which an award is not in payment.

Are the tax commissioners the right people to deal with that category of appeal? The Minister might say that the Government will change the way in which the tax commissioners work to make it more like the way in which the social security appeals process works. However, everything has to be in place by 2003. We already have a social security appeals structure that is dealing with working families tax credit. I should stress that to the Committee. We have a tax credit, appeals against which are currently dealt with quite properly and effectively by the social security appeals system, and a group of people with experience of the client group, the processes and the system. As the saying goes, if something is not broken, why fix it? If we are to use the tax commissioners' route, will we have to reinvent through them all the good things about the social security appeals process that work for that client group?

The Minister may have studied the Leggatt report. I know someone who has, and I understand that it raised serious concerns about the general operation and effectiveness of tax tribunals. Much of what it said would be doubly worrying for the client group that we are talking about. One point made is that people are often not represented at them. The evidence is that, with social security appeals, being represented or being

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present has a big impact on ability to succeed. It might be that it is when people are likely to win that they turn up or have representation, so this might not exactly be cause and effect. But if the custom at tax commissioners' hearings is much less for people to turn up or be represented, there would need to be a change in culture.

There is a fundamental difference between the two tribunals. Social security tribunals have what is called an inquisitorial role. They do not just sit back, listen to the client put the case and then judge it. They try to find out what went on, and ask the relevant questions. When an appeal client does not, perhaps, understand the legal technicalities, he might nevertheless have a valid point to make if probed or prodded in the right direction and asked the right questions. Whereas the social security appeals process has that characteristic, it is not apparent that the tax commissioners do. Clearly, we want them to try and get the right answer, not just form a judgment on the basis of the case presented to them.

I would assert—although I am open to contradiction on this—that, by and large, the tax commissioners are used to dealing with a completely different client group. They usually deal with the better off, and those with complicated tax affairs. Social security appeal tribunals deal with very different people and circumstances, and they already handle the working families tax credit case load. They already know what they are doing.

The next question is which commissioners will people go to? The Bill gives the choice to go to the general commissioners or to the special commissioners. The general commissioners are unpaid volunteers. By contrast with the social security appeals process, if someone chooses one avenue here they can put their case to unpaid volunteers whose decision, if they have ruled on a matter of fact, cannot be appealed against. There are serious worries if folk in the client group that we are talking about put their case to non-specialists, who do not have to be tax experts but who can make rulings. Obviously, that is already part of the tax system, so people might say that it is not a problem because the general commissioners know how the system works. I am not sure, however, that that would be the case with this client group.

Alternatively, people can go to the special commissioners, who are salaried, legally qualified experts. But if people get it wrong, lose, and are deemed to have been unreasonable in going to the special commissioners, they could face costs. NACAB are worried that, potentially, not only the applicant, but the advisors could face costs. Such a situation does not arise in the context of social security appeals.

There is a whole raft of reasons for the amendment. The Minister might say that the commissioners are going to be reinvented so that they work in a similar way to social security tribunals. That would answer most of the concerns, but why bother? Why not just use the existing structure? If that reinvention is not going to happen, many concerns about the commissioners' route remain valid. The Lord Chancellor's Department is reviewing the role of

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such tribunals at the moment. It has expressed its reservations about the way in which tax tribunals work. Do we really want to put another large case load down a potentially inappropriate and unsatisfactory route?

I stress the widespread concern about the proposals. I understand the Government's desire for neatness, but I wonder if effectiveness might suffer as a result.

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