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7 Jul 2003 : Column 817

Tax Credits

Mr. Deputy Speaker (Sir Alan Haselhurst): I should inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

7.17 pm

Mr. David Willetts (Havant): I beg to move,

This debate is not about the principle of boosting families' incomes through the tax or the benefits system. That has been a well-established part of British policy for a long time. Nor is it about helping families in low-paid work. Again, Conservatives have long been in favour of providing extra assistance for such families, which indeed is what the family credit, which we introduced, was all about. Those issues are shared ground, and invented disagreements on them need not detain us tonight. We have called this debate for the simple reason that 1 million families are still not getting the tax credits to which they are entitled. That is the scandal to which we are drawing attention through this debate.

Some of those families have applied, but have not yet been able to wade through the thicket of red tape to get their payments, while many others have not even applied in the first place. Ministers have given a range of estimates of the number of families affected, so I want to make the arithmetic absolutely clear. The Inland Revenue set it out in a very helpful poster, simply saying,

As a result of a serious oversight in the Treasury, it gave a full and accurate answer to a question that I asked on the subject. I was told:

So we have 7.2 million families with children and 90 per cent. of them are entitled to the tax credits. That makes 6.5 million families with children who should be receiving those credits. That is the basic arithmetic—[Interruption.]—and I am pleased to hear that it is welcome on the Government Benches.

We have had a range of estimates from the Government. The Paymaster General has sometimes said that 6 million are eligible. In the pre-Budget report the Chancellor said that around 5.75 million families with children were expected to benefit from the child tax credit. In fact, as fears of a debacle loomed, the Treasury's official estimate of the number of children and families entitled to the tax credit miraculously started disappearing. The Treasury took the cautious and careful measure of reducing the target before being

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judged against it. In his Budget speech, the Chancellor said that for the first time from this month, 5 million families with incomes below £58,000 a year would receive the new child tax credit. However, not 5 million, not 5.5 million, but 6.5 million families are entitled to it.

What we know—the Paymaster General has made it clear again today—is that so far 4.2 million families are receiving the child tax credit and that a further 1.3 million families on income support or jobseeker's allowance will be moved on to that credit. That adds up to 5.5 million families: the gap between 5.5 million and 6.5 million is 1 million. There we have the 1 million families that are not receiving the help to which they are entitled. Those are the simple facts, and those are the families that we are representing in the debate tonight.

Roger Casale (Wimbledon): The hon. Gentleman seems to have a good command of the figures, so can he tell us how many families are eligible for the credit in his constituency and what he has done to inform them about how to take it up?

Mr. Willetts: I can tell the hon. Gentleman that I have done considerable work on the Inland Revenue MPs' phoneline trying to help constituents who come to my surgeries in great distress about their inability to get the tax credits, and every Opposition Member—and, I suspect, Government Member—has been doing exactly the same. We all know what the problem is and why it arose. Part of the reason I have before me now—a 12-page claim form that every family is supposed to fill in. It is said that it could be a lot worse, but the reason that it is only 12 pages is that in order to fill it in claimants have to read the 47-page information booklet as well, taking them through question after question, so families have to wrestle through 59 pages in all in order to get the tax credits that should be theirs by right.

Let me quote an accountant from Grant Thornton:

The system has collapsed under the sheer weight of its own complexity and the last three months have been some of the blackest in the history of Inland Revenue, as millions of families have tried to make their way through the system.

I shall give the House some examples of the problems that people have encountered. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown), whom I see in his place, mentioned his constituent, Mrs. Stocker, who received a letter from Inland Revenue stating that she had not

—and the date was supplied in this way—"00/00/0000". That was the date with which Inland Revenue was working. As a result, it was said that the payment of tax credits had stopped. Inland Revenue was simply incapable of recognising the date from the start of the claim. To add insult to injury, my hon. Friend's constituent received a letter from Inland Revenue stating that she did not qualify for tax credits because she was part of another household for which an award was currently in payment. They meant her husband's household, in which she thought she had lived, with him,

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for many years. The husband received a similar letter explaining that he could not be paid because she was supposed to be in receipt of the tax credit. They were then separately told that their children lived in a third household. That is the sort of shambles with which many people have had to wrestle in the past few months.

Mr. Geoffrey Clifton-Brown (Cotswold): Mrs. Stocker, my constituent, originally applied for the tax credit as long ago as last September. Despite much correspondence and many telephone calls, she received an acknowledgement only in November. She eventually received the reply to which my hon. Friend referred, but does he realise that she worked for Inland Revenue, so they had all the details all the time? Even worse, when I rang the MPs' helpline I was told that, because she worked for Inland Revenue, I could not use the line because her details were confidential.

Mr. Willetts: I am grateful to my hon. Friend for that extra twist in this extraordinary saga. Other examples abound. My hon. Friend the Member for Wealden (Mr. Hendry) cited a case of someone who did not receive the tax credit, despite earning only £10,000 a year, because Inland Revenue had placed the comma in the wrong place and believed that she earned £100,000 a year. She received a letter explaining that she would not receive the tax credit for that reason. There are many examples of families caught in that trap.

My hon. Friend the Member for North Thanet (Mr. Gale) showed me a phone bill from one of his constituents who had made 325 phone calls to the hotline to try to disentangle his child tax credit claim. One of the constituents of my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), also in his place this evening, made 70 phone calls to the hotline. The man on that line eventually told him that someone would call him between 8 and 11 the next morning to sort out his problem. He then added, in a moment of truthfulness, that

Having given the official answer, the man then gave the accurate answer—and, needless to say, no phone call took place the next morning. Those are the sort of problems with which hon. Members throughout the House have had to wrestle on behalf of their constituents.

Mr. David Cameron (Witney): Is my hon. Friend aware that the problem with administration also affects the Pension Service and pension credits? My constituent, Mrs. Costar, received a letter from her mother's last address, saying:

The only trouble is that her mother died in 1972.

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