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Mr. Willetts: I am afraid that that is the sort of example that every hon. Member has encountered and the problem is that enormous personal distress is often caused in that way. Hundreds of thousands of people have received insulting letters about their personal
Andrew Selous (South-West Bedfordshire): My hon. Friend rightly talks about the distress caused to people applying for the credits, but does he agree that those who work in Inland Revenue offices have themselves had to put up with an intolerable amount of stress because of what has gone wrong in the system? We should not forget them in this debate either.
Mr. Willetts: My hon. Friend is right and I want to make it absolutely clear that our motion is in no way an attack on the people working in Inland Revenue, who find themselves in desperate circumstances trying to wrestle with hundreds of thousands, if not millions, of inquiries from taxpayers throughout the country who are seriously worried about their financial circumstances. The source of the problem is not Inland Revenue, nor even software problems and computing systemsthough they may be part of the problem. The real source of the problem is the policy decisions taken by Ministers.
To gain a measure of the shambles that people now facesome having to contend with months of delay before they receive their tax creditslet me remind Ministers of the speech given by the Prime Minister to his party conference on 1 October 1996. Those were the days when he could say, in a savage attack on the delivery of benefits under the Conservative Government:
Mr. Steve Webb (Northavon): The hon. Gentleman is right to point to the administrative shambles of the tax credit, and we support his motion in that regard. He said that he is concerned about the actual policy, but the motion makes no positive proposals, apart from an emergency social fund. If he were in government, what policy would he adopt to make tax credits work?
Mr. Willetts: I have three practical proposals to try to make the system work better and I hope that Ministers will consider them carefully. I hope that I do not have to superglue my hand to the Dispatch Box to get Ministers' attention.
Mr. Willetts: My hon. Friend is right and I am grateful to her for that point. If I give the House a short summary of the story so far, it will be clear why our system of tax and benefits has descended into shambles. In the four years since 1999, we have seen the abolition of the family credit, then the introduction of the working families tax credit, the disabled person's tax credit, the child care tax credit and the employment credit. [Hon. Members: "Hooray."] Then the Government abolished the married couple's allowance. Then they introduced the children's tax credit and then a baby tax credit. [Hon. Members: "Hooray."] Then the system needed further reform, so the Government abolished the working families tax credit, the disabled person's tax credit and the children's tax creditsome of the very tax credits that they have just been cheering. Labour Members are a bit behind, but some of the tax credits only lasted a year, so they have to be quick. Having introduced the baby tax credit, the Government abolished it after a year. Then they introduced the new child tax credit, abolished the employment credit and introduced a working tax credit. That is what they have done in the past four years, and they ask us why the situation has become such a shambles.
Mr. James Plaskitt (Warwick and Leamington): The combined effect of the changes introduced mean that for the first child in a low-income family the weekly support is now £54.25. How much was it when the Conservatives left office?
Mr. Willetts: At least under our Government, we did not have 1 million families who were not getting any help. It does not matter what the theory is, because if families are not getting the money, they are not getting the money. That is the point.
Mr. Russell Brown (Dumfries): I do not know what sort of working relationship the hon. Gentleman and his colleagues have with their local Inland Revenue offices, but I have had many people come to my office and had no problem in diverting them to the local revenue office for payments to be made within 24 hours.
The social fund includes a mysterious provision for something called alignment loans. They are a special invention whose sole purpose is to tide people over when they are not receiving other benefits to which they are entitled. It is a sad reflection on our social security system that we have to have alignment loans to lend people money while they wait for other benefits. Indeed, alignment loans are an increasing proportion of all crisis
Secondly, the Paymaster General should lift the deadline, which falls tonight, after which people will no longer be able to apply for the child tax credit and receive the full year's payments. If one already has children and put in an application for the child tax credit from tomorrow, it will be backdated by three months and, therefore, it will not be for the full year. As every month passes, people will not be able to get the full year's value of the child tax credit. There is no reason why the Inland Revenue should have a rule on the backdating of payments of tax allowances within the financial year. Most tax allowances may be claimed even after the end of the financial year.
The same Inland Revenue and Treasury press officers who were briefing over the weekend that it would be impossible to remove the backdating rule were saying the opposite when it came to the baby tax credit. The baby tax credit is a special, double rate of tax credit, payable for children in the first year of life. It is a record-breaking tax creditout of 500,000 families entitled to it, so far only 150,000 have received it. That 30 per cent. take-up rate is perhaps the lowest of any tax credit yet, although the Government may yet manage to improve on that performance. When we drew that to the attention of the Treasury, a spokeswoman did not see what the problem was because
Thirdly, there is a strong case for compensation. We hope that we will hear authoritatively from Ministers what their policy on compensation will be. People need guidance. They have suffered serious financial losses as a result of the failures of the system. For example, a constituent of my hon. Friend the Member for Chipping Barnet (Sir Sydney Chapman) found that the Inland Revenue was no longer sending payments directly to her account on the dates that it was supposed to. Instead, she was being sent giros irregularly. As a result, she could not be sure that the money would be in her account to pay her direct debits, and she has incurred £129 of bank charges because she has gone into debt because the payments have not been received regularly. In another example, a lady's bank charged her £320 in returned cheque fees after she had written cheques on a promise by the Inland Revenue that the interim payment would be made within 24 hoursas the hon. Member for Dumfries (Mr. Brown) claimed. She did not receive the money, the cheques bounced and she faces £320 in charges as a result. Those are the people who need to know whether they are entitled to compensation, and I hope that we will hear from the Minister on that point tonight.