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Sir Nicholas Winterton: I am pleased that the hon. Gentleman raised that point so early in his speech because it was the point that I put to the Secretary of State. He denied that such things were happening, but, unless I have completely misunderstood the letters that I have received, it is happening. Benefit is being taken away before the new tax credit is implemented. Is the hon. Gentleman confirming that, because, if he is, it is the real issue about which I am deeply concerned?
Mr. Webb: The hon. Gentleman puts his finger on precisely what is happening. There should have been a
guarantee that the most needy families who received the old top-ups to their wages—the old working families tax credit—would keep the money until the new money was on stream. That would have prevented a lot of the pain, but it did not happen.We should set the context of the debate by pointing out that the Bill that introduced the system went through the House unopposed. No party objected to the principle of the new tax credit regime. I had the dubious privilege of serving on the Committee that considered the Tax Credits Bill and on the Committee that considered the previous Bill on tax credits. The Conservatives tabled many amendments on fraud, quite reasonably, but very few related to the issues that we are discussing. There has been an administrative failure to deliver a system of extra help for low-income families that was broadly endorsed by the House as a whole.
The schizophrenic relationship between the Treasury and the Department for Work and Pensions was beautifully summed up when the hon. Member for North Thanet (Mr. Gale) asked about the Secretary of State's computer. The Secretary of State said, in as many words, "Don't ask me, it's not my Department." The computer is not his at all—it belongs to the Treasury and the Inland Revenue. I am slightly puzzled that the Secretary of State is speaking in the debate at all, because the new regime is supposed to be part of the integrated tax system.
Mr. Andrew Smith: Does the hon. Gentleman accept that if the official Opposition had put up the shadow Chancellor to lead the debate—I suggested earlier that they should have done, but he clearly did not want to debate the subject—Treasury spokespeople would be speaking rather than the hon. Member for Havant (Mr. Willetts), me and the hon. Member for Northavon (Mr. Webb)? Why is he speaking?
Mr. Webb: The shadow Chancellor led the previous debate and I think that one debate in a day is quite sufficient for him.
Who is responsible for the system? The Secretary of State did not say that he knows nothing about it, so he clearly takes a close interest. The problem is that it is not really a system of tax credits at all because the Government have not integrated the measure in the tax system. The three-month backdating rule is a benefit rule, so the credit is really a social security benefit. There is a take-up problem because the credit is not integrated in the tax system. I recall that there was no take-up problem with the married couple's allowance, but the flat-rate child credit—the analogue of the old married couple's allowance—does have a take-up problem. Some people receive less money under the new system because they took up the married couple's allowance but do not claim the new tax credit.
Take-up is important. It is perfectly reasonable for the Secretary of State to point out that there was low take-up during the initial phases of family credit, but he cannot gloss over the fact that 1 million families are missing out. The baby credit take-up rate is
extraordinary. The hon. Member for Havant (Mr. Willetts) read a quote from The Times on Saturday that said that the baby credit may be claimed until 2009—I suspect that most children will have grown out of baby clothes by that time. Indeed, the claim could probably be combined with claims for pension credit to save trouble. However, the idea that the baby credit may be claimed five or six years after children were babies demonstrates the absurdity of the entire system.Take-up is a real issue, which is why my hon. Friend the Member for Roxburgh and Berwickshire (Sir Archy Kirkwood), the Chairman of the Select Committee on Work and Pensions, is absolutely right to say that we could put back the deadline without a problem. I did not understand the Secretary of State's response to that point. If people claim in August, the assessment is still based on their income during the whole financial year because that is the way in which the system works. Why must they supply more or different information if the claim is backdated only three months rather than to 6 April? The claim is still based on annual income, so payment must just be made for more weeks. The Secretary of State will reflect that his argument was specious, and given the deference that he properly paid to my hon. Friend, as we all do, I hope that he will revisit the point and either give us a more credible response or accept the point that we made over the weekend. Although that point is not detailed in the Conservative's motion, I am delighted that the hon. Member for Havant has come on board.
I also hope that the Paymaster General will answer my point about childless recipients, because they are the great forgotten people. The Institute for Fiscal Studies estimated that nearly 500,000 childless couples and single people with full-time, low-paid jobs would be brought into the new system for the first time. We have not received any separate figures showing the take-up among those groups—presumably because it is appalling. [Interruption.] I am happy to give way to the Paymaster General if she wishes to contradict my point.
Dawn Primarolo: I apologise for interrupting the hon. Gentleman's flow. It is not the case that there are no figures, and I shall answer his question when I wind up the debate.
A second group of people with problems are not those who have not yet received their money but, bizarrely, those who have received too much. Now that people have started to receive money, some have received ridiculous amounts. The hon. Member for Havant mentioned a person whose income was entered as £100,000 rather than £10,000, but there are also people who are receiving far too much money because their income was entered too low. They are trying to give the money back but they cannot. I am worried because the maximum payments can be thousands of pounds. If such payments are made to people who are entitled to only the basic payment of £500, they will be thousands of pounds in surplus.
Will the Paymaster General tell us how the money will be clawed back? Small overpayments could be dealt with by reducing the following year's payment, but if people are entitled to £500 yet receive £5,000 will they receive
nothing for nine years or, as I suspect, will the Inland Revenue ask for it back rather more quickly? People might hear the Government's rhetoric and think that the new system generously gives lots of money and, thus, spend the money on their children. What will happen if the Inland Revenue asks for it back? Will she run a scan on her computer, as I asked her to in a Westminster Hall debate on the same subject, on entitlement this year to the children's tax credit and entitlement last year to the working families tax credit to spot cases in which someone's entitlement has shot up tenfold, and investigate where mistakes have been made? That would help to pre-empt the problem and would be better than merely reacting to it when something goes wrong.Much of what we have heard relates to problems with the IT system. A common thread runs through those problems. I understand that the company EDS is involved in the computer system for the tax credits. I also understand that it is involved in the computer system for the Child Support Agency, which is not going well. In addition, I understand that it has a hand in the pension credit system as well. How can we be confident that the pension credit system will not be even more of a shambles than the existing tax credit system? The same hands appear to be on the tiller in each case. There are some important questions to ask about the Government's IT projects, the management of those projects and whether the Government become beholden to one supplier when the contracts come up for renewal because no one else would dream of taking them on, in which case the taxpayer is not getting good value for money and the public are not getting good service.
Mr. Gale: Does the hon. Gentleman accept that a fairly senior civil servant involved in the CSA told me this morning that there is no prospect in the foreseeable future of historical cases migrating to the new system because the CSA computer is in total chaos? As I said to the Secretary of State, who clearly does not have a clue what is going on in his Department, his computers in general are in chaos.
Mr. Webb: The hon. Gentleman is right. Dealing with new CSA cases should be straightforward because they have been relevant only since March. If a small fraction of the caseload is in chaos, I am worried whether the whole system will work correctly. The addition of the tax credits and the pension credit means that we are heading for chaos. That has to be a worry for our constituents.
The hon. Member for Falkirk, East (Mr. Connarty) raised the important issue of passported benefits. That has also been a bit of a shambles. I hope that the Paymaster General can clarify the rules. When people who are not on the maximum rate of income support move on to the child tax credit, they could lose the income support element entirely. How will the passporting work in that situation? I visited the Department of Health website today to look at the health benefit scheme, which is important to low-income families because it includes measures such as free prescriptions. The website on low-income health benefits says, "If you are on working families tax credit", which was abolished four months ago, "these are your entitlements." There is then a little note that
says, "This page will be updated." That shows the lack of joined-up thinking across the Government on passported benefits because, four months into the new system, the Department of Health has not got round to issuing new guidelines. Problems will be acute next April when the poorest families come across to the new system, because they really need the passported benefits. I hope that we have a coherent explanation of how passporting will work.There is one aspect of tax credits on which I will court unpopularity with the public at large. I understand that the Inland Revenue has thrown resources at trying to sort out the problem of the tax credit backlog by putting people's tax returns in a corner in a room in Bootle. I am reliably informed that somewhere in Bootle there is a cupboard with a big pile of unopened tax returns.
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