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Dawn Primarolo: The hon. Gentleman needs to be reminded that his party supported the tax credits, including the flexible system and the way in which that is approached. The ombudsman's report says:

It goes on to say that new challenges need to be met, however. The CAB's summary says:

The issues thus revolve around administration.

I shall address each of the six points that the hon. Gentleman made. First, he asked about adopting a response to claimants of clearly explaining their entitlement and what that is based on and, as it says in the ombudsman's report, working on a case-by-case basis. That was covered by my statement on 26 May and I reiterated the position at the beginning of my comments today. I have accepted that the ombudsman's point was correct and I have already started acting on that.

The hon. Gentleman said that claimants should be made aware of their entitlement when dealing with disputed claims. Again, my statement on 26 May
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referred to that and my opening comments today confirmed what I said. I especially made the point about the suspension of disputed claims.

The hon. Gentleman asked about writing off official error. He knows full well that in cases in which either an administrative or information technology error has been made by the Inland Revenue and it would be reasonable to assume that the claimants did not realise that a payment had been made in error, that money has been written off. In my statement on 26 May, I made it clear that we needed to review the procedure and determine not only whether to suspend recovery until a dispute has been resolved, but how we communicate with claimants so that the Department can ensure that they know exactly what their entitlements are.

The hon. Gentleman asked about the transfer of jobseeker's allowance and income support to the system. I have told him that the system is not in disarray, and that is what the ombudsman says. I have told the House repeatedly that we keep the transfer under careful consideration. We plan to start it later this year, but I assure him that if that is not the case for any reason, I will inform him and also the House.

My accountability has been questioned. First, I have answered all questions about the matter, both written and oral. Secondly, I have made statements to the House. Thirdly, I have been involved in debates on the tax credit system in the House. Fourthly, I meet hon. Members and delegations from community and voluntary organisations to discuss exactly these points.

As the hon. Gentleman said, his final question was fundamental. When he talks about the inheritance and the problems that families face, he must acknowledge that the system in place before failed to tackle child poverty, failed to respond to the needs and changing circumstances of families and failed to recognise the changing nature of the labour market. He does not realise that the income change for 300,000 of the people who have received overpayments is in excess of £10,000 per year. Is he seriously suggesting that if an overpayment is not disputed and the claimant is prepared to pay it back, we should not collect it? That is ridiculous.

Mr. David Laws (Yeovil) (LD): Is not the truth that the tax credit system has been in chaos and that Ministers have persistently been in denial about the extent of the problems, and that they still seem to be in denial? What is chaos if it is not 1.9 million people overpaid £2 billion of taxpayers' money that should not have been paid out, if it is not 700,000 underpayments and if it is not two thirds of the overpaid awards going to households that the ombudsman describes as on modest incomes? Is not the Paymaster General more concerned than the impression she gave about the conclusion in the ombudsman's report,

as a consequence of these problems—

Are not those precisely the people who are losing out as a consequence of the endemic overpayments in the system?
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Are there not three questions, in particular, on which we need clear answers from the Paymaster General? First, there is the vital issue of overpayments. Will the right hon. Lady clarify the statement that the Prime Minister made earlier in Prime Minister's questions, in which he appeared to give the impression that overpayments as a consequence of official error are to be written off. That was very different from what the right hon. Lady has told us. She knows perfectly well that there are a multiplicity of cases where the Inland Revenue has made the errors. Yet at the end of the day money is still being clawed back from people. What will be done to tackle that problem? How many of the overpayments due to official error will be written off? Can the right hon. Lady give us an absolute guarantee that from now on the system will be one of investigation first and recovery second, and not what we have had, which has been recovery first and then investigation?

On a point of law, can the Paymaster General tell us whether she has received the legal advice that is referred to by the ombudsman in her report as to whether the Inland Revenue has been acting lawfully over the past year in the way in which the recovery policy has been applied? Can she give us a clear answer on that?

On a second point, what is the right hon. Lady doing about the chaos of the computer system that has generated so many of these problems? When will that be resolved?

On a third point, is the right hon. Lady more concerned than the impression that she gave in her statement about the ombudsman's observation that her report raises

a financial support system with such "inbuilt instability or uncertainty" can truly meet the needs of people on modest incomes? If it is so obvious that we should have the system that we now have, why did we have fixed awards under the working families tax credit and why were there fixed awards under the family credit system? Should not the right hon. Lady examine that issue seriously?

On a final issue, I feel almost sorry for the Paymaster General. The system was introduced by the Chancellor and he has been very successful in claiming the credit—taking the credit, as it were—for the system of tax credits. He has left the Paymaster General to mop up all of the difficult issues that we have been discussing. Does the right hon. Lady accept that she is ultimately accountable, and that if these problems, which are affecting some of the most vulnerable families, are not resolved over the next few weeks, she ultimately must accept the responsibility that comes with her office?

Dawn Primarolo: I do accept the responsibility, and that is why I am here. I do not need the hon. Gentleman's sympathy for doing my job, although I think that he was offering it rather tongue in cheek. Perhaps I should remind him of his party's policy at the time when tax credits were introduced. I quote from the then Liberal Democrat spokesman:

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The hon. Gentleman said that in the course of the Bill that introduced the tax credit system. He said:

when the system is introduced—

That was what the previous spokesperson for the Liberal Democrats said on the issue.

The hon. Member for Yeovil (Mr. Laws) asked five questions. The first was on write-off. I explained today and I have explained in previous debates, in written answers and personally to the hon. Gentleman during meetings how the compensation and the write-offs occur. The hon. Gentleman then said that he wanted a system of investigation first and suspension afterwards. He clearly was not listening—again—to what I said today, to what I said on the 26 May and to what I said on the Adjournment debate on 7 June, at which he was present. I asked the Revenue to suspend recovery while the disputes were being investigated.

The hon. Gentleman asked a technical question about legal advice. If he will forgive me, I need to write to him on that. I will also respond in writing to the hon. Member for Tatton (Mr. Osborne).

The hon. Member for Yeovil reiterates the point that the system is in chaos. It is not. The ombudsman says that it is not; she says that there are particular problems, which I acknowledge. They are important problems and they need to be sorted out. That is why, in making my statement on 26 May, in what I have said in the House at Question Time, in what I have said in written answers and in what I said on the Adjournment debate on 7 June, I have acknowledged all of that. I do that both inside and outside the House when I am asked questions on these matters.

There is a fundamental issue, and that is why the hon. Gentleman must make a choice. I know that that is difficult for Liberal Democrats. They are not keen on making choices because it is much better just to attack everything in sight. The choice is between a flat rate unresponsive system that is unfair, that is fixed and that does not help families to meet the changing needs in the economy, or to have flexibility. Those are the two models. What the House has to decide, what the Government have to decide and what the Opposition parties have to come to a conclusion on is which model they prefer and whether they are prepared to tackle child poverty.

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