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Dawn Primarolo: My hon. Friend was a distinguished member of the Treasury Committee and no doubt he hopes to serve on it again. If so, I look forward to discussing this with him in Committee. On the question of the tax credits, as I have repeatedly said, there is a fundamental choice. If we are to operate the responsive system that is widely accepted both inside and outside the House as the correct way to support families with children, we must decide how that flexibility is delivered to claimants and we must do so with certainty. I do not wish to give the impression that I am not concentrating on the errors, but I am disappointed that, while millions of families have benefited from tax credits and have good things to say about them, we never hear about that from the Opposition.
 
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Hywel Williams (Caernarfon) (PC): The Paymaster General may recall a Westminster Hall debate that I secured three years ago on the implementation of the scheme, in which I listed a large number of problems that real people are facing in the real world in getting the correct level of tax credits. The Paymaster General was full of sympathy, but she was sanguine at the time that the system was running properly. Anyone who heard her this morning on the "Today" programme and this afternoon will recognise the same tone yet again. Clearly, the system has caused real problems to real people. May I quote briefly from a letter from a tax credit office? I am sure hon. Members will savour this—

Mr. Speaker: Order. May I say to the hon. Gentleman that this is a very busy day? Back-Bench speeches for the main business are down to eight minutes, and we have private Bills to be presented, so if the hon. Gentleman will just ask a supplementary question, we can get on with the business.

Hywel Williams: Thank you, Mr. Speaker. Given the real problems that the system has caused many families in my constituency and throughout the country, will the Paymaster General take responsibility and consider her position?

Dawn Primarolo: Quite a lot of people need to take responsibility and remember the role they played in the development of the policy. It was developed in wide consultation with the voluntary and community sector and was discussed extensively in the House. The principle of choosing between a fixed system and a flexible system was part of that debate. If the hon. Gentleman does not want a system that responds to the changing needs of families, his responsibility is to tell them how he would help them instead.

Mr. Jim Cunningham (Coventry, South) (Lab): I welcome my right hon. Friend's statement, particularly the part about the hardship test. Very often, regardless of who is at fault, when families suddenly find they have a debt of £1,000 or £2,000, it can seem like the end of the world. For the record, any time I have raised an issue with my right hon. Friend regarding tax credits, she has dealt with it on a personal basis. For the Opposition to attack her integrity today is nothing short of disgusting. The Opposition mentioned the Child Support Agency. Who created that shambles, which we are still dealing with today?

Dawn Primarolo: I am grateful for my hon. Friend's comments. All Members will agree that when they have approached me with their constituency problems, I have dealt with them. It is important for me to listen to the comments made in the House and in the reports published today, reflect on what they mean for the administration of the system and take steps to deal with the problems and issues. That is precisely what I have done today in my statement and on previous occasions, and it is what I intend to continue to do.

Mr. Richard Bacon (South Norfolk) (Con): The Paymaster General said a moment ago that she would like a greater degree of certainty. Is she saying she is minded to agree with the ombudsman in her report, where she
 
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questions whether the financial support system, which includes a degree of inbuilt financial uncertainty, can meet the needs of this particular group of families? Is the right hon. Lady saying that she will take that point on board, or will she continue to ignore it?

Dawn Primarolo: I am sorry, Mr. Speaker, if this is becoming somewhat repetitive. I have explained a number of times that the system is about flexibility and responding to the changing needs of families. That is the issue that needs to be addressed. The adjudicator in the report published earlier in the week mentioned the need for more flexibility. The ombudsman recognises the need for flexibility. She and the CAB are saying that the administrative issues need to be dealt with, and I agree; that the IT problems need to be finally sorted, and I agree; and that steps should be taken, and I agree and have taken those steps. I will be taking more steps, and the House will be informed of them.

Clive Efford (Eltham) (Lab): Some of us are not as young as the shadow Chancellor, and we can remember the families who were trapped on benefits when the Labour Government came in. Families in London could not go to work because they were trapped on housing benefit and council tax benefit. There was no national minimum wage, and it would have cost them to go to work. Tax credits have turned that around.

May I tell my right hon. Friend about a case that came to me? A constituent received a statement that gave no indication of the basis on which the calculations had been made. May I suggest that in future every communication contains the facts on which the calculations are based and advises people what to do if they are incorrect?

Dawn Primarolo: My hon. Friend may certainly suggest that. It is in line with the recommendations in the ombudsman's, the adjudicator's and the CAB's reports and in line with the statement that I made about how I intend to proceed from my statement on 26 May. That is one of the issues that we need to address.

Dr. John Pugh (Southport) (LD): Back in June 2003 the Paymaster General stated:

"The IT system . . . has not been working as well as expected . .  . The Inland Revenue are working urgently . . . to improve the system"—[Official Report, 13 June 2003; Vol. 406 1093W.]

What did she mean by "urgently", and has she secured damages from the IT contractor?

Dawn Primarolo: The hon. Gentleman will be aware, as will the House, not only from my statements, but from publicity elsewhere, of the difficulties experienced in the early months of the introduction of the tax credits and, in particular, with the IT system. He will also be aware that the Department's IT partner has changed and that the Department is working closely with its new IT partner to sort out the issues.

Ed Balls (Normanton) (Lab): Does my right hon. Friend agree that in moving from the inflexibilities and unfairnesses of the old benefits system to what is effectively the integration of tax and benefits through the new tax credits system, it is important that we balance the interests of taxpayers and poor families?
 
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That is why, in the original design, if incomes fall, families are fully compensated, but if their incomes go up, they must rise above the £2,500 threshold before they have to make repayments. In looking again at whether that balance has been struck as well as it could have been and whether we need to learn from experience, can my right hon. Friend confirm that she will do nothing to go backwards on tax credit integration or on reducing the unfairnesses or the inflexibilities and that she will do nothing to put at risk a reform for which she deserves huge credit, which has taken a million families out of poverty and which was opposed consistently from the beginning by the entire Opposition?

Dawn Primarolo: My hon. Friend is right. As he knows, the integration of the tax and benefits system has removed stigma and enabled people to move from unemployment into work. It has supported families, helped reduce the number of children in poverty and made sure that we have a flexible system that responds to families' needs. The choice is between a fixed, unresponsive, unfair system and a flexible system that responds to family changes. Within that equation, as he rightly identifies, we need to strike a balance on behalf of the taxpayer and define the limits of that flexibility. In the present system, all drops in income are automatically adjusted when we are notified, so that the family does not lose out. If there is any rise in income over £2,500 a year—a sum lower than that is not notifiable—the family should report an increase of income in the year. That strikes a balance of generosity on behalf of the taxpayer and recognises our partnership and the responsibility of society to support children in families, while limiting the cost of the system for the taxpayer.

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