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Mr. George Osborne: This is an opportune moment to ask the Chief Secretary about the statutory test, which we have called for, which is in the parliamentary ombudsman's report, and about which the right hon. Member for Birkenhead (Mr. Field) has tabled an early-day motion. Such a test would help to establish on what grounds money should be reclaimed when there has been an overpayment. Will he give us a clear answer now as to whether the Government will introduce a statutory test?

Mr. Browne: On the basis of our current advice, we have no intention of introducing a statutory test. If the hon. Gentleman will be patient, I shall deal with the question of appeals and how we handle overpayments in due course.

As I was saying, the problem is that we simply do not know the Conservative party's true position. More people than ever before are receiving tax credits to help with the costs of bringing up their children, but the Conservatives cannot bring themselves to support that.

The proportion of workless households with children had fallen from just over 16 per cent. in the spring of 1997 to a little over 13 per cent. by the autumn of 2004, and the lone parent employment rate rose from a little over 45 per cent. in 1997 to nearly 56 per cent. in 2004. Tax credits have played their role in helping parents move into work. There is clear evidence from respected independent commentators such as, ironically, the Institute for Fiscal Studies that our policies to make work pay have helped to boost the number of lone parents in work and, consequently, to lift a significant number of children out of poverty. How can anyone seriously seek to undermine a policy that contributes to such improvements?

I do not and will not downplay the problems that administrative difficulties have caused many people with their overpayments. On behalf of the Government, the Prime Minister has tendered an apology which I am happy to repeat. I know that this has been a difficult time for some people. The Government are determined that the tax credit system will deliver what it is meant to
 
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achieve, because it plays such a significant role in our ambition to lift the children of this country out of poverty and to continue to allow our labour markets to work as they have, to the benefit of our economy.

My right hon. Friend the Paymaster General acknowledged the challenges faced by the tax credit system in her statement to the House on 26 May—before, I should add, the publication of the reports that prompted the Opposition to table their motion. On that occasion, my right hon. Friend focused on six measures to improve the operation of the tax credit system.

First, from April 2006 a much-improved awards notice will be issued, and we will review the information that we give claimants to help them to understand the system better. It is all very well for others to say that that will take time. Of course it will. We are dealing with millions of claimants and, potentially, millions of notices, and it is best to take the time and get the system right. Secondly, from this week we are running pilot schemes, contacting customers and encouraging them to report changes. That is relevant to what was said earlier about proactive engagement with claimants. Thirdly, we intend to improve the service from the helpline. We want to stop people from being passed from one department to another, and to ensure that they are given answers within a reasonable time. Fourthly, Her Majesty's Revenue and Customs will speed up its identification of IT system problems, which will mean quicker repairs. Fifthly, we will work more closely with the voluntary sector to give more active support to the most vulnerable claimants. Finally, we will spell out more clearly how we define hardship, and we are testing options for suspension of the recovery of disputed overpayments.

Stewart Hosie (Dundee, East) (SNP): In the case of one of my constituents, the payment award was correct but was withdrawn. Having contacted the helpline, my constituent was advised to contact the local Member of Parliament. I have heard of that practice anecdotally, and have been told of it by a constituent. Will the Chief Secretary confirm that that was the wrong advice, that the problem should have been resolved, and that the first point of resolution is not contacting the Member of Parliament?

Mr. Browne: I have no difficulty in agreeing that that was not the right advice. A helpline is there to help people, not to refer them to another source of help that, presumably, must then contact the helpline itself. I too am a constituency Member of Parliament.

The distinct advantage in respect of tax credit cases is that calls are recorded. That is a very helpful tool in determining the credibility and reliability of people's recollection of such calls, but it is also a helpful training tool, in that it allows us to identify those working on the helpline who perhaps need further support and training. If the hon. Member for Dundee, East (Stewart Hosie)—or any other Members who are tempted to intervene to describe examples of such behaviour—bring to my attention, or to the attention of my right hon. Friend the Paymaster General, the detailed circumstances behind such anecdotes, we can examine whether a particular helpline helper or official is giving proper advice. If they are not, we can then assist them. However, I have no
 
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difficulty in agreeing with the hon. Gentleman that the advice that was given was not appropriate in the circumstance that he described.

Mr. George Osborne: I return to an issue about which I twice asked the Paymaster General at Treasury questions. According to the National Association of Citizens Advice Bureaux, some helpline staff and some tax credit staff have advised people to borrow money on credit cards to meet the overpayments. Does the Chief Secretary consider that good advice?

Mr. Browne: No, I do not, and such advice should not be given, but I say to the shadow Chancellor what I said to the hon. Member for Dundee, East—if he brings to my attention the detail of such calls—[Interruption.] With due respect to the shadow Chancellor, the fact that something is in the report means nothing; it does not mean that it happened or that it is anything more than an anecdote. If it did indeed happen, it should not have, but it would help if those who have information supporting such assertions were to make it available. We have the advantage that these calls are recorded, and that the official who dealt with a particular call can therefore be identified. As a result, we can look at the circumstances of the relevant part of the conversation, and determine the advice given and whether it was properly understood by the caller. I am not disputing that the report says what it says; I am simply pointing out that if we are given the details of a particular case, we can chase it up.

Mr. Dorrell : Will the right hon. Gentleman reflect on what he has just said? Surely he cannot be arguing that if the parliamentary ombudsman has examined a particular constituency case and quoted the evidence emerging from his inquiries, he, as a Minister, can ignore such evidence. That cannot be right.

Mr. Browne: I hear what the right hon. Gentleman is saying, and if that is what I said I accept entirely his admonition; I should reflect on it and I will do so. I should point out in my defence that in answering the shadow Chancellor's question, I did not understand him to be saying that this assertion emanated from the ombudsman's report. I do not recall it being in that report; that said, I do not pretend to recollect the report comprehensively. However, if the facts that instruct the right hon. Gentleman's admonition are correct, I accept it and I will deal with it.

Mr. Laws: Will the Chief Secretary give way one last time?

Mr. Browne: Yes, but it will be the last time.

Mr. Laws: I am grateful to the Chief Secretary. Before he winds up his opening speech, can he clarify whether the Treasury accepts the ombudsman's second, very important recommendation, which is that the Revenue should not seek to recover an overpayment until it has decided whether the excess amount should be recovered in accordance with the code of practice? Has a decision been reached on that point?

Mr. Browne: This issue formed part of the discussion between my right hon. Friend the Paymaster General
 
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and the authors of the report. I have no difficulty in agreeing with the hon. Gentleman that that proposal should be accepted, and it will be accepted.

All of the proposals put before the House in my right hon. Friend the Paymaster General's statement of 26 May are in hand. I will say, however, that the system has been through only one full cycle. By that, I mean one cycle in which people applied for the credits, were assessed and received them and had their accounts adjusted to reflect current circumstances—in other words, only one cycle in which the flexibility of the system has been fully applied. The essence of the policy means that, across the system as a whole, there will necessarily be an element of overpayment and underpayment. As it is a system of retrospective adjustment, it shows the value of a flexible system.

Let me reassure the House that two thirds of the total overpayment figure is due to rises in family income—rises that the House should welcome as further evidence of labour market improvements and employment opportunities today. Nearly £1 billion of the overpayment—around half—is due to increases in income of more than £10,000 a year. In many such cases, Her Majesty's Revenue and Customs were notified not during the year, but at the end of the year for the reconciliation process. Clearly, our next challenge is to ensure that claimants inform us during the year of any changes to their circumstances on that scale. So while this is not a perfect system and we do want to make it work better, it is neither broken nor in chaos, as some commentators and Opposition Members may have claimed.

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