Previous SectionIndexHome Page

Mr. Peter Bone (Wellingborough) (Con): I thank you, Mr. Deputy Speaker, for calling me to speak on an issue with which every Member of this House is doubtless only too familiar. I went to the House of Commons Library to research the tax credits system, and the librarian was most helpful. She tapped into her
12 Jul 2005 : Column 746
computer the phrase "tax credits", and the printer started to produce page after page. Suddenly, she screamed, "But it's all gobbledegook!" I have those 25 pages of complete gobbledegook in my hand. Perhaps the explanation is that there was a glitch in the Library's computer system. However, as a new Member I have been told that everything produced by the House of Commons Library is always accurate, so I suspect that the librarian's initial view—that the tax credit system is "all gobbledegook"—might be right. There is one thing, however, of which I am absolutely certain: many of my constituents believe the tax credit system to be complete gobbledegook.

The tax credit system is so confusing and complicated that no one seems to know what they are entitled to. The 2000 Budget stated that an integrated child tax credit would

Has transparency and administration improved? It seems to me that the current system, which largely revolves around the highly fluid concept of what is "reasonable", has achieved the exact opposite.      Let us consider the forms that claimants must fill in to apply for tax credits. As a chartered accountant, I am not ashamed to say that I find them confusing. I am professionally trained—how on earth is the average person, who relies on the extra income that tax credits generate, meant to understand them? Tax credits are meant to help the most vulnerable in our society. They are meant to encourage people to come off welfare and to go back to work. They are meant to make life just that bit more comfortable for those on low or moderate incomes, yet these are the very people whom the system is penalising by being inefficient, bewildering and incompetent.

I am very grateful to be able to speak about an issue that affects so many of my constituents in Wellingborough and Rushden. I am sure that I am not alone in finding that a good majority of the constituency postbag consists of letters from constituents who need help with, and clarification of, their tax credit payments. Indeed, half those who ask for help at my weekly surgeries ask about this very issue. I was interested to read the Paymaster General's statistics. According to them, between April and December 2004 the Tax Credit Office, Treasury Ministers and members of the Board of Inland Revenue received almost 6,000 letters from MPs who were trying to sort out the many problems that their constituents were experiencing—

Mr. Ian Austin : The hon. Gentleman positions himself as being on the side of the low paid in his constituency, but I recall that he once boasted of paying his employees £1 an hour. Does he think that that was the right thing to do, and does he think that tax credits are designed to help those who are left on such low wages?

Mr. Bone: I will treat that point with the contempt it deserves; no such boast was ever made.

Constituents have problems with tax credit payments, with overpayments, with lack of payments and with no payments at all. In the tax year from April 2003 to March 2004, the Tax Credit Office hotline for MPs took more than 19,000 calls. That is 19,000 calls from MPs
12 Jul 2005 : Column 747
alone, who have had to get involved because their constituents have hit a brick wall and cannot get any further by themselves. Thanks to the system's incompetence, this problem is widespread and affects vulnerable families right across the country, so it is no surprise to learn that the two latest reports on tax credits were less than complimentary about this fundamentally flawed system.

Given the tax credit system's very nature, it will always fail the most vulnerable in our society. Because it has so many different elements, it can only confuse and confound those who claim tax credits. Claimants have to estimate their income for the following year, which in itself gives rise to massive complications. But the real problems come when a claimant's circumstances change. Claimants are asked to notify the Tax Credit Office of certain changes within three months, though for other changes notification can wait until the end of the financial year. However, like many elements of this baffling system, precisely what changes need to be declared and when is just not clear.

Many of my constituents who contact me for help have told me that, to be on the safe side, they inform the Tax Credit Office of all changes. One would think that that was very sensible of them, but it is here that the problem starts for thousands of families who are being penalised by the system. Much of my tax credit case work is taken up by constituents who have had their tax credits stopped completely due to overpayments in previous months. In some cases, the Tax Credit Office states that the overpayments will not be recovered as it was an error by that office in the first place. Why, then, did it stop the tax credits completely and why are those credits continuing to be stopped? In almost all the cases that I have dealt with, the claimant informed the Tax Credit Office of changes to their circumstances. In many cases, that office failed to update its records either through computer error or inefficiency, yet it is my constituents, along with many others, that suffer. In fact, according to the latest reports, nearly 2 million families have suffered.

How is a family meant to plan for the future—financially or otherwise—if they never know exactly what is going into the bank account each month? The rules and regulations of tax credits state that people do not need to pay back an overpayment if they reasonably believed that it was a correct statement of what they should have received. However, what is "reasonable"? It is another open-ended, fluid and confusing term, which means all things to all men and penalises the very people that the system is supposed to help. Families often do not know their financial situation from one day to the next and while the correct procedures are not being followed to update the tax credits computer system when changes occur, those families will continue to live in financial limbo.

As for the cost of bureaucracy and waste, the Government, as usual, do not disappoint. The sheer volume of forms, the fact that payments are made through PAYE rather than directly to the claimant and the vulnerability of the system to massive fraud are all costing the taxpayer dearly—about £400 million a year and with nearly 7,500 people working the system.
12 Jul 2005 : Column 748

I would like to finish by giving just one example of how the tax credit system has failed those who need it most. A constituent came to me in desperate need of help—her case comes to the crux of why the system is failing. She was about to be evicted from her council house for being severely behind in her rent and for being unable to keep up her payments on her council tax. It all started when she had to leave work due to illness. She was incorrectly paid working tax credit instead of incapacity benefit. Of course, it turned out that she was being overpaid tax credits and the Revenue asked her to pay the money back. Not only was she not in a financial position to do so, but she was also penalised by the council for receiving tax credits, which counted against her housing and council tax benefit.

After several attempts to contact the Tax Credit Office to advise it that her tax credits must cease, she was still receiving the tax credit payments 14 weeks later. Because she was receiving no other benefits due to the overpayment, that is all that she and her children had to live on. When she rang that office again, she was told that her case was stuck in processing and that she would just have to wait her turn. Unfortunately, hers is not a unique case, but it is wholly unacceptable. The current tax credit system is, by its very nature, inefficient and fundamentally flawed and it penalises the most vulnerable of our society. Two million families have suffered under that system, which relies on staff regularly updating claimants' information and a computer system that properly processes the correct data. At the moment, we have neither. How long will it be before the Government realise that micro-management and bureaucracy do nothing but penalise the most vulnerable people in our society?

6.34 pm

Mr. Richard Spring (West Suffolk) (Con): Looking back on the debate, one realises that this really is a case of the road to hell being paved with good intentions. Back in 1998, when Martin Taylor submitted his report "Work Incentives" after observing the taxation and benefit system, he said:

The difficulty in reality is that IT systems are never easy. The truth is that the Government's record on them does not inspire confidence. The Child Support Agency's computer system, which cost nearly £500 million, failed, leading to the resignation of the chief executive. Staff at the Department for Work and Pensions were unable to process new benefits and pension claims for several days because the system went down. The computer systems of the Passport Service, the Criminal Records Bureau and National Air Traffic Services have also had problems. And so we go on.

In November, the National Audit Office, commenting critically on IT problems, cited inter alia a lack of clear senior management and ministerial ownership and leadership. That has certainly been the case in this instance. The Paymaster General told the House on 7 February:

12 Jul 2005 : Column 749

That is in contrast to what Steve Lamey, the chief information officer at Her Majesty's Revenue and Customs, said:

With the introduction of this hugely complex system, warning bells should have been sounded a little earlier, before the problems we continue to hear about emerged.

We hear that of the Inland Revenue's 90 million letters sent out each year, 35 per cent. are returned and 31 million are wrongly addressed—and 29 per cent. of PAYE codings are incorrect. The mood music is clear. Even the Labour thinkers Anthony Giddens and Patrick Diamond have spoken about a "complicated means testing infrastructure" in respect of tax credits.

I would point out to the Paymaster General that the years between 1999 and 2003 saw enormous changes in the benefits system. At one point, we had the introduction of the working families tax credit, the disabled person's tax credit and the child care tax credit—and later we had the abolition of the working families tax credit, the disabled person's tax credit, the children's tax credit, the baby tax credit and the employment credit. The former shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Havant (Mr. Willetts), observed:

Where has all that landed us? As a press release relating to a Citizens Advice service report graphically expressed it:

What we have seen is simply grotesque—incidents of hardship, anxiety and bureaucratic incompetence on an unprecedented scale. It is ludicrous to describe the reality using terms such as "stable" and "performing well". We know that the Government are trying to recoup £1.9 billion for 2003–04, and that they will not pursue a further £800 million from recipients who fall within the 2005 disregard.

How will that be dealt with in the Government accounts? That is an interesting question, and I have discovered the answer. The Public Accounts Committee reported:

12 Jul 2005 : Column 750

So for these massive sums of money, full parliamentary reporting and scrutiny are not available. More light should have been shed on this very murky issue.

I am very disappointed that the Chief Secretary is not present to hear the end of the debate. I do not know where he is: he is always very courteous in the House, but it was extraordinary that, like the Chancellor of the Exchequer, he has failed to offer any apology for the grotesque misfortune that has befallen many thousands of the most vulnerable people in the country. The right hon. Gentleman gave a bloodless and technocratic performance.

The Chief Secretary was very unclear about the statutory test for the recovery of excess payments, which he rejected. To answer his challenge, I can say that the Opposition accept the global amount for the provisions of tax credits, but we need clear answers to many questions. The Chief Secretary did not give them, and I hope that the Paymaster General will take this opportunity to do so.

The hon. Member for Yeovil (Mr. Laws) said that Ministers were taking a long time to resolve the tax credit problem. He rightly noted that no real action plan exists, and mentioned the exhortations from Citizens Advice. He also talked about error rates and the amount of bureaucracy, and I agree with him that we need very clear answers from the Paymaster General on these matters.

Next Section IndexHome Page