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Rob Marris : The hon. Gentleman has cited the hon. Member for Havant (Mr. Willetts), who said that most of all he wanted an end to the ludicrous tax credit system that the Chancellor introduced, which he called a failed idea from the 1970s. Earlier, the hon. Member for Tatton (Mr. Osborne) seemed to cite approvingly a report from the Institute for Fiscal Studies that suggested that the tax credit system had led to more rather than less poverty. Do the Opposition intend to abolish the system or not?
Mr. Spring: My hon. Friend the Member for Tatton (Mr. Osborne) made the position very clear. Given the huge bureaucracy and costs of the tax credit system, and the huge suffering that it has caused, we need a full-blown review of its operation. All hon. Members should be committed to that, and I refer the hon. Gentleman to the ombudsman's report in that respect.
The right hon. Member for Birkenhead (Mr. Field) was right to say that the question is not whether we dislike child poverty or want to deal with it, but how we resolve it. Of course, we are all committed to abolishing child poverty, and the right hon. Gentleman listed three clear reforms that need to be introduced. He asked that the Paymaster General respond to his suggestions, and I hope she will.
My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) made a very well informed speech. He said that the operation of the system contained imbalances that discriminate against families, and that there was insufficient recognition of that. That is an important point, and it could be part of a review of the whole system.
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It is always refreshing to hear from my right hon. Friend the Member for Charnwood (Mr. Dorrell), who has considerable ministerial experience, and who rightly said that the Chancellor and those closest to him underestimated enormously the policy difficulties involved in a change of this sort, with all the attendant consequences. He asked whether the price was worth paying.
The hon. Member for Doncaster, North (Edward Miliband) posed five questions. He rightly said that any system that imposes a stigma on people is unacceptable. His questions were listened to with respect, but he must appreciate that the system is failing in a monumental way. It is the responsibility of the Opposition and other hon. Members to hold the Government to account. We have to find a way forward. Although the hon. Gentleman cited the system's objectives, I do not believe that he can be remotely satisfied with the way it is working out in practice.
My hon. Friend the Member for Wellingborough (Mr. Bone) made an excellent and very practical speech, in which he spoke about the problems that people brought to his surgery. He brought a sense of reality to the debate, and set out the terrible fact that families in this country have no idea what their income is going to be.
The parliamentary ombudsman has criticised the application of the system, the customer interface and the IT equipment. The Government must take that on board, but they must also recognise that they have been caught between creating chaos and misery on the one hand, and spending vast sums of taxpayers' money on the other.
I can only echo what was said by my hon. Friend the Member for Tatton and many others. There has to be a proper and comprehensive review of the system, to bring order to the problem and to ensure that it never happens again on any comparable scale. It is reported that the head of the HMRC has said that it would cost £5 billion to revamp the system, and we know that the running costs now total more than £400 million.
The Atkinson review of Government bureaucracy said that the Government were inefficient and that a different system was needed, but no fewer than 3,200 Revenue staff are trying to underpin the tax credits helpline. The Treasury spin machine told The Times this morning that that was due to a massive increase in take-up. That is utterly wrong: it is due to the massive chaos of the system.
The Chancellor of the Exchequer is the father of tax credits. He is attending a meeting of ECOFIN, and perhaps he will talk about waste in the EU and about our £3.6 billion rebate. Perhaps he will speak about the lack of transparency in the EU, and about the need to fight oppressive regulation and bureaucracy. However, what would the right hon. Gentleman's credibility be if his fellow Finance Ministers knew that the most recent tax credit overpayments totalled about three quarters of the very rebate he is supposedly so determined to secure? One simply could not write the script.
Finally, whatever criticism one may make of the Paymaster General, she is the one who has defended the tax credits nightmare, both in this Chamber and in
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Westminster Hall. She has acknowledged the hardships that it has caused, and even the Prime Minister has apologised, but we have yet to hear a word of remorse from the person with departmental oversight of this bureaucratic nightmare. I leave it to the House to make a judgment on that.
The Paymaster General (Dawn Primarolo): In the few moments left for my reply to this important debate, I want to try to touch on all the major points that Members have raised. I start by making clear that the debate must be set in context. As the Minister, I fully acknowledge the problems with the introduction of the tax credit system and the IT system. I have been open with the House about the problems caused for some claimants and I would never wish anybody to suggest that I underestimate them. I have listened carefully to the points that have been made about the recommendations by the ombudsman, the adjudicator and the CAB and I shall return to them. I shall explain to the House how I propose to take forward those recommendations.
Like my hon. Friend the Member for Doncaster, North (Edward Miliband), I want to start by setting the context. I was interested in what the right hon. Member for Charnwood (Mr. Dorrell) said and, if I may, I will paraphrase him. He said that the Conservatives were very concerned about poverty, but they had been unable to do anything about it and it continued remorselessly to rise under their Administration. When people talk about the misery of poverty, they should consider that context: the rise from 1 million to 4 million in the number of children who fell into poverty under his Government.
The tax credit system assists and supports the poor. It is important to reinforce that point. As my hon. Friend the Member for Doncaster, North suggested, it is a broad-based system. He referred to take-up, and said that tax credits were well targeted and that the system destigmatised claimants and ensured that most families received support. More than 500,000 children have been lifted out of poverty since 199899, and 6.1 million families, with 10 million childrennot an insignificant numberare benefiting from tax credits. By October 2005, in real terms, families with children in the poorest fifth of the population will, on average, be £3,200 a year better off. Children's risk of poverty has fallen from 33 to 28 per cent., after housing costs, between 198889 and 200304. Of course, more needs to be done, as the Government's child poverty strategy and the review published last summer clearly indicated. We need to develop that work.
Members have referred specifically to the administration of the system. My right hon. Friend the Member for Birkenhead (Mr. Field) focused on how the system could be made to work and to respond, in particular, to the needs of the more vulnerable. I understand entirely that he wants a wider debate about whether tax credits really are the way forward. He will understand that as a Minister, I am committed to tax credits but those are perfectly legitimate questions and they need to be asked.
So, what have I done? On 5 July, I met Citizens Advice and the ombudsman, and today I met the adjudicator. I discussed with all of them their recommendations. I have
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agreed that there should be a formal response to the ombudsman's recommendations, giving a time frame for their delivery where possible. Most important, I was keen to learn from the experience of all three and to discuss with them how we could maintain contact and ensure that the recommendations are properly taken forward, how we can report back to them and how they can assist us in that process. All three organisations acknowledged the value of the tax credit system, but noted the need to deal with the issues that have been raised.
With regard to the recommendations made by Citizens Advice, the ombudsman and the adjudicator, recommendation 10 in the ombudsman's report is that there should be a blanket amnesty on overpayments. As I have explained to the House and explained again to those organisations, the Government have a responsibility to balance our duty of care for all claimants with our duty to all taxpayers with regard to the public purse, so we cannot make a blanket decision for all cases where overpayment is vastly out of proportion to the award, and in many cases is not contested. However, we have said that, with that exception, we want to engage with them and to consider all their recommendations and the practicalities of taking them forward. For example, all three organisations made recommendations about award notices. We have been consulting them about the introduction of a new award notice. I have asked that the ombudsman and the adjudicator consider that in the light of the points they made. A draft is available, and I shall be delighted to put it in the Library.
I can assure the House that I shall work closely with the consultation group, the voluntary sector, the ombudsman and the adjudicator to take that work forward. Many elements in my statement to the House of 26 May preceded the reports, but encompassed many, indeed all of the points, with the exception of the amnesty. That relates to the point made in a slightly different fashion by my right hon. Friend the Member for Birkenhead about the possibilities of what I would describe as playback, whereby the tax credit claimant would receive a playback of all the awards and the changes that had been made through the year, so that they had a clear statement. I have asked that that be taken forward as a matter of urgency.
The system works for the majority of people, but at every point I try to draw on all the expertise and knowledge of those three organisations and others to improve it, and to deal specifically with the steps that we may need to take for an important group in the tax credit population. For example, I have asked the CAB to engage in discussions with us about how we can develop and enhance its advocacy role, using its expertise especially to reinforce support and advice. I have asked HMRC, in the period of merger, to examine how we can strengthen and ensure access for that particular group in many different ways.
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