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16 May 2006 : Column 251WH—continued

My hon. Friend talked about the importance of personal and community development, and as she knows, we have maintained its level of funding. However, we have rightly said that we want LSC partnerships at a local level to determine better the
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priorities for that expenditure. We do not want it centrally driven to the same extent.

My hon. Friend discussed the union learning fund, and like her I think that it is an unsung success story of this Labour Government. If I may make a political point, it is one of the most effective ways in which the Labour party and the trade unions work together. It has brought real benefits by introducing into the education and training system, through the support of their peers, people who would otherwise not have taken that approach.

My hon. Friend talked about having a mountain to climb in terms of people who left school or college 20, 30, 40 years ago with no qualifications. It is the most significant challenge that we face. On all the evidence they are the people who miss out on social, economic, health and other advantages. We need to focus on reskilling those adults, and we are doing so through the level 2 “Train to Gain” initiative. It is one of the most radical policies that this Government have pursued: for the first time saying to adults in the workplace who do not have a full level 2 qualification that the state will guarantee that level of education and training.

The recent change that we made in the further education White Paper to extend the free entitlement up to level 3 and the age of 25 is a significant step forward, as is the foundation learning tier to which I referred earlier. However, all that comes down to priorities, and we are a Government who have significantly increased investment in the further education sector. In that context, we have rightly said that the priorities must be 16 to 19-year-olds, adult basic skills, and the roll out of “Train to Gain”. We want to do more than that, but we cannot say that we have those priorities and then have a set of other priorities. I know that that is not what my hon. Friend is saying, and we need to keep the issues under review to monitor their impact. However, if we are saying that those core priorities are genuinely important, we must commit resources to them—

Hywel Williams (in the Chair): Order. We must move to the next debate.

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Tax Credit System (Angus)

1 pm

Mr. Mike Weir (Angus) (SNP): I am pleased to appear for the first time under your distinguished chairmanship, Mr. Williams, and I am sure that this will be the first of many such occasions. I should say at the outset that the debate is not about the effectiveness or desirability of tax credits but about the way in which the system that is used to calculate and deliver them fails many of my constituents. Although I shall be referring to specific cases, they illustrate a general problem with the tax credits system.

In my first term in Parliament, by far and away the most complaints that I received concerned the Child Support Agency, and no one was at all surprised when the Government effectively threw in the towel, conceded that the agency was unworkable and ordered a redesign. Sadly, over the past two years, the number of complaints about tax credits has risen substantially and now rivals the number of complaints about the CSA. Unless the Government take urgent action to tackle the problems, they will simply multiply, and we will end up in the same situation as we did with the ill-fated CSA. Several constituents have told me that they are so dispirited and worn down by the problems that they have encountered that they will no longer claim tax credits, even though they are entitled to them. That is a terrible indictment of a system that is supposed to help those who are most in need.

The problems that I shall describe affect constituents across my constituency and, I assume, across much of the rest of the country. The first case that I want to bring to hon. Members’ attention is that of Katie Adamson, from Forfar, who first came to my office in December 2005. She applied for child tax credit first as a single claimant and then jointly with Anthony O’Hare. Her problems began with the annual review in September 2005, when she received a letter asking whether there were any changes in her circumstances. There were not, so she phoned the department, and the person she spoke to told her that she could send the form back blank or not send it back, because confirmation that there had been no changes had, in effect, been recorded as a result of her call. Being a cautious and sensible young woman, however, she sent the form back anyway.

Soon afterwards, Katie received a letter from the tax credits office informing her that it had heard nothing further regarding changes in her circumstances, so her tax credit would be stopped. At that point, she contacted the citizens advice bureau. The tax credits office told the bureau that it acknowledged the error and would recommence the payments. It may come as no great surprise, however, to hear that that did not happen, and that brings us to the crux of many of the problems with the system. As MPs, we contact the tax credit hotline or the tax credits office, and those involved acknowledge that a mistake has been made, but they seem incapable of rectifying it, because of the computer system that they operate. In many cases, we seem to have slipped into the “Little Britain” sketch in which the computer says no, and that is it.

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To return to the long-suffering Katie, however, nothing happened for 11 weeks, and the arrears accumulated. The computer system was blamed for the problem, although, to be fair, the department agreed to make a manual payment for four weeks. However, Katie had to make a 40-mile round trip to Dundee, at a not inconsiderable cost, to collect it, and she received nothing further after that. After she contacted my office, we contacted the technical department and were assured that the error had been sorted out and that payments would be made to her bank account as normal. Bizarrely, however, she was then told that she would receive the full arrears for 11 weeks, but that she would have to pay back the four weeks that she had received as a manual payment in the interim. Quite how that was a sensible way to deal with the situation escapes me.

Finally, my office managed to secure arrears payments of £224.94 for Katie. Even then, however, we noticed that she was still due £85.96, so we contacted the department again to point that out. It accepted that there was an error and agreed to forward the arrears, but nothing has been received to date. That was bad enough, but at least Katie had got through the maze and got most of the money that she was due. However, nothing about the tax credit system is quite as simple as that. She and her partner Tony then received three award letters on the same day.

The first letter related to Katie’s single claim prior to December 2005 and claimed an overpayment of £1,383.12. The tax credits office has since agreed that that was sent in error. The second notice claimed an overpayment of £224.92. Yet that related to the period for which it had already been agreed that a payment of £85.96 remained due to her. That contradicted what she had previously been told. The last letter referred to the new tax year, 2006-07. However, a portion of the overpayment referred to in the previous letter had been deducted wrongly from the award. We are still chasing the office about that. I do not know whether hon. Members can follow those complications, but I am sure that they can begin to appreciate the “Little Britain” sketch.

Worse still, the tax credits office claimed an overpayment of £1,210.20 for the tax year 2004-05. My office raised that several times, until the tax credits office finally responded that there was no record of any overpayments for that year, but repeated the claim that there was an overpayment of £1,383.12 for 2005-06. That was the sum that it had previously agreed in writing was an error. It was going back and claiming something that it had already said was not due.

This is just one case, but it is a complete mess and it illustrates a problem. Both my constituent and my office have been told one thing, only to receive correspondence totally at odds with the verbal advice and sometimes at odds with previous written advice. The computer gets the blame, but is there no point at which human interventions in the system can stop cases spiralling out of control and creating havoc for people like Katie Adamson?

If the case were an isolated one, I should put it down to bad luck, but it is far too general a problem. Ishall briefly note a few points about other cases. Another Forfar constituent—Forfar seems particularly unfortunate in experiencing such cases—faced a claim
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for more than £10,000. The couple had made an application and received an award. Before it was paid, the husband was paid off, but quickly got another job at a reduced income. They received a letter telling them how much they would be paid, which they queried, saying that they thought it was incorrect; but they were assured that it was correct.

Eventually, when the inevitable happened and money was reclaimed from them, they were told that the problem was that their two children had been input into the computer system twice. They appealed on that basis, only to discover later that the real reason was that the wrong income had been entered on the computer. Part of the problem appears to have been that the couple never received a formal award notice after the change of job setting out how the amount was calculated, but the tax credits office refuses to accept that.

I can do no better than to quote a paragraph from a letter from my constituent:

Again, the computer says no. That seems to be the crux of the problem. The department relies on the computer absolutely, but will not consider that it could be wrong. It reminds me of the constituent who repeatedly questioned the amount that was awarded, and was assured that it was right. When, inevitably, a repayment was claimed, she received a letter saying that although she had been assured that it was correct, it was not reasonable for her to accept that. What definition of “reasonable” does the department use?

Yet another Forfar constituent had been receiving working tax credit since 2003. In October 2005 she was told that she was no longer entitled to it, and a repayment of £1,200 was demanded. That was queried and the office agreed that it was a mistake and that she was still entitled to working tax credit. However, no payments were made in November, which left her very worried. When she contacted my office we contacted the department, which again pleaded computer error and promised manual payments. A manual payment was made in December, but in the same month she received three applications to complete and two demand letters, one for £1,000 and one for £700. She went to the Dundee office and was advised to appeal on both demands. She was then also told that the computer had now ended her claim—the computer seemed to be dealing with things all by itself.

My office contacted the tax credits office and received a letter in response that was totally incomprehensible. I am a lawyer, and I could not understand what it said, so we contacted the tax credits office. Surprise surprise, it could not understand the letter either, even though it had sent it out. Perhaps the computer had moved on to composing the letters as well.

In early March, the department promised to cease sending demand notices and to try to resolve the
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problem. Thankfully, for once, no more notices have been received but there has been no resolution either. That lady is still not receiving the money to which she is entitled. The case is unacceptable, and it has left this lady in worry. I wrote to one of the Minister’s colleagues on 3 April, but I await a response.

It is not just the people who have come to see me in my office who are having problems. After I secured the debate, Arbroath citizen’s advice bureau—we have left Forfar, for a change—contacted me and brought to my attention a case that it was dealing with. A young couple had received an overpayment demand for more than £19,000 for the period between 2003 and 2005. On 7 November 2005, the CAB wrote to the Department and said:

The department asked for a copy of the original application, which had been made online and of which the constituent had no copy, although I appreciate that that system has been changed in the interim. No response was received until April of this year, when the constituent received another demand notice. The CAB wrote again on 10 April, and made a formal complaint. It has now received an acknowledgement and a promise of a full reply, but that came only after a formal complaint was made. It is simply not good enough that it has taken six months from when the original application was made to reach that stage.

Even this morning, I got yet another letter. A constituent had come to my office who had been chased for a repayment. The tax credits officer said that the payments had been made to their employer, but the employer denies that any such payments have been made. The letter states that due to technical difficulties the office is unable to bring my constituent’s records up to date. Again, the computer is unable to deal with it.

It seems to me that the problem is that the system is too complex and relies on a computer system that is not up to the task. There appears to be no process that allows human intervention to deal with a problem once it occurs. The demands keep coming, irrespective of what is said to me or to anyone else. Even when it is agreed that manual payments will be made and the person goes to collect them, the situation is not resolved, the computer does not deal with it and there seems to be no way to break into the cycle of the computer program. That is exacerbated further by the forms and letters, which are very difficult to understand. As I say, I am a lawyer and I find them difficult. Many of my constituents, who are far from being lawyers, simply cannot follow the information that is given to them.

The time frame for dealing with cases often means that people are trying to reconstruct information from a number of years with little written information from the applicant, but a mountain of often contradictory information from the department. As I said at the outset, it seems that the complaints about tax credits are now rivalling those about the Child Support Agency. I appeal to the Minister to consider the problem seriously. I am sure that he will tell me that tax credits are a good thing, and are helping a lot of people. I am not here to dispute that or agree with it. I am here to ask about the system, in particular the
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computer system that seems to have a will of its own in dealing with my constituents. Unless the problem is tackled now, things will continue to deteriorate until, like the CSA, the tax credit system cannot continue. I appeal to the Minister to deal with the matter now, and to tackle that dreadful computer system.

1.15 pm

The Chief Secretary to the Treasury (Mr. Stephen Timms): I begin by welcoming this debate, which is the first that I have answered as Chief Secretary. I am grateful to the hon. Member for Angus (Mr. Weir) for raising the topic and for his interest in and concern about the tax credit system. The debate is focused on Scotland, and the hon. Gentleman gave a number of examples of the unhappy experience of some people in Angus. However, it raises United Kingdom-wide tax credit policy issues. Alongside child benefit, the tax credit system now delivers significant financial support to the vast majority of families with children in the UK.

I shall not even begin to attempt to defend the unhappy sagas described by the hon. Gentleman. He named Katie Adamson, but he did not name the individual concerned in the second case.

Mr. Weir: I specifically asked Katie Adamson whether I could name her, because of the complexities of her case; for obvious reasons, other constituents preferred anonymity. However, I am happy to givefull details to the Minister if he wants to look into them.

Mr. Timms: I would be grateful if the hon. Gentleman did so, because I shall certainly want to take up those cases with officials.

As the hon. Gentleman anticipated, I want to tell the Chamber that we must not lose sight of what has been achieved through the tax credit system. It has beenvital in two important areas. First, it has reduced the extent of child poverty; and, secondly, it has made work pay.

The system provides financial support, which is worth more than £15 billion this year, to nearly 20 million people. In Scotland, it is worth about £1.5 billion; and in the hon. Gentleman’s constituency last month, 7,100 families benefited from tax credits, including 10,900 children. The hon. Gentleman is right to highlight the problems faced by some of his constituents, although they form only a small proportion of the 7,100 families who benefit from the system.

The hon. Gentleman has raised 10 cases this year in which people have had a problem with tax credits, and I readily concede that it would have been much better if he had not had to raise any. My right hon. Friend the Paymaster General and I will be happy to look at the cases that he has referred to today, but I hope that he will acknowledge how much the tax credit system is delivering to a large number of families in his constituency.

We have set a target—I am sure that the hon. Gentleman supports it—to eliminate child poverty within a generation. Tax credits have helped lift some 700,000 children out of relative poverty since 1997, including 80,000 in Scotland, which is broadly in line
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with the milestone that we set to reduce the number by a quarter by last year. The UNICEF report “Child Poverty in Rich Countries 2005” states:

However, it says that there are exceptions, and the country achieving the biggest reduction in that proportion has been the UK. It points out:

It then says that

The tax credit system has been key to that success.

For a family with two children on half average earnings, the tax credit system provides £4,400 a year. The least well-off can now receive up to £107 a week, compared with just £20 per week in 1997; and the number of people receiving tax credits is seven times higher than the number of those who received family credit.

Mr. Weir: As I said at the outset, I am not here to criticise or agree with tax credits; it is the system that bothers me. Although I appreciate what the Minister says, does he not accept that, if constituents are telling me that they are no longer prepared to go through the hassle of claiming tax credit because of the situation that they find themselves in, something is wrong and that a simplified system is needed to deal with the problem?

Mr. Timms: I am hoping that the hon. Gentleman will acknowledge the strengths of the system. He takes a neutral view that perhaps it is a good thing but perhaps it is not.

Mr. Weir: To be fair, that is not what I said.

Mr. Timms: That is what I understood. I would be happy to give way again in a moment, but it is important in the backdrop to this debate to set out why the system was introduced, why it has the characteristics that it has and what a great deal has been achieved through it, including for more than 7,000 families in his constituency.

I accept that the system ought to work smoothly and that the problems to which the hon. Gentleman rightly drew attention must be put right. We have made several changes. Last year, my right hon. Friend the Paymaster General made some announcements which I shall outline in a moment. They started to take effect from last month and will continue progressively to take effect in the coming year. I hope that in the hon. Gentleman’s constituency they will tackle effectively the kind of problems that he described.

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