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Mr. McFall:
I agree and hope that the Paymaster General continues to talk to the Committee while she considers the pause. We said that we were concerned by the apparent lack of urgency on the part of the
Government and the Paymaster General in seeking to implement the pause before recovery of overpayment, given that automatic recovery of overpayments is contrary to natural justice. We recommend that the Government reassess the priority that they have assigned to implementing the pause. I hope that she refers to that.
In deciding whether to write off an overpayment, HMRC should not apply a stringently objective reasonableness test, but take account of things such as a claimant’s circumstances and the clarity of award notices. I know that the Paymaster General has considered that.
Mr. Michael Wills (North Swindon) (Lab): Does my right hon. Friend agree that one of the important innovations that the Paymaster General and her team introduced was the hardship team, which examined individual circumstances and could vary the amount of repayment? Does he share my concern that the hardship team was disbanded at the start of this financial year and no date has been set for it to be re-established? Does he share my hope that the Paymaster General will address that?
Mr. McFall: I agree entirely. I do not know the particular circumstances of the case, but I am willing to take my hon. Friend’s word on it. However, as I said, we have to distinguish between those who have been overpaid and can pay the money back adequately, and those low-income families who are experiencing hardship and are in distress. As he says, a hardship team is essential in determining that, and I hope that the Paymaster General considers the issue.
I think that I have exhausted all possible interventions and finish on three things mentioned earlier. First, on the support for families, more families are getting the credit. Secondly, we are making progress on child poverty targets. Thirdly, on incentives to work, my hon. Friend the Member for Leeds, East mentioned young people who are unemployed. I am a former school teacher. When I first took up teaching, a lot of the kids whom I taught in the area where I lived went on not to work, but to unemployment. I would meet some of them five, 10 years later. They would be with their wife or kids, pushing a pram, and I would dread asking, “What are you doing?” I was reluctant to do that. Now I can walk down my high street and ask people what they are doing with more confidence and more authority because more people are in work.
We need a flexible system that responds to people’s needs and provides incentives to work, especially for young people, because we must remember that unemployment is the single most important determinant of poverty. If we can have such a system, warts and all, it deserves our support. However, we will keep our critical eye on the Paymaster General over the next few months. We will not let up and will work as a team to ensure that we get the system right.
3.32 pm
Mr. Roger Gale (North Thanet) (Con):
I am saddened that the Paymaster General is alone on the Front Bench. In the time that I have dealt with her on such issues, and on the two occasions when I have
found it necessary to go to the Treasury to meet her to discuss them, I have found her and her civil servants extremely courteous. The fact of the matter is, however, that a ghost is missing from the banquet—it is the author of this shambles, the Chancellor of the Exchequer. It is conspicuous that over the three years of malfunction of the system that he introduced he has not taken part in one of these debates. Like the Duke of Plaza-Toro, he has led his troops from behind. Frankly, that level of political timidity in somebody who—at least once—aspired to be the Prime Minister of the United Kingdom is very unbecoming indeed.
My hon. Friend the Member for Guildford (Anne Milton) correctly said that the debate is about people, and it is— [Interruption.]
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the hon. Gentleman, but we do not want a sedentary interchange. It is extremely disruptive.
Mr. Gale: I want to deal with the people issues. Some correspondence fortuitously landed on my desk this morning. It was from a constituent and pretty much encapsulates much of the argument. He enclosed a letter from HM Revenue and Customs, which was sent to him on 17 May. It said:
“On 25 June 2004, an amendment was made to your award as you had informed us that”
“correct income was £7500.00. Unfortunately due to a system error”
“of £23930.00 was not taken into consideration and you were awarded a higher entitlement than normal.
Two award notices dated 25-06-2004 were issued to you, one referring to your 2003-2004 award and the other referring to your 2004-2005 award. They both stated that you were now entitled to £5695.85 tax credits...In our view”—
“it was reasonable for you to have known that due to the increased level of your joint household income this increased entitlement was incorrect...Although this overpayment was caused by a mistake on our behalf, we do not believe it was reasonable for you to think this increased entitlement was correct. I consider that you should have been aware that your payments were wrong, therefore the decision to recover both overpayments is correct.”
In other words, “Game, set and match; we’re right and you’re wrong.”
“In your last letter in which you changed your mind about how the overpayment occurred and we pointed out errors so you ‘reconsider’. We find this wholly unreasonable and yet again you have made a glaring mistake in stating”—
“received Tax Credits via his employer totalling £1,393.74...In fact we received no tax credits via my employer as the enclosed wage slips will verify.
You state it was reasonable for us to know we should not be entitled to the overpayment, may we enquire why? We supplied all the information, you made the errors, you stated our award may change...You accept the errors, You make more errors in stating tax credits paid via employer...You change your mind over the reasons for overpayment and we are meant to believe you when you state we should have been responsible.”
The Revenue and Customs has batteries of civil servants and an unbelievably expensive information technology system paid for by United Kingdom taxpayers, yet it cannot get its sums right. However, it expects our constituents to work out—presumably on the back of an envelope, without the help of the civil servants and the computer—sums that the Treasury cannot itself get right, and to take responsibility for the Treasury’s errors.
The Prime Minister stood at the Dispatch Box at a Prime Minister’s Question Time and told the House, in terms, that the Treasury would not seek to reclaim money that was paid as a result of a fault of the Treasury. Ever since that statement was made, the Treasury has wriggled and weasled. It has sought to claim, in one form or another, that all the problems—problems that have been referred to every Member of Parliament—are the fault not of the Treasury or of Revenue and Customs, but of the man who cannot work out complex sums on the back of an envelope, who, in this instance, is my constituent.
Mr. Dunne: All Members could give similar examples to that which my hon. Friend offers of HMRC’s excuses for its incompetence. A problem of the sort that we have not heard mention of so far arrived on my desk yesterday. As a result of an internal systems breakdown, an overpayment remained unrecognised for more than six months. The advice given to my constituent—the excuse—was, “Treat it as an interest-free loan and we will come and get it from you later. We cannot sort it now because things are in such a mess.”
Mr. Gale: My hon. Friend highlights a point that has been made time and again in our debate. You will be relieved to know, Mr. Deputy Speaker, that I do not propose to read out all the 106 cases with which I have dealt. Twenty-nine are still live, many have been outstanding for more than two years, one has been referred to the adjudicator, and eight more will have to be referred to the adjudicator. Because of our debate, I plucked out 12 cases from the 29 live ones and discovered that there was an average repayment claim of £2,190 per household, a lowest figure of £611 and a highest figure of £4,262.
By implication, we are talking about some of the poorest, most underprivileged families in the country. Sadly, the per capita level of deprivation in North Thanet, in east Kent, is still among the highest in the United Kingdom. Can any Member begin to contemplate the terror and misery felt by a young man or woman who picks off the doormat a bill for £4,000, when they do not have 4,000 pence in the bank, and such money as they did have has long been spent on household and living essentials? How can the Treasury and the chairman of the Revenue and Customs, who was rewarded with a knighthood for his incompetence, dare to justify this sort of situation? We know how, because in response to another constituency case, a Revenue and Customs senior business manager wrote to me on 1 June and said:
“Overpayments are sometimes inevitable in a flexible system as changes in circumstances which reduce entitlement can happen at any time in the year.”
Forgive me, but the right hon. Member for West Dunbartonshire (Mr. McFall) has referred over and over again to the wonderfully flexible system. The system is flexible, in so far as I can see, in terms of the number of excuses that it allows Revenue and Customs to generate for its failures, but it is not responsive to data input—I think that that is the expression.
In evidence to the Treasury Committee, the Paymaster General said with tremendous and accustomed candour:
“I am not a computer person.”
The problem is that not only is the right hon. Lady not a computer person, but so far I can see, the people responsible for the installation and maintenance of the Treasury’s computers are not computer people either—they are not capable of getting it right—and the result is a Treasury Committee report that is absolutely scathing in its determination.
We are dealing with real people. Teething troubles have been referred to—if there are such troubles, all I can say is that second teeth are coming through, because the programme is now three years old. The Treasury team responsible, including the Paymaster General and the Chancellor of the Exchequer, have had three years to get it right.
Members of Parliament continue to receive cases of hardship and misery, generated by a scheme that we were told would solve people’s problems and help them out of debt, poverty and hardship and back into work. For a third of the people involved in the scheme, who are supposedly receiving money as beneficiaries, the reverse is the case—it is creating problems and causing hardship. It hurts me to have to say this, but frankly, if the chairman of Revenue and Customs and the Treasury team responsible for the scheme cannot get it right after three years, they should move over and make way for someone who can.
3.41 pm
Ms Sally Keeble (Northampton, North) (Lab): A bit later in my remarks, I want to deal with an aspect of the tax credit scheme that has not been talked about much: the child care element—a particularly important point that is responsible for some of the very high levels of overpayment. Before I do so, it is important to return to the fact that the policy is basically the right one. Although everyone says, “Oh yes, we agree that it is the right one, but...”, we are left with the “buts”, which are undermining. The implication that the system is working so badly that it cannot be made to work and therefore that it must be changed is one of the things that I want to refute very strongly.
We have a choice, and my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) was right to press on both Opposition parties that there is a choice between flat-rate and real-time benefits. Of course, a flat-rate benefit would be easier to administer. We could just say, “We know the family size, and here’s a flat-rate payment.” However, the real issue is what the payment should be. That is where things become problematic, because we might assume that there is an identikit family and we might give people a certain
amount of money. Labour Members’ suspicion is that if the Opposition ever got their hands on the system, the level would be too low.
People are now much more familiar with working with computer systems and real-time benefits can take account of changing circumstances. In a sense, people expect the system to target their real needs much more carefully. Again, that comes back to the child care element. That is why it is so important and why my right hon. Friend was correct constantly to press the point about the flat-rate system versus the more flexible version.
By providing flexibility, we make it possible for people to remain in work. That is fundamental not only to the fight against poverty, but to people’s dignity, self-respect, standing in society and ability to support their children and to hold out the prospect of a better life for them and all the other things that people want to do for their families. In a previous incarnation, when I was the leader of an inner-London council during all the Tory recessions, I saw people on flat-rate benefits who lived on large council estates, and those benefits only served to keep them in poverty.
Mr. Tobias Ellwood (Bournemouth, East) (Con): I remind the hon. Lady that her party is in power and this motion has been tabled because mistakes are being made by the Government. Does she agree that about half of those who apply for tax credits receive the wrong assessment? That is what we should be addressing, not some fictitious idea of what a future Conservative Government might do.
Ms Keeble: It is not a fictitious idea, because it relates to policy choices and what has been learned from the past to inform the future. It also relates to what happens to lone parents—unemployed women bringing up children—and their prospects. I do not think that anyone—and that includes Labour Members—has referred to that key issue for the tax credit system.
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): The hon. Lady rightly sets out the objectives for the system, but major problems are caused by the high degree of error and incompetence, and they would make it worth while investigating returning to a system of fixed awards. The experience of my constituents is that it is no longer worth the trouble of engaging with the tax credits system—which was set up to help them—because the incompetence has been going on for three years and they are sick of it.
Ms Keeble:
The hon. Gentleman makes the fair point that if a system is constantly run down, people disengage from it. It is important therefore to ensure that the public understand that the system can make a real difference to their life chances. I accept that it is complicated, and people may need help with working their way through it. The Committee’s report contains important recommendations with which, as a member of the Committee, I wholeheartedly concur. We must recognise that if we are to give people a hand up, not a hand out—to use one of our old phrases—we must
ensure that we provide them with the kind of support that will help them best in their present circumstances, not the circumstances in which they were last year.
The system is important because of what it has done for women, and that is why we must get the administration of it right. I take second place to nobody in criticising the administration and the amount of fraud. The system was designed to give a real chance to people on low and average incomes—and in some cases, people with fairly high earnings but large family commitments—to get children out of poverty and to provide some dignity for women who had been kept out of work and at home on benefits for many years, and it is a scandal that it is hampered by administration problems and fraud. That is why Labour Members are so concerned about the administration and why the Committee’s report has received so much attention. It is certainly an excellent report.
Much of the ground has already been covered and other hon. Members wish to speak, so I shall make only a few points. The staff have received much criticism, and when we visited them in Preston it was clear that they have thought a lot about the issues and learned a lot from doing so. Some of the managers had done superb jobs in sorting out their targeting and working out ways to deal with the administrative problems. That deserves to be recognised, and the staff should be congratulated on their work. The system is complex and people who are not used to it or to dealing with benefits of this type can find it difficult to come to terms with. Such problems need to be resolved, but it is important that we do not merely castigate the staff for what has happened.
The report identifies various problems, but other challenges—such as the difficulty of reporting a change in circumstances—remain. The report spends a lot of time talking about how people’s income can vary in-year. That is understandable when people working shifts or in temporary jobs have to adjust their hours for school holidays and so on. However, evidence gathered for the report made it clear that people’s lives change. We must accept that families break up and that people find new partners. New babies get born and children grow up, moving from nursery school to their main school and then out to work.
All those changes can have an impact on a person’s tax credit claim. My right hon. Friend the Chancellor announced changes to the system in his Budget statement, and their implementation must take account of people’s changing circumstances. I am sure that my right hon. Friend the Paymaster General is more familiar with the details than I am, but I think that one of the proposals is that a change in circumstances will have to be reported in one month rather than in three months. Staff must be geared up and ready to deal with such changes, and claimants must also be aware of what they have to do. They must be able to manage what can be quite a complicated process, as it is not always clear that a change in circumstances will be permanent.
In addition, the relevant computer systems must be geared up to deal with the requirement that changes in circumstances are reported more quickly. It is important, too, that people who advise claimants understand the changes.
The Treasury Committee also talks about the ombudsman’s recommendation about an independent appeals system, and makes it clear that it wants to see a report on the practicalities involved. I hope that HMRC can look into the matter very carefully and make a report available quickly, because it is really important to ensure that a paper chase, once begun, does not proliferate.
The hon. Member for North Thanet (Mr. Gale) mentioned the arguments that people can get into, and the sequence of events is familiar to all hon. Members. When a person in receipt of a tax credit award undergoes a change in circumstances, he or she is likely to say that the award was wrong in the first place. Details of the changes are fed through the system, making the first award even more wrong and rendering incorrect any award made subsequently. The problem then is that it is very difficult to alter the first award, with the result that a paper chase begins that goes on and on. It can take an inordinately long time to resolve such a problem.
Any appeals system has to be appropriate. It must arrive at the right decision and provide proper redress, but it also has to be quite fast. It must not add to the paper chase—it is very important that the appeals system makes things better rather than worse. I hope that the HMRC report on an independent appeals system is made available to hon. Members, and that it is prepared very quickly.
My final point has to do with child care, an element in the debate that has been overlooked so far. It is important that we remember that the flexible tax credits system recognises the cost of caring for children. It is not perfect, but for the first time ever women can claim their child care costs and go out to work.
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