| Previous Section | Index | Home Page |
Mr. Darling indicated assent.
Richard Ottaway: I see that the right hon. Gentleman understands. Will he explain what his conclusions are?
Mr. Darling: Of course I understand what co-firing is. It is referred to in the energy review, and it is something that we ought to encourage. It is useful in the disposal of waste, and it also means that less coal is burned.
David Taylor (North-West Leicestershire) (Lab/Co-op): Approximately 800 million tonnes of coal lie under my county of Leicestershire—part of which I represent—and under the constituency of the hon. Member for Rutland and Melton (Mr. Duncan), who speaks for the Opposition on these matters. I therefore welcome the references that my right hon. Friend the Secretary of State made to the role of coal in future energy policy, but within what time frame does he expect the investment in clean-coal and carbon-capture technology to bear fruit? There is a real risk that a continued and expanded role for coal will be met only through higher coal imports and more open-cast coal extraction, in England and elsewhere.
Mr. Darling: I agree that we need to press ahead as fast we can, but the answer to my hon. Friend’s question depends on how quickly we can solve the remaining technical problems. However, I assure him that I feel very strongly about the matter and that I want to make progress. A bigger role for coal would benefit this country and the industry right across the world. It represents a huge opportunity, if we can only get it right.
Several hon. Members rose—
Mr. Deputy Speaker: Order. I am afraid that we must move on. No doubt we will come back to this subject in due course.
Tax Credits
4.57 pm
The Paymaster General (Dawn Primarolo): Tax credits today provide support to 20 million people, including 6 million families and 10.1 million children. Tax credits take-up is at unprecedented levels, with 93 per cent. of families on incomes below £10,000 claiming their entitlement to the child tax credit. That compares with the 57 per cent. take-up in the first year of family credit.
Tax credits have improved work incentives, reduced the tax burden on low-to middle-income families, and helped to reduce child poverty dramatically. Tax credits and economic stability have helped to increase the number of people in work by more than 2 million since spring 1997, and since 1997, long-term unemployment has been reduced by 450,000. Tax credits have also ensured that the Government have implemented our commitment to ensure that work pays over welfare. For example, the changes that we are making mean that, from October 2006, a couple with two children moving into full-time work on the national minimum wage will be £41 per week better off in work.
The tax credit system has also played a key role in tackling child poverty. Since 1996-97, 700,000 children have been lifted out of relative poverty, whereas child poverty had doubled in the previous 20 years. In addition, there are now more than 1.8 million fewer children in absolute poverty, before housing costs are taken into account, than was the case in 1996-97.
A figure of £2.2 billion is often referred to for adjustments leading to overpayments, with the suggestion that that represents the amount lost to the Exchequer. However, that total includes moneys that have been recovered or are still to be recovered. Once error, fraud and adjustments leading to overpayment are taken into account, the net total estimated not to be recovered for 2003-04 is between £1.24 billion and £1.74 billion, as reported to the House in the documents that have been laid before the House today. That figure takes into account Her Majesty’s Revenue and Customs estimates of claimant error and fraud through the random inquiry programme, and which are being published today.
I remind the House that those figures relate to three years ago, when claimants were unfamiliar with the new rules and processes and the Inland Revenue was experiencing initial IT problems. The HMRC is today publishing a detailed account of what it is doing, and will do, to tackle error and fraud in tax credits, setting out the detailed programme of action that is in place to ensure that claimants receive the tax credits to which they are entitled, at the right time.
To help reduce claimant error, the HMRC is pursuing a number of measures, such as targeted advertising, including the current campaign to encourage claimants to renew their tax credit claim in good time, an improved claim form to reduce claimant error and redesigned award notices that include a clearer summary of the tax credit award and how it has been calculated. The HMRC is improving the information given with award notices—for example, by providing a ready reckoner—and improving access to contact centres.
Identity theft is a serious and growing problem for the United Kingdom. It is increasingly linked to organised crime and is the source of significant amounts of financial fraud in both the public and private sectors. The Home Office estimates that the cost of identity fraud is £1.7 billion a year, of which tax credit-related fraud is a small proportion. A separate statement will be issued today announcing that Sir James Crosby is to head a public-private forum on identity to explore issues relating to identity management and associated technologies. Our aim is to do everything that we can, at all levels, to prevent identity fraud.
To tackle fraud, the HMRC is pursuing a range of measures, which include further refining of its risk assessment, putting compliance specialists in contact centres and increasing pre-payment checks on claims where fraud or non-compliance is suspected. In addition, the HMRC will continue to use the information it holds, as well as data held by other Departments and third parties, to support and enhance its compliance operations.
Tax credits and economic stability have helped to increase the number of people in work by more than 2 million since spring 1997, and since 1997 long-term unemployment has reduced by 450,000. Tax credits have improved work incentives, reduced the tax burden on low-to-middle-income families and helped dramatically to reduce child poverty.
Mr. Mark Francois (Rayleigh) (Con): I thank the Paymaster General for her statement and for providing me with a copy in advance.
About 6 million families claim tax credits, at a cost of about £16 billion a year, which is equivalent to 5p in the pound on the standard rate of income tax. As we pointed out in our recent Opposition-inspired debate on the subject, according to the latest available figures about 2 million families were overpaid, while just under 1 million families were underpaid, so nearly half of all payments in the system were wrong.
According to the figures in the statement, more than £1.2 billion a year is going astray in error and fraud. Is not it embarrassing beyond belief that the Treasury—of all Departments—has to have the accounts of one its principal arms qualified by the National Audit Office because it has failed to control fraud and error in a system that the Chancellor personally introduced? Given that situation, I have four specific points to put the Paymaster General. First, when did she realise the true scale of fraud in the tax credits system? She announced last December that she was closing the e-portal because of fraud via the tax credits website, but the amount concerned was miniscule compared with today’s figures. When did she really know how bad the problem was and why has the Treasury not done more actively to combat it?
Secondly, the
right hon. Member for Birkenhead (Mr. Field), who is in his place,
previously warned publicly that the system was open to fraud and
recommended additional counter-fraud measures, but, as he knows and has
put on the record, they were not adopted. Will the Paymaster General
confirm that although the fraud now appears to be much greater than
previously admitted, the Government’s recent response has been
to reduce the number of qualified
anti-fraud officers within the anti-fraud compliance organisation and to
replace them with less qualified administrative staff? I have here a
copy of an internal HMRC plan to do exactly that. It is entitled,
“Claimant Compliance Restructuring Project” and it was
recently leaked to my hon. Friend the Member for South Norfolk (Mr.
Bacon). It confirms the plan in considerable detail. How on earth does
it make sense to let go experienced anti-fraud officers, most of whom
recover many times their own salary, when the degree of fraud in the
system appears to be spiralling out of
control?
Thirdly, will the Paymaster General now concede that the current tax credits system is increasingly discredited and urgently needs to be reformed? When the House debated the problems with the system in our Opposition day debate on 7 June, the Chief Secretary to the Treasury, who is in his place, called for a consensus across the House on the operation of tax credits. We remember it well. As part of that, given the scale of the fraud and error that has been revealed today, will Ministers finally admit that the current system is now discredited and has to be reformed, as we on these Benches have argued for quite some time?
Fourthly, although we welcome the presence of the Chancellor this afternoon, why did he not deliver the statement to the House? Tax credits are his personal creation, but for the past year he has not answered a single oral question about them. When will the Chancellor stand at the Dispatch Box and explain why his overcomplicated and increasingly discredited system is now causing so much misery to exactly the low-income families that it was introduced to help in the first place?
Today’s figures relate only to 2003-04 and we are now in financial year 2006-07, so we suspect that the problem of fraud in the tax credits system remains much greater than the Government are currently willing to admit. Indeed, the Comptroller and Auditor General says in his accompanying report, which was published today:
“There is currently no evidence to justify a lower estimate for 2005-06. Consequently I have qualified my opinion on the Trust statement.”
If it proves to be the case that the fraud and error on this scale continues to persist at these levels, or if it transpires that the right hon. Lady knew about all of this much earlier than she is letting on, her position must surely become untenable.
The Prime Minister told the House a few weeks ago at Prime Minister’s questions that the working families tax credit was working well. The Working families tax credit was abolished three years ago. The Chancellor has created a system that is so complicated that even the Prime Minister does not understand it. The Chancellor is the real culprit in this whole fiasco. The Paymaster General mentioned 1997. The Labour manifesto in that year said:
“we must crack down on dishonesty in the benefit system.”
This is not a crackdown; it is a meltdown—and it is the Chancellor’s personal meltdown. It is he, more than anyone else, who has let down low-income families and it is he who should ultimately be held to account for this fiasco.
Dawn Primarolo: The hon. Gentleman clearly has not read the Comptroller and Auditor General’s report. I will address each of his points in turn, but I also say to him that there are 6 million families—10 million children—in the tax credits system. Progress is being made on reducing child poverty, which increased and doubled under family credit and his Government. We are helping 6 million families, while his Government helped 600,000—there is no comparison. The hon. Gentleman cannot get away from the fact that his party is not committed to eradicating child poverty.
Let us deal with the hon. Gentleman’s points. First, I remind him that since 1997, the number of families with children paying no net tax has risen from just fewer than 2.5 million to more than 3 million in 2006-07, which is a result of tax credits and benefits reform. On the point about error and fraud in the system, regrettably, most of the error is on behalf of the claimant—we must remember that this is the first year. The figures on error and fraud in tax credits that were published today show an incident range of 8.8 to 10.6 per cent. The range for the working families tax credit was 10 to 14 per cent., while the figure for jobseeker’s allowance was 13.2 per cent. The figure for income support was 9.2 per cent. Those are based on figures from when the Government first collated data on a comparable basis. The hon. Gentleman is simply not concentrating.
The hon. Gentleman asked about the e-portal. I refer him to paragraphs 2.31 and 2.33 of the Comptroller and Auditor General’s report. That report clearly sets out the period of the attack on the portal and confirms the information that has been repeatedly provided to the House. The hon. Gentleman also said that staff are being cut, but there is absolutely no substantiation of that point. In fact, in paragraph 2.27, the Comptroller and Auditor General refers to the fact that more staff are being employed in tax credit compliance, not fewer.
The hon. Gentleman referred to reform. We know the reform that the official Opposition wish to undertake—they want to undermine tax credits and, if they ever get the chance, to abolish them. That is the message to take out to tens of thousands of families in every constituency in the country. The hon. Gentleman should read the report before he stands up and makes accusations.
Mr. John McFall (West Dunbartonshire) (Lab/Co-op): I represent a constituency with traditionally and historically high unemployment. Tax credits have played a significant role in providing families with incentives to work, as well as reducing child poverty. Will the Paymaster General comment on fraud and the work that she is doing with companies such as Network Rail to ensure that fraud is closed down? Will she break down the causes of overpayment into those that are the responsibility of the HMRC and those that are the responsibility of the claimants?
Dawn
Primarolo: If my right hon. Friend looks at the documents
that were published today on the error and fraud statistics for
2003-04, he will see that there is a breakdown of error between
claimants and fraud. The difference is that in order to ascertain that
there has been fraud, an investigating officer must be utterly
convinced that the intent of the claimant was to
defraud, as opposed to an error having occurred when the application was
returned. The figures show that fraud is put at £70
million.
I concur with the points of the Comptroller and Auditor General with regard to the work that needs to go forward. We now have the base year for figures, and there must be improvement and development on those figures. As I set out in my statement, there are steps in place, including the changes that were announced in the pre-Budget report in 2005. The CAG also acknowledges that there is improvement in the system, and we are continuing to build on that.
Mr. David Laws (Yeovil) (LD): Is not the truth that we have just heard an extraordinarily complacent statement from a Minister in denial about a system that is clearly in a mess? A moment ago, the Paymaster General referred to the National Audit Office report. I am delighted that she has read it, because she did not refer to it or any of the information that it cites in her statement. Can she confirm some facts that were not in her statement? The original estimate for fraud for the first year of operation was £460 million, but it may now be as high as £1.28 billion. Will she confirm that the figure for the second year of the operation of the system is expected to be as high again? She suggested that fraud is falling, but will she confirm that it is likely to rise in the system and that, in the past year alone, £131 million was lost to organised fraud by criminal gangs? Can she confirm that tax credit fraud and error account for more fraud and error than any other benefit and that the error and fraud rates in tax credits are higher than in any other welfare benefit? Can she confirm, too, something that her Department has clearly told the Comptroller and Auditor General, but not the House? For the third year of operation, the Department expects overpayment on tax credits of £1.8 billion, and it estimates that there will be overpayments of £5.8 billion in the first three years, and £2.4 billion in fraud. Can she confirm those figures, which she left out of her statement?
Can the Paymaster General confirm something that her Majesty’s Revenue and Customs staff told us—that there has not been a proper anti-fraud culture in the tax credits department, and that it is so obsessed by take-up that it has left the stable doors open to fraud? She implied that problems arose with the e-portal shortly before she closed it in December 2005, but can she confirm that the document by the Comptroller and Auditor General says that those problems were known about at the end of 2004, and that the number of suspected organised fraud cases gradually increased throughout 2005? Why, therefore, did it take so long to do anything about the problem and why were claimants using the e-portal not required to produce documentary evidence of their identity and address?
The
Paymaster General did not say anything about payments to individuals
subject to immigration control, which were written off by the Inland
Revenue because they should not have been made. Why were the
verification procedures, specifically rule 12, suspended for 18 months
after April 2003? Was she aware of the decision at the time, and did
she approve it? Why has it taken her so long to implement the
recommendations in the ombudsman’s report? The Chancellor and
the Paymaster General know that many Liberal Democrat
Members want the system to work rather than abolish it, but the
Government’s complacency about fraud, error and overpayment is
undermining the very system designed to help people on low incomes, and
has affected people on lower incomes in particular. The Government are
in a persistent state of denial, but is it not time not only for new
ministerial leadership on the issue in the Department, but for a
Minister who will seek solutions instead of making
excuses?
Dawn Primarolo: The hon. Gentleman never misses an opportunity to try to spread innuendo and undermine the tax credits system. If he read paragraph 2.28 of the report, he would see, far from his accusation that the compliance strategy is not working, that the Comptroller and Auditor General details the amount that was prevented from going to people who made fraudulent attempts to claim tax credits. It shows that the HMRC prevented payments of £447 million, so the majority of attempts were dealt with. The hon. Gentleman touched on the e-portal, but if he continues to read paragraph 2.28, he will see that all the figures are provided, including those on the questions of suspected organised fraud and the specific attack on the e-portal.
If the hon. Gentleman still needs convincing, he should refer to tables 10 and 11 in the Comptroller and Auditor General’s report, which detail how the HMRC dealt successfully with attacks on the tax credit system. He has been provided with that information, but he persists with innuendo. He should present the House with proof or stop trying to undermine the system.
Mr. Frank Field (Birkenhead) (Lab): Does the Paymaster General accept that there is a natural tension in a radical Government who want to redistribute large sums of money to the poorest people in society, while making sure that taxpayers’ money is spent properly? Historically, we have done that through one Department paying the benefit and the Treasury watching over the Department that pays out that money. Given that the Treasury now pays out the benefits and watches the taxpayers’ interests, will she reflect further on whether the Treasury has the balance right between helping poor families and protecting taxpayers?
Although the statement today is about fraud and the associated problems, is there not also a problem of take-up? Even those of us who are not enamoured by tax credits ought to admit that the poorest families have gained more help through this measure than through any other measure that any other Government have introduced. I have noticed in my constituency that mothers who might be eligible for the first time claim child benefit, but are not aware of the tax credit side. May I suggest that my right hon. Friend considers combining the form for applying for child benefit with tax credits? When applying for child benefit, that person has to produce a genuine birth certificate. That might stop some of the fraud in the system.
Dawn
Primarolo: My right hon. Friend makes a series of
important points. Surely the test of the policy is whether it is
successfully lifting children out of poverty, and it is. All the
independent reports indicate the substantial contribution that tax
credits are making to the delivery of the Government’s target of
lifting children out of poverty. A careful balance needs to be
struck, but the huge benefits that we can see as a result of the tax
credits, the fact that more people are returning to work, the fact that
lone parents are being supported into work, the fact that take-up among
the poorest—under £10,000 a year per family—is at
93 per cent. and rising, and the fact the child care element is at
record levels and rising, all address his first point.
On my right hon. Friend’s second point, paragraph 2.10 of the Comptroller and Auditor General’s report shows that as a result of the flexible system being run through the tax credits, in 2004-05 some £700 million went to families, which would not have happened without the disregard and the way the present system operates. In the previous year, £800 million more went to families than would have done under a fixed system. Although he is right to press the Government to focus on take-up and make the system better, which we have been doing—the figures are from the first year—I still believe that the direction of travel is correct and that we are delivering our policy objectives.
Mr. Michael Fallon (Sevenoaks) (Con): Why does the Paymaster General again blame claimants, instead of apologising to the 2 million families who have been wrongly paid? Given that she and the Chancellor are entirely responsible for designing a system that has become a fraudsters charter, will she reflect on the fact that if the two of them worked in the private sector and lost £1.5 billion, they would not simply be sacked—they would probably both be prosecuted?
Dawn Primarolo: I am surprised at the hon. Gentleman, who is experienced in the House. It is rubbish to suggest that the tax credits system is a fraudsters charter. He knows that because he is the Chairman of the Treasury Sub-Committee, which produced an excellent report saying how much it valued the contribution that tax credits make to lifting children out of poverty and helping families back into work. He knows full well from comparisons of benefits in their first year of operation that the issue is always challenging. There were particular problems with the computer system in 2003-04, but he knows full well that since that period the improvements that I have announced in this Chamber and that the Chancellor announced in the 2005 pre-Budget report have made significant inroads into improving tax credits. The hon. Gentleman should be honest: he does not want to help the poor, because he wants to abolish tax credits.
Mr. George Mudie (Leeds, East) (Lab): As a member of the Treasury Committee, I urge on the Paymaster General in the battle against fraud; as a Back-Bench inner-city constituency MP, however, I urge her to continue her efforts. The tax credit policy has pulled thousands of kids out of absolute poverty in my constituency and it has put single parents who have been on benefit for the whole time that I have been an MP into work, which allows them to earn for their families, for the community and for the economy and to give their kids a better standard of living. I hope that the Paymaster General will not be disheartened by the Opposition’s petulant carping.
Dawn Primarolo: I assure my hon. Friend that I am not disheartened. Indeed, I am encouraged by the excellent communications that have been sent to me and to other hon. Members describing how tax credits have helped single parents and families. Tax credits also help the Government in our historic challenge of eradicating child poverty. At some point, the Opposition parties must decide whether they are to going to continue to oppose tax credits. If they are, what will they say to the tens of thousands of families in their constituencies who will lose hundreds of pounds a month?
Mr. David Gauke (South-West Hertfordshire) (Con): The Paymaster General has referred to the excellent Treasury Committee report, which criticised her and Her Majesty’s Revenue and Customs for failing
“to establish a complete picture of patterns of claimant error and fraud in 2003-04”.
Assuming that she has finally established a complete picture—one wonders what the Chancellor of the Exchequer and she have been doing for the past three years—will she set a target to improve those appalling figures?
Dawn Primarolo: While we are discussing the Treasury Committee report, I shall remind the House of what it said:
“the regime...enjoys a great deal of support and goodwill...We agree that the policy underpinning tax credits of taking people, and especially children, out of poverty, is laudable, and that the programme has had considerable success... We welcome the fact that the Government is seeking to improve the operation of the tax credits regime by introducing a package of reforms”.
If the hon. Gentleman examines the report by the Comptroller and Auditor General, he will see the continued improvements, which have been monitored, and how the Treasury is developing tax credits to ensure their smooth operation.
Ms Sally Keeble (Northampton, North) (Lab): I welcome the measures to tackle identity fraud announced this afternoon. I, too, am a member of the Treasury Committee, and I underline the fact that the report welcomes the way in which tax credits have targeted child poverty, and so it should. The system helps 9.9 million children, whereas the old family credit helped only 1.6 million children. In moving forward with the tax credit system, will my right hon. Friend make sure that the child care element is protected, because it allows women to go out work, which ultimately improves living standards for children in this country?
Dawn
Primarolo: My hon. Friend regularly discusses child care
payments in this House because she is an absolute champion for making
sure that such payments not only operate properly, but reach more and
more families, and I am considering how we can ensure that that
happens. On identity fraud, I remind her and the House that the
Treasury identified the stolen identities, that it stopped the majority
of those claims and that it is now working with banks, the Home Office
and other Departments to take forward a strategy. The creation of bank
accounts caused the difficulties in the tax credits system.What I
announced today, in referring to the written statement as regards Sir
James Crosby and
the public-private forum on identity, is how we can all learn, in the
private and public sectors, how to eradicate identity
fraud.
Sir George Young (North-West Hampshire) (Con): There is widespread support among Members on both sides of the House for policies that help low-income families in work. However, it is clear not only from today’s statement but from the endless debates that we have had in this Chamber and in Westminster Hall over the past nine years that the present system is not fit for purpose. Will the Paymaster General now answer the question that has been put to her twice: has not the time come to devise a better interface between the low-paid citizen and the state?
Dawn Primarolo: The evidence clearly demonstrates that tax credits are working, particularly in getting resources to those who are lower paid or unemployed and want to return to work, including women who need to pay for child care arrangements. None of that was available under the previous Government. The right hon. Gentleman is right in his assessment that the Government should be redoubling their efforts to eradicate child poverty and to ensure that tax credits play their proper role. When he has an opportunity to read the Comptroller and Auditor General’s report, he will see that it clearly sets out how Her Majesty’s Revenue and Customs is going about that.
Sarah McCarthy-Fry (Portsmouth, North) (Lab/Co-op): I recently spoke to a single parent in my constituency who has two young children. She told me that without tax credits she would find it difficult, if not impossible, to carry on working, and therefore would be forced back on to benefits and unable to give her children the standard of living they had been used to. Last year, the shadow Chancellor refused to acknowledge the part that our tax credits have played in reducing child poverty. Does my right hon. Friend agree that that shows how out of touch the Conservatives are with ordinary people’s lives?
| Next Section | Index | Home Page |