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Tax Credits

3. Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): If he will make a statement on the recent operation of the tax credits system. [84764]

5. Mr. David Heathcoat-Amory (Wells) (Con): What assessment he has made of the level of fraud in the tax credit system in the last 12 months. [84766]

The Paymaster General (Dawn Primarolo): I made a statement to the House on Tuesday on the operation of tax credits. Her Majesty’s Revenue and Customs published on its website its estimates of error and fraud for tax credits relating to 2003-04.

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Danny Alexander: I am grateful for that reply, but it is a shame that it did not come from the Chancellor, who has not answered an oral question on tax credits for 791 days. One cause of the extraordinary level of fraud and error in tax credits—now the worst in the welfare system—was payments made to people subject to immigration controls. Why were the verification procedures that would have prevented such mistakes, specifically rule 12, suspended for 18 months from April 2003? Did the Paymaster General approve that decision?

Dawn Primarolo: I can tell the hon. Gentleman that at no point were officials instructed to overlook irregularities where claimants had failed the UK residential rule. I also say to the hon. Gentleman that I am the Minister for the Department, I am accountable to the House and I accept responsibility for what happens in the Department.

Mr. Heathcoat-Amory: Tax credits are the Chancellor’s flagship scheme, but the level of fraud and error reported to the House earlier this week is running at nearly £2 billion for just one year. Does that not add the Treasury to the growing list of Government Departments, such as the Department for Environment, Food and Rural Affairs and the Home Office, that are not fit for purpose? How can the Treasury hope to control the rest of Whitehall when it cannot even run its own schemes properly?

Dawn Primarolo: If the right hon. Gentleman looks at the figures for 2005-06, as reported to the House, he will see that the Department stopped the overwhelming number of attempts to defraud it, thus demonstrating clearly that the anti-fraud measures are working. But of course he is right, and it is true for any Department that fraud must be tackled and reduced and that claimant error must also be tackled, by ensuring that claimants have clearer information and a clear understanding of their responsibilities and that the Department responds accurately and in a timely way to those submissions.

Angela Eagle (Wallasey) (Lab): May I ask my right hon. Friend to focus on the outcome of the tax credits system, which in my constituency is providing new chances for single parents to work and therefore look after their own families, giving new opportunities to people who did not have them before and tackling child poverty, which was an absolute scourge when the Labour party came to power?

Dawn Primarolo: My hon. Friend works very hard in her constituency to ensure that her constituents receive all their entitlements, including tax credits, and she will know that the take-up of tax credits in their first year of operation, particularly for lower income families, was about 93 per cent., so we now have 10 million children—6 million families—benefiting. Tax credits have made a huge contribution in helping people to return to work, in paying for child care and, most importantly, in eradicating child poverty and lifting children out of poverty. That is the situation that needs to be tackled, because child poverty doubled under the previous Government, and the difference between the
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Labour party and the Conservative party is that we are dedicated to eradicating child poverty; they do not even want to understand it.

Mr. George Mudie (Leeds, East) (Lab): Is the Paymaster General aware that, only five weeks ago, the Treasury Sub-Committee—chaired so well by the hon. Member for Sevenoaks (Mr. Fallon), who is sitting on the Opposition Benches—found that the policy of using tax credits as a method of taking people out of poverty was laudable and that the programme had considerable success? Encouraged by such all-party support, will she assure us that she will continue her efforts to help the poorest people in our communities?

Dawn Primarolo: My hon. Friend is right to refer to the Treasury Sub-Committee report, which I welcomed when it was presented to the House, because it made it absolutely clear that both the Sub-Committee and the overwhelming number of people who gave evidence to it said that tax credits had widespread support, that they made an important contribution to tackling child poverty, and that they should be supported.

Mr. David Gauke (South-West Hertfordshire) (Con): We have learned that, in 2003-04, nearly £1 in every £10 paid in tax credits was paid either in error or because of fraud. Specifically with regard to fraud, does the Paymaster General believe that that figure will fall as a proportion of tax credits paid, and if not, why not?

Dawn Primarolo: If the hon. Gentleman looks at the figures for 2003-04, he will see that they are divided between claimant error and fraud, which amounts to £70 million. As I explained to the House earlier in the week, the difference between error and fraud is that the investigating officer must be certain that there was an attempt to defraud, as opposed to a genuine error. The hon. Gentleman is quite right to suggest that strategies need to be developed—they have been announced to the House—to ensure that claimant error is reduced, that the information given to the Department is correct, and that officials act on it speedily and correctly. I have already answered the question on fraud in response to the right hon. Member for Wells (Mr. Heathcoat-Amory), by pointing out that the strategies in place in the Department are ensuring that the majority of fraud attempts made against it are not succeeding.

Mr. Wayne David (Caerphilly) (Lab): Does the Paymaster General agree that tax credits have been absolutely central in helping to reduce the tax burden on low-to-middle income families and that Opposition Members should welcome that?

Dawn Primarolo: One would expect both the Opposition parties to welcome tax credits on the basis that, according to the latest figures from the Organisation for Economic Co-operation and Development, the tax paid by an average family on £21,000 a year has gone down from between 18 and 19 per cent. to 9 per cent. That has to be welcomed. In addition, the number of families paying no tax on their income has risen since 1997 from fewer than 2.5 million
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to more than 3 million, when tax credits and benefit reform are taken together. One would have thought that the Opposition parties would welcome this, but they do not, because they do not want to tackle poverty. That is the dividing line between us. They decry the experience of poverty but, unlike this party, they will do nothing to eradicate it.

Mr. Paul Goodman (Wycombe) (Con): The Paymaster General is making a spirited attempt to defend the indefensible, but the real culprit is not the Paymaster General—I will pay her that compliment—but the Chancellor. He invented the system, which is riddled with error and fraud. The Treasury itself concedes that nearly half of all payments are wrong. Week after week, the Chancellor answers questions about world poverty, which is not his responsibility, but he will not answer questions about tax credits, which are. Will he now get to his feet, come to the Dispatch Box and take responsibility for this mess, instead of using the Paymaster General as a human shield?

Dawn Primarolo: I fear that the hon. Gentleman has made a terrible mistake here. He has just described tax credits as “indefensible”. What is indefensible is his party’s record of doubling child poverty. When he reflects on his contribution in the Chamber today, he will deeply regret the fact that, for the first time, he has made it abundantly clear that the Conservatives are not prepared to defend tax credits. They do not support them because they are not prepared to tackle child poverty.

Cocaine Smuggling

6. John Mann (Bassetlaw) (Lab): How many drugs liaison officers within Her Majesty’s Revenue and Customs are employed in tackling cocaine smuggling. [84767]

The Financial Secretary to the Treasury (John Healey): From April this year, the Serious Organised Crime Agency—SOCA—took over responsibility for the network of overseas drugs liaison officers. Her Majesty’s Revenue and Customs retains responsibility for anti-smuggling controls at the UK borders, and continues to seize drugs as part of its frontier work.

John Mann: Unlike drugs such as heroin, cocaine is incredibly price-sensitive. Can the Minister give us an assurance that the expertise that has been built up in Customs and Excise will be made fully available to SOCA to ensure that the unsung successes in intercepting cocaine that have taken place in areas such as the Caribbean, giving great value for money, are not only continued but expanded by the Government?

John Healey: I pay tribute to my hon. Friend’s work in the House, his constituency and elsewhere on the serious menace that drugs cause in our communities. I can give him the assurance that he seeks. When SOCA was set up, more than 1,100 drugs officers and their expertise were transferred from HMRC, and they now play an integral part in the work that SOCA is undertaking. I can also assure him that HMRC and
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SOCA continue to work closely together, including at the frontiers, so that we can continue to play a part in the battle against drugs.

Mr. Philip Hollobone (Kettering) (Con): A very high proportion of the 8,000 foreign prisoners in British jails are drug smugglers from Jamaica and other Caribbean countries. Will the Minister liaise with the Home Secretary to ensure that those people are sent back to secure detention in their own countries, thus saving the British taxpayer a small fortune?

John Healey: The hon. Gentleman refers to a groundbreaking, innovative and highly effective programme called Operation Airbridge. This involved UK Customs and Excise—later HMRC—linking up with the Jamaican constabulary to prevent would-be cocaine smugglers and swallowers from getting on to the planes in the first place. That operation has resulted in an increase in the number of smugglers being intercepted in Jamaica, a reduction in the number of seizures and smugglers from the Caribbean being intercepted here, and a consequent reduction in the number of smugglers from those parts of the world having to be dealt with by our criminal justice system.

Mr. Bob Blizzard (Waveney) (Lab): Until April there were two drug liaison officers in Peru, and then SOCA moved them to Colombia. Peru is the second largest cocaine-producing country in the world, cocaine production is on the increase and crop eradication and substitution programmes are not working. Intelligence-led intervention in trafficking will make the biggest difference to this country. Will my hon. Friend increase SOCA’s resources for that work, so that our drug liaison officers, who are very successful, can be in both Peru and Colombia?

John Healey: My hon. Friend is right to say that the role played by drug liaison officers overseas is pivotal. As I have explained, they have now been transferred to SOCA. He is right to stress the importance of being able to intercept drugs at every stage of the supply chain. He may be interested to know that in the first 10 months of last year, the agencies combined intercepted more than 30 tonnes of cocaine destined for European markets, which we would otherwise have had to try to intercept either at our borders or on our streets. That important international work is helping to keep some of our local communities freer of drugs than they would otherwise be.

Monetary Policy Committee

7. Sir Peter Tapsell (Louth and Horncastle) (Con): What plans he has to review the appointments procedure of the Monetary Policy Committee of the Bank of England. [84768]

The Chancellor of the Exchequer (Mr. Gordon Brown): Today I am appointing to the Monetary Policy Committee Mr. Andrew Sentance, chief economist at British Airways and previously chief economist of the CBI, and Professor Tim Besley of the London School of Economics. The whole House will also want to pay
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tribute to the work of the former MPC members—Richard Lambert, who is now director general of the CBI, and particularly David Walton, a brilliant economist who tragically passed away at the young age of just 43. Recognising the issues of market sensitivity, the procedure is that all appointments are made strictly in accordance with the legislation.

Sir Peter Tapsell: I start by echoing the Chancellor’s deep regret at the tragic early death of the brilliant David Walton, which is a great loss to this country. But does the Chancellor regard his answer as an adequate response to the growing criticism in the City, in which even the Governor of the Bank of England has partially joined, of what is perceived as his dilatory and over-secretive approach to the filling of vacancies as they occur on the Monetary Policy Committee? Why can the procedure not be more open and transparent? Is it appropriate, in a Bank of England that the Chancellor claims he has made independent, that those appointments should be made by him in such a personal way?

Mr. Brown: Let us remind the House that the hon. Gentleman was a vicious opponent of the independence of the Bank of England. He said that it would lead to deflationary policies and higher unemployment, and that the Bank of England’s reputation would be damaged. All those things proved to be untrue. On the appointments system for the Bank of England’s Monetary Policy Committee, the legislation requires that we seek people with experience and expertise. That has been achieved, and the proof is in the record. It would be wrong, when there is market sensitivity—which, unfortunately, the shadow Chancellor denies—if a rumour about a Monetary Policy Committee appointment meant that there was movement of the pound and the stock exchange. There is market sensitivity, so such appointments must be handled with care.

Mr. George Osborne (Tatton) (Con): The Chancellor appoints them all.

Mr. Brown: Well, if we had followed the Opposition’s policy, the Bank of England would not have been independent, we would not have had stability, we would not have had low inflation, and we would not have had the lowest interest rates for 30 years.

Mr. Brian H. Donohoe (Central Ayrshire) (Lab): Has a review been undertaken to find out the effects of the independence of the bank since 1997?

Mr. Brown: The effect of independence for the Bank of England and the accompany monetary and fiscal policy is that inflation, interest rates and mortgage rates have been half what they were in the previous 18 years. I have considered all kinds of proposals that have been put forward for reform of the Bank of England Monetary Policy Committee. I have considered the shadow Chancellor’s proposal that the House of Commons vote every year on the inflation target, which would be a recipe for the very instability that the Conservatives created in government. I have also
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considered his proposals for appointment to the Monetary Policy Committee—and it is remarkable that those proposals are intended to increase the external accountability of the Monetary Policy Committee. Even the Governor of the Bank of England would disagree with a proposal for the Governor to choose the two deputy Governors, the Governor to choose the other two internal members and the Governor also to have a role in the appointment of the remaining four members. That would mean the Governor having either a direct or an indirect role in the appointment of all eight members except himself. How would that secure accountability? The shadow Chancellor should go back to the drawing board and think again—about this and other issues.

Julia Goldsworthy (Falmouth and Camborne) (LD): I echo the sympathy expressed by the Chancellor over the sad death of David Walton. The independence of the Bank of England was called for and welcomed by the Liberal Democrats, but does the Chancellor agree that it is compromised by the direct control that he exercises in appointments? Is he prepared to give up that control and fall into line with the code relating to ministerial appointments? If not, why not?

Mr. Brown: I remind the hon. Lady that the Conservative party opposed the legislation for independence of the Bank of England. She says that she supported that legislation—

Mr. Lindsay Hoyle (Chorley) (Lab): She was not here.

Mr. Brown: But the hon. Lady’s party supported it. The legislation that she supported provided for five internal members of the Bank of England and four external members. That was in the legislation. The Chancellor of the Exchequer was obliged to propose the appointment of people with experience and expertise to the Monetary Policy Committee. I ask the House whether the record of the Bank of England as a result of our decisions has been good or bad. In my view, the only answer that the House can give is that we have achieved a degree of stability that the Conservatives could never dream of.

Mr. Mark Hoban (Fareham) (Con): I echo the Chancellor’s comments about the late David Walton, and the work that he and Richard Lambert did on the MPC—but Richard Lambert was appointed to the MPC by means of a telephone call, as was Andrew Large. The Governor said before the Treasury Committee that the current process was

Is it not time for a proper, open and robust process for MPC appointments, rather than their being made furtively behind closed doors, on the whim of the Chancellor?

Mr. Brown: The policy of the hon. Gentleman’s party favours greater accountability of the MPC to Parliament and the public, but the detail of the shadow Chancellor’s proposal is that the two deputy Governors
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should be chosen by the Governor, the two internal members should be chosen by the Governor, and the Governor should have a direct role in the choice of the four external members. That is not extending external accountability. The Conservatives are making a laughing stock of their own policies.

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