Examination of Witnesses (Questions 80
- 99)
MONDAY 24 JANUARY 2005
INLAND REVENUE
Q80 Mr Steinberg: Are other Permanent
Secretaries aware of their track record?
Mr Varney: We have shared our
experience with OGC but, as you said, there are a small number
of companies and each of them has the distinguished past of at
least one glorious problem.
Q81 Mr Steinberg: Were checks ever
made on EDS at the time?
Mr Varney: Yes.
Q82 Mr Steinberg: So why were the
problems not found out?
Mr Varney: I think that is the
issue about which we are clearly right in the centre of the court
case.
Q83 Mr Steinberg: Because I would
have thought that there would have been tests taken and errors
found which could have been put right at the time. It seems strange
to me that this continuously went on and mistakes were being made
and made and nobody seemed to pick them up, but you are saying
they were picked up. If they were, why were they not put right?
Mr Varney: I think we had quite
an extensive discussion last year with—
Q84 Mr Steinberg: What I am saying
is there was £94 million worth of errors and my view is that
if £94 million worth were being made 30 years ago somebody
would have said "Wait a minute, I think there is £94
million worth of errors being made here", and nobody seems
to be doing that.
Mr Varney: As I say, we are pursuing
them in the courts.
Mr Steinberg: I have a load of questions
here on EDS so I will have to miss them out.
Q85 Chairman: So you are not prepared
to say any more on EDS?
Mr Varney: I do not think it would
be helpful.
Q86 Mr Steinberg: Does the new partner,
Capgemini, expect to be able to recover overpayments? Will it
be doing that?
Mr Varney: No. The systems they
are running will be used by us to pursue the overpayments, and
we think some of them will be recovered. Some of them are being.
Q87 Mr Steinberg: How much?
Mr Varney: Too early to say, really.
Q88 Mr Steinberg: So what do you
reckon the loss to the taxpayer is going to be as a whole, or
is it "too early to say"?
Mr Varney: Yes, but I will be
back.
Q89 Mr Steinberg: A number of members
have mentioned, I think the Chairman did and I think Angela mentioned
it as well, that basically the people who receive tax credits
to begin with are also those who are the least fortunate in society
and are usually the poorest anyway, and Angela asked whether she
should tell her constituents to bank some of the money just in
case it was going to be overpaid. I do not think that would be
a good idea because the very fact they are getting tax credit
is basically because they desperately need to spend that money
so when they receive a Giro or cheque for it they are hardly going
to consider banking some of it because they need to spend it.
So how do you expect the poorest people in society to pay back
money that is overpaid? The system is inherently wrong, is it
not?
Mr Varney: The code of practice
lays out what we will do in terms of the recovery rate, but the
reason there is an overpayment is because circumstances have changed.
One of the reasons is that people's economic circumstances are
much better than we anticipated when we did the award.
Q90 Mr Steinberg: Yes, but they do
not change that much, do they? A few quid here or there puts them
under benefit or not under benefit
Mr Varney: By more than £2,500
because that is the dead zone that Parliament has discussed, but
there is clearly a very delicate section of the population which
is absolutely captured by this, and we need to handle them appropriately
with kid gloves thinking our way through it, but there are also
other people who, quite legitimately, have much better economic
circumstances and who owe us money.
Q91 Mr Steinberg: Very quickly, what
do you think, and this is going to be a guestimate obviously,
the actual overpayment through errors of fraud is going to be
this year?
Mr Varney: I do not know.
Mr Hartnett: We will not know,
Mr Steinberg, until we get through to about July, when awards
for 2003-04 will have been finalised, we will have carried out
investigations, in particular random sum investigations, which
will give us an indicative figure for fraud and error.
Q92 Mr Williams: What is the largest
amount that up to now you have tried to reclaim?
Mr Varney: £19,500.
Q93 Mr Williams: That is a lot of
money, is it not? It would be a shock to 90% of the population,
and possibly more, to get a demand for that?
Mr Varney: But you would notice
that you had received it.
Q94 Mr Williams: Sorry?
Mr Varney: You would notice that
you had received it.
Q95 Mr Williams: Yes, but if you
are reclaiming it—
Mr Varney: No, but I think you
would ask yourself, "£19,500 is quite a lot of money.
Is this really what I am entitled to?" Your reaction as MPs
has been very clear. You would say to yourselves, "This is
a large sum of money".
Q96 Mr Williams: Yes. On the other
hand people submit the information and they expect to get the
right answers from you, and they take it for granted that if they
get a letter or an indication from you that they are in conformity
with their annual tax requirements that is correct?
Mr Varney: Besides the areas where
there are computer errors, which I have said is a separate case,
if on the information we have made the right assessment and the
information was incorrect, then they have received the wrong entitlement.
Q97 Mr Field: But they never know
that.
Mr Varney: That is an issue where
we have tried with the design of forms to give feedback. I do
not think you can say in every case they will not know, but what
you can do is say "We are going through each case to see
what we were told, when we were told it, and whether, on the basis
of the information we were given, we made the right decision but
the information was wrong".
Q98 Mr Williams: In the context of
tax credit situations the biggest error is going to be with people
on the lowest income, is it not?
Mr Varney: We do not know enough
yet to be able to say "yes" to that. Errors are spread
over, we think, a variety of incomes.
Q99 Mr Williams: But the likelihood
statistically, since this is not necessarily related to the individual
income of the people who have been overpaid or underpaid, is that
this is something that could occur to anyone in any part of the
spectrum, therefore one would expect, if there are more people
on low income, the likelihood is there are more people on low
income who are now being asked to pay it back.
Mr Hartnett: David is right in
that we do not know yet, but one of the errors—
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