Examination of Witnesses (Questions 100
- 119)
MONDAY 24 JANUARY 2005
INLAND REVENUE
Q100 Mr Williams: But the trouble
is because of the six year limit people need clarity from you
and we need to know fairly soon.
Mr Hartnett: Can I pick up your
point, if I may, on the issue of poorer people? One of the errors
deleted income and so made it look as though people had less household
income than they otherwise had. Now, that tended to happen further
up the income scale within tax credits rather than at the bottom
or near the bottom, and that is one of the reasons why at the
minute we cannot give you a full response to what the spread is.
We understand the spread of overpayments in particular circumstances,
but not yet what the demographic or financial segmentation is.
Q101 Mr Williams: How soon are you
likely to be able to give us clarification for that?
Mr Varney: July.
Q102 Mr Williams: You will submit
a document to us in July by the NAO giving us an update on the
information?
Mr Varney: Certainly, we will
try our best. If everything runs according to plan we will do
it in July.[4]
Q103 Mr Williams: I was slightly
puzzled when the Chairman asked you a question earlier about the
time of your predecessor and you said you could not answer that.
Does that not suggest to you that it would be logical for us to
have your predecessor sitting alongside you to deal with this
questioning?
Mr Varney: You asked me a question—obviously
these are questions for you—about what I thought and I told
you the basis on which I thought I could make an informed judgment.
Q104 Mr Williams: No, as I recollect
the Chairman asked you a question about your predecessor and because
it was your predecessor, you said you were unable to answer it.
Generally, the practice of this Committee is, and the practice
within the Civil Service has been, to presume that the new Accounting
Officer is like the Queen when the King is dead: "God save
the King", "The Accounting Officer is dead, "best
of luck with the next one". What you are saying is you are
unwilling to accept that you should be able to answer in the way
which your predecessor would be able to, which to us means it
would be logical, therefore, to consider having your predecessor
called in.
Mr Varney: I do not think my predecessor
would be able to answer either. When he spoke to you he was expecting
a number of tools to develop and approaches which would illuminate
the answer and would work in the direction he was forecasting.
I think the direction there might be some reduction is one I hope
we will be able to live up to, but today I know those tools will
not provide the sort of answer which he gave. I am saying to you,
my position is I am going to wait until I have done all the work
and then I can make a sensible assessment.
Q105 Mr Williams: Social security
has its own definitions of hardship. You said you may take into
account hardship when you are making a request for a refund. How
do you decide what is and is not a hardship case?
Mr Varney: Included in the Report
we have got our code of practice which tries to spell out the
factors we will take into account on page 135. What we have tried
to do is make as explicit as we can the factors which people,
who are wishing to appeal, can use in putting their case together.
Q106 Mr Williams: Is there any appeal
against you?
Mr Varney: Yes.
Q107 Mr Williams: Who do they appeal
to?
Mr Varney: They appeal to us.
I think we have had about 37,000 cases[5].
Mr Field: It is not an appeal though.
Q108 Mr Williams: There is no appeal
outside your organisation?
Mr Varney: There is not. Obviously,
some cases come through MPs who raise their issues.
Q109 Mr Williams: But you are the
final arbiter?
Mr Varney: In hardship, yes.
Q110 Mr Williams: Can you give us
any idea how many hardship cases you have had put to you and how
many you have accepted and turned down?
Mr Varney: I think we have given
you the statistics about the appeals; how many people got money
as compensation or redress for stress, strain and hardship, but
the actual number of hardship cases, I am quite happy to write
to the Committee and say: "Here is the number we have dealt
with and here is the number we have not"[6].
Q111 Mr Williams: I think it is possible
that there may be a helpful memory jogger coming up.
Mr Varney: There is a memory jogger
which is reminding me of something I said previously.
Q112 Mr Williams: It is reminding
you not to tell us any more.
Mr Varney: It is not helping me
answer your question which I am quite prepared to write to the
Committee on.
Q113 Mr Williams: I understand that
but I would have thought you might have anticipated this is the
sort of question we would ask you. If you can let us have that
information. Coming back to the system, I do not want to get into
the legalities, but what I cannot understand is what it says in
your letter to Mr Bacon—who was very astute in noting the
importance of this issue—is that a function to cleanse the
database of all records was deleting cases we did not want deleted,
and this was put down to a capacity problem. Was there a specification
of any capacity in the original contract, the memory capacity
for this particular area of a system?
Mr Varney: No. What has happened
is, I think we hold about 16 million records in Pay As You Earn[7]
and if we do not cleanse the system regularly the capacity of
the system gets eaten up with information we are not using. What
we will do now when we delete cases is we will delete them to
a backup file. We can hold them on the backup file and reconstitute
the information if we need it again, it will not be deleted.
Q114 Mr Field: I apologise for not being
here for most of the meeting. I hope I am not going over grounds
which other members have gone over. I want to ask you some questions
about my constituents who do not recognise the service you have
been describing which I have been hearing for the time I have
been here. Do you accept that your disappointment with administering
tax credit is beginning to change the public's perception of how
the Revenue runs?
Mr Varney: I think there is a
change in perception, I accept that. I think where payments have
been made successfully and in the right amounts to the right families,
that tends to be taken for granted. In those areas where there
have been mistakes and they get highlighted, that gives an overall
impression of the system which I think does have an impact on
reputation.
Mr Field: Generally speaking, given that
my constituents think you are all rather clever—
Q115 Chairman: We think you are rather
clever.
Mr Varney: I will take that as
a compliment.
Q116 Mr Field:—and that they
ought to be careful in making their tax returns, my guess is now
people have seen how you have performed the tax credit, they do
not think you are as good as they thought you were. Therefore,
in that sense the public perception of this service is changing.
Mr Varney: It has been interesting.
On the forms we have been seeing how well people understand and
asking people how well they think they understand the system.
We are getting higher levels of people saying they think they
understand the system and the way it works. I accept fully that
we are going through a difficult process of introducing annularity
relating benefit to income on a delayed basis on the tax system.
As I said to the Chairman right at the beginning, I think in the
couple of years' time we will be able to give a considered view
of some of the challenges and difficulties of a system like this.
Q117 Mr Field: If people are filling
in their forms, thinking they are getting greater understanding
of the system, I think they are either fooling themselves or you.
I doubt whether most MPs understand it, it is immensely complicated.
One of the problems is when the cheques come through there is
no way my constituents can understand whether you have paid them
the right money or not. Then they find, arbitrarily, you grab
most of it back, their living standards are massively reduced
as a consequence and then being normal Brits they think they might
appeal. You talked to Alan Williams about an appeal, they do not
have an appeal, they are talking to the people who made the mistake.
There is no outside body, is there, to whom they can appeal who
can judge whether you have behaved properly?
Mr Varney: Some of the cases do
end up with MPs in Parliament.
Q118 Mr Field: Indeed mine are.
Mr Varney: You have asked me about
the general ones, but you get very quickly to the specific case.
Performing a judgment is a process which is quite time consuming.
We have had correspondence with yourself on some of the cases
you brought and normally a file arrives on my desk with all the
considerations we made before I signed the letter to you. It is
a change. I said earlier, which I think is correct, that we have
only just gone through the first cycle of renewals. Certainly,
that has gone much better than the general publicity we suggested
about tax credits and the system is performing better than it
was.
Q119 Mr Field: One of my constituents
had 15 forms from you telling her different amounts of tax credits
but the onus is on her, if she is going to have the debt wiped
off, to show that she understood she had been paid the wrong amount,
is that not the rule?
Mr Varney: As I said, in the code
of practice we have set out in quite a lot of detail that if there
are circumstances of hardship how we are going to delay recovery
but, also, the factors we would take into account in considering
whether to pursue an over-recovery. We are trying to meet the
requirements of last year and clearly lay out clearly our processes
and procedures.
4 Ev 23-26 Back
5
Note by witness: The 37,000 figure relates to the approximate
number of tax credit complaint cases received from claimants in
2004-05 (as at 31 December 2004), not the number of appeals. Tax
credit claimants can appeal against our decisions on their tax
credit entitlement only, not against our decision about recovering
an overpayment. (See also Q110.) Back
6
Ev 22 Back
7
Note by witness: Correction-PAYE databases hold about
40 million (not 16 milllion) records. Back
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