Examination of Witnesses (Questions 160
- 175)
MONDAY 24 JANUARY 2005
INLAND REVENUE
Q160 Mr Bacon: You think it is less
than £100 million?
Mr Varney: Yes.
Q161 Mr Bacon: You are an Accounting
Officer and, therefore, you are responsible to Parliament for
how public money is spent. The C&AG said in his Report that
last year he qualified the accounts because there was a 10%-14%
by value error rate and although the Department believes it might
be half that now, the C&AG says the Department has not estimated
the level of financial error on New Tax Credits and I quote: "I
have no evidence that error has yet been reduced significantly
to enable me to give an unqualified audit opinion. I therefore
have qualified my audit opinion on the 2003-04 trust statement
in respect of the New Tax Credit payment". Obviously you
are failing in your duty to Parliament to account for how public
money is spent efficiently, effectively and economically if the
accounts are qualified, which they are. This is a discussion which
does not just affect your Department, it is a discussion we have
had with Sir Richard Mottram concerning the DWP, do you think
that officials who are Accounting Officers and those who work
for them have a responsibility to ministers to advise them to
design systems which are as simple as they can be, to have as
little complexity as possible, on the basis that complexity itself
inhibits the efficient economic and effective spending of public
money? In other words, the policy itself inhibits your ability
to do your job as an Accounting Officer and account accurately
to Parliament for the monies which Parliament votes for you.
Mr Varney: Let me try and separate
that because there are quite a lot of things in there which I
do not find myself in agreement with. As an Accounting Officer,
in all the areas, one tries to make sure we are discharging our
duties of Parliament. The Auditor General has quite rightly drawn
attention to the fact that we cannot quantify the errors in New
Tax Credits and, therefore, qualified the accounts. We will have
to work to get a set of accounts which are unqualified. In the
formation of HMRC, which you know, our previous policy work has
gone across to the Treasury. Our role in discussion about the
policy is the experience which comes from operating systems and
the advantages and disadvantages of different approaches, and
that is the advice which will be giving to Ministers.
Q162 Mr Steinberg: Listening to Ian
Davidson and the mistakes which are made, if you turn to page
126, figure seven, does this not sum it all up and it is the cause
of all the problems, the fact that the New Tax Credits, the Accuracy
of Processing and Calculating Awards is 78% correct against a
target accuracy of 90%, whereas the old tax credits were in some
cases 98% right and at the worst 85% right. Surely that is the
solution to the problem or the reason for the problem is the staff
are making so many mistakes.
Mr Varney: Clearly it is something
we need to improve. I think the Committee will be probably glad
to hear that in 2004-05 it is improving and moving up. Clearly
it is an issue in the system.
Q163 Mr Steinberg: If they are making
so many errors no wonder there are so many overpayments.
Mr Varney: There are overpayments
in the system in part because of the design of the system. If
you focus on the overpayment issue, the overpayment issue comes
about in part because there are errors. Another part is the change
of economic outlook of individuals, which is much better than
we thought it was and, therefore, they are entitled to less credit
or there is a change in their family circumstance which means
they have got a lesser entitlement.
Mr Steinberg: Finally, the point Mr Davidson
made, for goodness sake do not take any notice of him as far as
hotlines are concerned because when I have somebody screaming
at my secretary that it is her fault they are not getting the
tax credits—and that happens, our secretaries and our staff
tend to get the blame: "You have not paid me my correct tax
credits"—at least they have the advantage of being
able to go home and sort it out over the hotline. If the hotline
was not there, in many cases sometimes you would have to call
the police, to be quite honest, to get them out of the office.
Do not get rid of the hotline for goodness sake.
Q164 Jim Sheridan: Just to clarify
the position, Mr Steinberg has raised it already, the MPs' hotline,
is that still available? I think Mr Davidson identified situations
where your staff are quoting the Data Protection Act and refuse
to discuss cases. Would you clarify what the position is?
Mr Varney: The hotline is available.
We changed the number of the hotline and we advised you. The reason
for that is the lady sitting on that number was receiving harassment
calls[9].
Q165 Jim Sheridan: From MPs?
Mr Varney: From outside.
Q166 Jim Sheridan: Harassment calls
from MPs?
Mr Varney: No, no.
Q167 Mr Field: That is just how we
feel.
Mr Varney: No, from an outside
individual in which the police are involved now.
Q168 Jim Sheridan: MPs can still
use a hotline?
Mr Varney: There is still a number
and it is still to be used by MPs and their officers in order
to process cases of the type that Mr Steinberg has described.
Q169 Mr Field: On the qualification
of your accounts: were the accounts of the Revenue ever qualified
by the Comptroller before you had to run these tax benefits?
Mr Varney: No.
Q170 Mr Field: There might be a lesson
there, might there not?
Mr Varney: That is the reason
they have been qualified.
Q171 Mr Field: Going back to the
earlier questions, there is a culture in that there is one department
of government which understands about paying out money and the
other one has quite a good record in collecting it in. They are
different activities.
Mr Varney: I think we go back
to the issue of the annularity. As I said, I think after two or
three years we will be able to talk to you about what our experience
is of the new system. We are in the very early stages of the new
system.
Q172 Mr Field: When do you think
you will get your accounts back not being qualified?
Mr Varney: I am working hard to
do that. I do not like having accounts qualified. It is the first
time it has ever happened to me so I am working hard. As you have
pointed out, and I think that is right, in the system of benefits,
there has been a feature of those accounts. It is a challenge
for us.
Q173 Mr Field: Will it be in the
next financial year?
Mr Varney: I am not going to give
you a forecast, you will only be inviting me back after I have
retired!
Q174 Chairman: Could we have a note
please on paragraphs 3.18 to 3.20 on the avoidance opportunities
in stamp duty and land tax?
Mr Varney: Of course[10].
Q175 Chairman: There is no time to
deal with it now. Thank you very much, gentlemen. We will be issuing
our Report and seeking to help you resolve the public's dent of
confidence in the Inland Revenue as a result of what has been
going on in tax credits.
Mr Varney: Thank you very much.
9 Note by witness: Correction: the telephone
number that was changed was that of the Complaints Co-ordinator
in the Chairman's Private Office and not the MP's Tax Credit Helpline. Back
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