Examination of Witnesses (Questions 20-39)|
12 OCTOBER 2005
Q20 Mr Todd: I have understood it.
Thank you. May I turn to the information technology systems used
in the delivery of this service. If you look back on thisand
there is lots of opportunity for hindsight on this projectdo
you think using a system which, the Ombudsman pointed out, relied
almost entirely on the viability of the information systems which
you had purchased was prudent?
Mr Varney: I am not sure I would
agree that we are totally reliant on IT . . . If we are going
to deliver a system of this size and this scale, it would be a
combination of both IT and telephony.
Q21 Mr Todd: But most of us have
experienced, when we talk to your advisors who help Members of
Parliament with figures, that they are wholly reliant on working
their way through an IT system which quite frequently, even now,
is not very responsive to their requests for informationor,
indeed, particularly stable, from what I can tell.
Mr Varney: May I try to parcel
this upbecause you have asked a question which has quite
a lot of angles to it and I think it would be helpful if I tried
to explain. First of all, may I say that we are currently in dispute
with EDS who built the system. I really cannot say anything more
than that there are discussions going on at this moment in time
Q22 Mr Todd: I am going to ask you
to say more.
Mr Varney: Maybe I can persuade
you that there is not much more that I can say, other than that
discussions are ongoing. If they are not resolved satisfactorily,
the case will go to court. We have been trying to stabiliseand
I think have been successfulthe IT system. It is still
potentially fragile and, therefore, every time we have to do something,
I approach it in the spirit that we do not want to lose any progress
that we have made in stability. Part of the challenge of the people
we have is to be able to access information so we can produce
a case note by pooling all the information together. That is something
that we are trying to do. As you have rightly said, with the benefit
of hindsight, there are lots of lessons to learn out of this,
but you would be faced, I think, if you were trying to build a
system like this, with having to use a computer system of some
sort and a combination of telephony. We are trying to get the
most out of the system we have got.
Q23 Mr Todd: In the design of a system
of this kind, I would have expected competent management to have
provided some fallback should the system not deliver appropriatelysince
it is hardly an uncommon experience to find a system that is not
delivering entirely what you would expect. Looking from the outset,
I have been startled that there did not appear to be any framework
to providing a human-based service when the information system
was clearly inadequate.
Mr Varney: I think on a system
of this scale there cannot be a fallback which is a manual system.
When the system did not work and deliver the functionality that
was required, then we were overwhelmed because we just do not
have enough resourcesand it is not just a question of people;
it is trained and skilled people with the right information in
the right place. But it is very easy to agree with you, given
where I am in the discussions with EDS and the stance I have taken
Q24 Mr Todd: Perhaps we could turn
to that. You have said that you do not wish to tell us any more
than that you are considering legal action against them. What
are the parameters of the dispute you have with EDS?
Mr Varney: I cannot really go
any further than to say we are in discussion with them.
Q25 Mr Todd: This is a system on
which millions of people in this country rely and which has cost
the taxpayer huge sums of money. We just touched on the potential
provision of £0.5 billion of overpayment, partly generated
by difficulties with this information system. I think you have
a duty to be rather more candid than to say we are considering
this with our lawyers.
Mr Varney: I want to be as candid
as I can, but I do not think it helps in the pursuit of the case
against EDS to rehearse the arguments we are having with
Q26 Mr Todd: Does it help in the
pursuit of the case against you and your team? There is another
possible scenario: one of your difficulties in defining your position
in relation to EDSafter all, this has been going on for
quite some timeis that you are not entirely confident that
the framework and the relationship with EDS was well enough defined
on your own side to pursue an appropriate action against them.
It would be helpful if we could be clear that you had sorted out
your own minds.
Mr Varney: I can approach this
with a very clear mind. I was not here.
Q27 Mr Todd: I know you were not
Mr Varney: My only concern in
this, first of all, is to make sure that we do the right thing
for the public interest and it would not assist that process,
in my judgment, at the moment, to go any further than where we
are with EDS.
Q28 Mr Todd: What timeline are you
on with this?
Mr Varney: We will get a solution
when we get a solution. We have been working at this.
Q29 Kerry McCarthy: On the question
of claimant error and fraud, you predicted in December 2003 that
error rates attributable to claimant error and fraud would be
halved. Are you in a position to update us on that? I think you
undertook to do so by July 2005.
Mr Varney: Yes, and in fact we
will not be able to do that until the spring of 2006. I wrote
to the Public Accounts Committee. When I gave evidence in front
of the Public Accounts Committee, they reminded me of what Nick
Montagu (then chairman of the Inland Revenue) had said, and I
said: "If he knew what I know now I think he would have made
a slightly different comment." We have done a very small
sample of the total sample that we have taken to detect this.
That gives an error rate of somewhere between 3% and 4%. But we
do not feel that is a realistic sub-set of the total population
we have been looking at statistically. We have to do a lot more
work and that will not be completed until the spring of 2006.
Q30 Kerry McCarthy: What specific
measures do you think will help reduce claimant error? Obviously
fraud is a different matter. Is it because the process is too
complicated? Is it down to phone calls not being dealt with?
Miss Walker: Part of the work
we are doing in response to the Paymaster-General's statement
on 26 May is to improve our communication with claimants. There
has been a lot of criticism on the literature we send out and
the forms we send out. We have already reviewed the award notice,
for instance: there will be a much improved version of the award
notice that will come out starting next April. We are currently
reviewing the accompanying literature, hoping to replace the thick
booklet that we send to people with a much shorter and clearer
leaflet. We have done usability testing of the new form with real
claimants: watching them filling in the form and learning from
the problems that they have. I think it is fair to say that in
2003-04, because it was the first year of the new system, yes,
it was difficult for people to understand and you would expect
more errors in the very first year than later years if people
are learning. But we are certainly working very hard to improve
the help and support that we give people, in order to reduce errors
that they make.
Q31 Kerry McCarthy: Has there been
any attempt to ascertain the extent to which people might be deterred
from putting in claims now or from reporting change in circumstances
because of the problem there has been with overpayments and lack
of responsiveness under the system?
Mr Varney: There is some anecdotal
evidence of some peoplebecause it tends to get picked up
in individual cases in the mediabut the level of take-up
of new tax credits is much higher than the benefit system that
Q32 Peter Viggers: I know from constituency
experience that the benefit that some people seek is nothing compared
with the personal nightmare and real hardship that is caused by
repayment. I would like to ask questions on two areas: communication
and criteria for assistance in repayment. Child Poverty Action
Group quite harshly said, "Helpline staff appear to be inadequately
briefed on both the law and the progress of particular cases."
I can confirm from my own constituency experience that many people
are distressed by the manner in which they seek information and
are able to do so. What are you going to do to improve communications?
Mr Varney: Let me say, first of
all, that we regret any case which causes upset to the members
of public we are trying to serve. I should say that absolutely
upfront. We are determined to try to improve the service we offer.
Miss Walker: Certainly we are
trying to improve the service that is given by the Helpline. We
are giving them extra training and support in particular areas.
We are certainly exploring at the moment the use of a particular
software tool which will guide the call-centre operators through
a series of questions so that we can make sure that they are giving
accurate and comprehensive advice with support from a computer
system. We are also looking at working with voluntary sector bodies
to look at particular problems that have been experienced, and
to feed that back into the training for call-centre operators.
Q33 Peter Viggers: Do your officials
and those who draft the proposals and the rules recognise that
dealing with an explanatory note of up to 56 pages can be quite
difficult for many people?
Miss Walker: I think I just said
that we are looking to replace that with a much shorter and simpler
Mr Varney: We have been working
with some of the voluntary organisations that are active in this
to try to produce a note which is clearer and more concise. The
IT facilitation will take time. It will come out in April, would
Mr Gray: Yes. There are a number
of aspects of communication we are seeking to improve. You mentioned
the guidance notes and we are also looking at and have already
made some simplifications and improvements in the claim forms
themselves as well as in the guidance notes. Certainly the general
issue you raise of the need for us to simplify and improve all
these materials is well taken. At the same time, however, we do
have to make sure that in the process of simplifying we do not
mislead by missing out important bits of information. But the
direction of travel is very much the one on which I think you
are urging us to go.
Q34 Peter Viggers: Earlier on you
said change of circumstances during the year can result in a requirement
for repayment. I have constituency experience of a number of cases
of people who have been told they are entitled to credit, they
have remonstrated and said they do not believe they are entitled
to it, and the staff have insisted on it, and then there has been
a repayment demand. This leads into a question about your criteria
for deciding that repayment shall take place. I am told that if
the claimant can produce a copy letter, written to you, showing
that they have remonstrated earlier, that is helpful, but of course
you encourage people to use the Helpline. Where is the burden
of proof if the claimant alleges you have made a mistake?
Mr Varney: We record the calls
we receive, so we have some capacity to go back and check. The
test which is in our so-called COP 26 is that it has to be an
error on our part and they could not have reasonably known that
there was an error. We have gone through that. Of the overpayments,
about one-third are people whose circumstances have improved by
£10,000 or more in the year in question, so the picture is
a combination of different groups of people who receive new tax
credits being affected in different ways. We are trying to go
through those casesit is quite resource intensivetrying
to find the facts of the cases. There is a certain number of cases
where the cost of doing that exceeds the amount in dispute and
it would not be consistent to spend money doing that, so we have
tried in some cases to make sure that we are not wasting more
money than we are likely to redeem.
Q35 Peter Viggers: Are you satisfied
that the burden of proof is correctly allocated as to the decision
as to whether the individual should have appreciated they have
been overpaid? This is a subjective judgment, is it?
Mr Varney: Yes. I said before
it is a heavy burden and our staff I think try to make the right
sorts of decisions. I reply to many of your letters. Some of them
then go on to investigation and that has caused us to reflect
on whether we have the right balance between compliance and compassion.
As you can expect, we are dealing with two sets of public: the
public who are receiving the tax credit and the wider public who
want to ensure that the money goes to people who really do deserve
it in the terms that parliament decided.
Q36 Peter Viggers: Do you take hardship
Mr Varney: Yes, we do. We try
to. I stand always subject to receiving a letter from any of you
where we have failed to do that. The intention of our policy is
to moderate the rate of recovery if it causes hardship. We have
the capacity to make extra payments in cases where people are
driven to real hardship.
Q37 Mr McFall: On the point made
to Mr Viggers you said that you do not have the correct information
regarding the family's income, but I would suggest to you that
the constituency cases I have dealt with would suggest an incompetent
system and maybe incompetent management. Perhaps I could detail
for you one case. I have a constituent who has been £10,600
overpaid. She thought it was because of the PAYE tax code changes
in 2002-03; the impression given was that that was due to the
new child tax credit and the married man's allowance getting taken
away. In March 2003 she had her first notification letter which
detailed incorrect information. When she got onto the staff, they
said, "Oh, it's scanning problems with the computer system,"
and she was assured the new information would be put on. In May
2003she had two award notices, incidentally, showing that
incorrect informationshe phoned the Helpline night and
day, but they were engaged, saying "High volume of calls".
She contacted the local Inland Revenue office in Dumbarton and
an official there was very helpful. That official contacted the
national Inland Revenue and came back and said, "You are
entitled with your circumstances to both child tax credit and
working tax credit. I find that very surprising but national office
have told me that is the case." In October 2004 my constituent
got on to the Hotline, an employee phoned her there, told her
she could not appeal, but she said, "I'm still in receipt
of payment and it should have stopped." This is going on
and on. The last advisor she spoke to in August '05 was Sereta,
from Team 31, West Midlandsso she has been taken all over
the country, from Dee, to the West Midlands to the south. She
said to Sereta, "Listen, Sereta, see the award notice I have
just now: it says I have no qualifying children," and Sereta
looked it up on the computer and said, "That's not right.
That's on the computer: you have two qualifying children, so I
can't understand it." That situation has prevailed for 18
months with that constituent. Now £10,600 overpaid. She saved
£3,800 of that in a special account and she is worried stiff
because when her children go to university then she will be having
to pay this all straight away. I suggest to you, Mr Varney, that
this is an incompetent system and incompetent management. I am
going to give you this information, so that you can give me a
personal account of this and take it through the whole system,
so that we as politicians can feel sure that the faults in the
system have been traced and that in any future cases our constituents
are going to be satisfied.
Mr Varney: This is a system which
deals with six million people and I deeply regret what has happened
Q38 Mr McFall: No, but the point,
Mr Varney: Let me finish.
Q39 Mr McFall: I understand, but
do not give me the platitudes
Mr Varney: I am not giving you
the platitudes, I am giving you an answer.