Examination of Witnesses (Questions 180-199)
RT HON
DAWN PRIMAROLO
MP, MR MIKE
HANSON AND
MISS SARAH
WALKER
26 OCTOBER 2005
Q180 Kerry McCarthy: The four weeks
to make a decision while overpayments are being suspended, would
that four weeks apply to making a decision where hardship applied?
Dawn Primarolo: Actually I would
hope it would be made quicker on hardship but I will go back and
double-check that. I would expect most to be determined faster
than the four weeks. One of the major complaints has been the
length of time it takes once something has been disputed. There
may be some which take longer than four weeks because they are
highly complex but I want to make them the exception, hence my
saying to the Department I expect them to aim at that and they
need to explain why they cannot meet it if it does not happen.
Q181 Jim Cousins: I wonder if I could
first clarify something about your statement. On the very point
my colleague, Kerry McCarthy, was just asking about, the interim
procedures, your written statement says that this will be subject
to final testing by HMRC and that if there is any problem or delay
as a result of that testing you will of course inform the Committee.
Dawn Primarolo: Absolutely, Mr
Cousins. Can I say I am being ultra-cautious here—experience
teaches me to do that, particularly on this subject. I am not
aware of any reason why it should not go ahead in the period the
Department tells me it needs to set it up, which is to round about
mid-November. I just put the caution in myself to say if they
come back, because manual procedures will not be as good as automated
ones, with something totally unexpected, I would need to take
a decision about whether I thought the risk was still on the side
of suspending or operating it manually, and of course I will let
the Committee and indeed the House know immediately. I do not
actually expect that but I am being highly cautious.
Q182 Jim Cousins: I am grateful to
you for that and for that clarification. I think we would both
agree that many of the people receiving tax credits work on low
incomes in the service industries, where variations of earnings
from week to week are very common, many people work on contracts
that may be quite short or seasonal, and that for many people
work does not last as long in those service sectors as it does
maybe in the professions or something like that. So change of
circumstance is something that is going to be extremely frequent
and extremely common for these very vulnerable people who are
working the sections of the economy where incomes are low, earnings
vary, jobs are short. You did say to the House in June that in
these circumstances of overpayment trigged by a change of circumstances,
people were told about the hardship provisions and were able to
be told about the procedures available if they disputed the assessment
which had been made. That was in your letter of June to David
Laws. But your reply, on exactly that same matter on 29 July,
to the Parliamentary Ombudsman was much less certain. You simply
said, "HMRC are looking for options for improving the information
they give to claimants about overpayment and will consider the
feasibility of your recommendation in this context." There
is a great deal of evidence that your assurance to the House in
June, no doubt given in complete good faith, was not accurate,
that people were not being told what they should do in circumstances
of hardship and they were not being told how they could challenge
awards and seek adjustments.
Dawn Primarolo: I think you are
referring, correct me if I am wrong, to the Ombudsman's recommendation
6. What you are quoting from is my response to the Ombudsman,
and her criticism was notwithstanding—and it is risky to
paraphrase the Ombudsman but basically in summary—what the
Department were telling her with regard to the investigation,
her consideration was, where there was in-year recovery of excess
tax credits and that was justified, the Revenue should take steps
to pay the additional tax credits automatically. That was recommendation
6. Her recommendation 5 was that the Department should ensure
that although that is supposed to happen that actually Revenue
staff who have contact with tax credit customers are alerted to
the circumstances. In my response to her I am basically saying
"Okay, I am going to go back and do precisely that to make
sure . . ." That is why the training and the changes in the
helpline are proceeding. There are a number of things, with respect,
that are happening here and we are trying to take on board. I
had a view about what was being said to myself as a minister through
various channels which led to my statement of 26 May. That was
followed by the Ombudsman and the Adjudicator's report which made
additional points, quite a number, and had to be swept up then
as part of the consideration, quite rightly. That is what I am
responding to at that point. The information to me is that should
happen but people are telling me it is not. The Ombudsman said
I should look again and that is what I am doing.
Q183 Jim Cousins: Minister, I am
asking a much more simple point. In a reply which has been placed
in the House, which all members have access to, you gave an assurance
on 30 June that when there was a request for the return of an
over-payment—I put it like that, that is not how the letters
are expressed—that the claimant would be told what to do
when the recovery creates hardship and, if they believed that
the over-payment was not right how to challenge it. I am simply
asking you, in an over-payment letter that is going out today
what are people being told? Is that promise being met?
Dawn Primarolo: Can I see the
letter you are referring to, firstly, that would help me. Thank
you.
Q184 Mr Love: You will not be able
to read it!
Dawn Primarolo: Yes. The overpayment
currently and the notification is an automatic process.
Q185 Jim Cousins: Minister, I am
terribly sorry, I am asking you, you have given us an assurance—
Dawn Primarolo: I know and I am
trying to give you an answer.
Q186 Jim Cousins: I am just asking
you, in an over-payment request that goes out today, is that assurance
being carried out?
Dawn Primarolo: In that case I
am going to have to ask you can I check and come back to the Committee
that that specific point you want is being done. You will appreciate,
I am sure, that there are a huge number of issues which people
write to me all the time about, including tax credits, and sometimes
I am not immediately able to recall every single point. If you
have a specific point in a letter and you require me to address
that specifically, I will do that in writing to you and the Committee.
Q187 Jim Cousins: I am grateful to
you. A Member of this House, the Member for Northavon, was able
to claim tax credits as a Member of Parliament. He was able to
do so perfectly properly—he is a professor of social policy,
he was able to work all of this out—by including his pension
contributions as an offset to his income, and his gift aid contributions
to offset against his income, thus triggering an entitlement to
tax credit; that was a Member of Parliament. Now what concerns
me is are the people we represent aware of this? Do they have
a similar opportunity? I went away and looked at all the forms,
you have to ask for a special set of forms and you get to page
30 before somebody says "By the way, do you contribute to
a pension? Do you contribute to gift aid?" Now this Committee
and all sorts of other committees in Parliament have been asking
questions about overpayments. I suspect millions of people are
being underpaid tax credits because they are not taking advantage
of the rule that the Hon Member for Northavon has taken advantage
of, perfectly properly. Surely this is something we must seek
to put right? If we are going to allow people to deduct from their
income their pension contributions and gift aid, and Members of
Parliament are doing it, surely to goodness we have got to flag
this up and make sure that all the poor people we represent are
similarly advantaged?
Dawn Primarolo: Mr Cousins, I
have absolutely no idea whether or not the Member for Northavon—
Q188 Jim Cousins: The issue is not
the Member for Northavon.
Dawn Primarolo: Hang on! Yes,
it is.
Q189 Jim Cousins: The issue is the
people we represent.
Dawn Primarolo: Let me answer
the question.—whether or not he claims tax credits.
Q190 Jim Cousins: That is not the
issue.
Dawn Primarolo: I am not entitled
to that information. I do not know even if the speculation is
correct, and I have no intention of trying to find out, nor have
I asked him. The second point you make is the point I hope I have
started to deal with and this is the important issue of the review
of all the materials that are sent to the taxpayer. I said in
my opening remarks, for instance, when the new award notice is
received they will receive a two-page summary saying "These
are the pertinent things you must check on your form and let us
know if it is not correct". What will happen, also, in that
process, which is not complete yet, is to ensure that taxpayers
are aware of their entitlements as well as their obligations under
the tax credit system, and that is in the process of being dealt
with.
Q191 Jim Cousins: A two-page form
is fine, the existing 12-page form, which everyone claiming a
tax credit will certainly have seen, does not make any reference
to this issue of an offset to income triggered by pension contributions
or gift aid contributions. The existing 12-page form does not
make any reference to it. You have to get to the supplementary
version on page 30 before you get to it. Can you give me an assurance
that in the two-page form this point will be mentioned?
Dawn Primarolo: No, I cannot,
Mr Cousins, because Parliament cannot have it both ways. It cannot
say to a minister shorten the form and then complain the form
has not got everything on it or shorten the guidance to the pertinent
points. What I am saying to you is that information is being reviewed
that it should be in more useable sections in terms of what a
taxpayer can have. It is exactly the same issues that are faced
in the tax system as well in terms of the information an individual
would expect to get, and there is a balance here. The old form
that that form replaces, the working families tax credit form,
was considerably larger and family credit before that was considerably
larger. All the time Parliament, the voluntary community sector,
everybody is saying the form has got to be shorter. The Department
is doing its best to get clear forms, clear advice and is taking
that forward now. If every Member wants everything on the form
then we are back to the very issue that Parliament wants me to
move away from. What I have to do is make sure that people have
relevant and timely information and I require the Department to
do that, and that is what I am doing at the present time.
Q192 Susan Kramer: The questions
that come to me are those involving the IT system. The tax credit
system, as you have told us in the past, essentially is one that
presumes the ability of a very sophisticated and automated IT
system to deliver the flexibility that you seek. The history of
the Department and the history of government putting in these
complex systems is one that shows they have difficult and prolonged
teething periods, as did this system. Can you try and explain
to me why when this system was introduced there were no manual
or human-based fallback systems to anticipate all of the teething
problems which caused problems for our constituents and also would
have enabled you to deliver on a commitment to suspend recoveries
during dispute at a much earlier date? It is beyond most of us
to understand why that was not in place.
Dawn Primarolo: I suppose, Ms
Kramer, I would refer you back to the debates in Parliament and
what Parliament concentrated on when the tax credit legislation
was going through and what they considered to be the most important
thing. It is true that in a Department like HMRC, that is dealing
with just short of 300 million taxpayer contacts a year inevitably
we have to rely in all our systems on a degree of IT, and that
was done in this case. I cannot comprehend a system that was entirely
manual and could have been a back-up to take-up of what may well
be when the figures are finally published some 80% or more. The
question, going back from that, was before we moved from WFTC,
the system went live, did we expect the system to perform? Well,
yes, of course we did, the back-up system was to stay with WFTC.
There is quite a heavy manual intervention as well in this process
in terms of contact centres and the staff there, in terms of the
processing of the material on to the computer but in such a vast
system it is impossible to comprehend in this day and age, particularly
when taxpayers more and more want to communicate with all arms
of government and every aspect of life, or at least some of them,
through email and other systems; that is why it is as it is. The
question of the flexibility in the system, and its ability to
allow changes is of course an important question, and I would
quite like to discuss that and it is an issue, quite properly,
that this Committee raised. I know that you are aware there are
outstanding negotiations which this Committee is keen to see us
proceed with but there is the possibility of court action as to
delivery of the system when it had its problems on introduction.
Therefore, I am unable to speculate at this stage or add any further
comments about what I do or do not think about the current system.
What I am trying to do is with the current system deliver the
policy objectives of tax credits and take account of the recommendations
that have been made to me by Parliament and elsewhere.
Q193 Susan Kramer: We understand,
because your Department has informed us, that this would be too
sensitive a time to raise the very specific questions of EDS—I
can say that much—though we hope very much we will get follow-on
from that. Surely it would have been the responsibility of your
Department to put in place a manual back-up, and I say this because
in the private industry world, particularly when it has not been
possible to pilot a system in a small area, you would have expected
very significant increases in staffing on a temporary basis, you
would have expected a fallback for a manual system to deal with
the difficulties of introducing something new, yet it seems to
me to be the Revenue's approach that you seize this thing as if
it is going to work practically from day one and think you can
pocket from an accounting perspective all the savings instead
of seeing it as an increased cost. I say that in a sense for going
forward because one of the questions is what have you learned
now about the design? I note Cap Gemini to be your provider on
this system, and they have just delivered very late on Eric, I
understand—another system that you have within the Department—causing
some chaos in the tax world at the moment. Can you talk to us
about what you might have learnt from this and how you might be
sharing those lessons with the rest of Government because we cannot
deal with every new IT system delivering two or three years of
anxiety and chaos?
Dawn Primarolo: There are quite
a lot of questions there. Firstly, can I say it is absolutely
not possible for me to venture into a discussion at the moment
on the questions of lessons learnt and what happens next, until—and
that is the clear advice to me—the dispute with regard to
compensation with EDS is settled. You said the Committee understands
that, Ms Kramer, and you want to return to that, and of course
that is entirely proper. Your characterisation of what happened
when tax credits were introduced, I entirely reject. It makes
it sound as if the Department in a cavalier fashion entered into
a process without proper preparation; it did not. I said to you
in terms of running an entirely manual system that is inconceivable
on that scale. What did happen—as in the comments to the
Chairman at the beginning of this hearing—is when the system
did not work there did have to be, and was, massive manual intervention
by the Department, for instance in paying off-line directly to
claimants giros and manual payments. There was an intervention
at that stage, and that is not without its problems either in
terms of supporting the system. It is absolutely not the case
to say that the Department just has this computer and nothing
else, and the figures clearly demonstrate that in terms of staff
who had to be transferred to do this and what the Department was
doing through its inquiry centres, through its helplines and in
terms of sending information out.
Q194 Mr Todd: On the dispute with
EDS, I can quite understand why you do not want to say anything
more but I wonder whether you would agree that resolving this
issue might best be done by engaging leadership within the Department
who were not directly concerned with the dispute itself and that
it might be prudent to avoid someone who has been directly engaged
in the system design and commission in the process of resolving
the dispute? You may want to note that.
Dawn Primarolo: I have noted that.
I am not commenting on that except to remind the Committee that
David Varney leads the discussions and negotiations here, of course
there is Paul Gray involved and others. Can I say I heard what
you said.
Q195 Mr Todd: The other remark is
Mr Varney did not give an impression to this Committee of complete
ownership of the resolution of this matter. He gave an impression
of a slightly "not on my watch" approach which in straight
factual terms is correct, it was not on his watch, but nevertheless
he is in charge of this organisation now.
Dawn Primarolo: He is the accounting
officer, it is on his watch.
Q196 Mr Todd: On the issue of learning,
without going into details of what went wrong with EDS, would
you accept that there is quite a lot of learning to be done about
the kinds of systems which are appropriate when delivering bulk
payments to people who are on lowish incomes, because that is
the target group this is aimed at, and with sometimes fragmented
lifestyles. Perhaps there is some work to be done in defining
the experience in designing this system. I am not meaning purely
in the information systems involved, I am meaning also the human
processes involved in interacting with those who are claiming
these payments.
Dawn Primarolo: Yes and yes. Yes,
I think there surely has to be always lessons to be learnt regardless
of what system is being talked about and, indeed, for Mr Steve
Lamey who is on the board now of HMRC in a wider context, that
is very much part of the work he is doing. On your second point,
which is to do with taxpayers who would clearly benefit for one
reason or another with face-to-face contact and more intensive
support, let me put it that way, from the Department or from certainly
a representative that provided that, the discussions that I asked
the Department to open with the Citizens Advice Bureau are to
address exactly that point. If we look at the total population
of tax credits which nine out of ten families get, it cannot be
true—and we know that from all our statistics—that
those families are all in need of intensive support. We do not
need the service for everybody but clearly, for a variety of reasons,
there are taxpayers—Mr Cousins touched on it himself as
well—who do require that. The challenge and the requirement
that I set to the Department in discussing this with the Citizens
Advice Bureau, and other representative bodies, is are there forms
of joint working that the Department can do with those organisations
whereby those organisations would provide, because it is a wider
benefit advice as well, that face-to-face support and then engage
with the Department. It could be co-location in an inquiry centre
or it could be tax credit staff or whatever located within an
advice bureau. I give only those as two examples to address the
issue. If you were the taxpayer and you needed that support how
do we put that in place? It is a segmentation of what is required.
Q197 Mr Todd: A risk analysis to
some extent—
Dawn Primarolo: Indeed, yes.
Q198 Mr Todd: —of those who,
based on the experience of previous contacts, may need a little
bit more assistance, whether it is in terms of Jim's query about
making sure they claim the things they are entitled to but also
others who may not be aware of some of the obligations they may
be under to inform people of changes in circumstances.
Dawn Primarolo: Yes. Before you
move off that, there is another point behind this, Mr Todd, which
I want to get on the record. I think there is also an issue of
how the Department deals with complaints when they first come
in and deals with them speedily or processes information before
it gets to the point where it becomes—That has got to be
an issue and is an issue which the Department is addressing now.
The question of overpayments in many examples which are being
given is where individuals repeatedly tried to tell the Department.
That is a failure further back.
Q199 Mr Todd: I did one of those
this afternoon, someone had apparently rung 17 times to tell people
of a change in circumstances.
Dawn Primarolo: Oh dear!
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