Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 180-199)


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!

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2005
Prepared 15 December 2005