Examination of Witnesses (Questions 220
- 239)
WEDNESDAY 25 JANUARY 2006
RT HON
FRANK FIELD
MP
Q220 Susan Kramer: Obviously we are
looking at the administration of tax credits rather than underlying
policy, but I have heard you speak out very warmly in support
of the Parliamentary and Health Service Ombudsman and the recommendations
that she made last year. From an administrative perspective, one
of the recommendations that she made was the write-off of all
excess overpayments caused by official error in 2003-04 and 2004-05.
Do you see that as an essential to clearing the ground to be able
to get to grips with the current system? In other words, if we
continue to try to unravel the past are we never going to be able
to move forward on this one?
Mr Field: As I understand it,
that is the Government's position to do so. The difficulty is
convincing them that the error is on their side rather than on
the claimant's side.
Q221 Susan Kramer: So would you be
in support of a much more blanket mechanism for dealing with the
past rather than trying to analyse on a claim-by-claim basis whether
or not it was caused by official error?
Mr Field: Chairman, I have brought,
which may I leave with you, a letter I received yesterday from
the last letter that I wrote in July about a constituent. Her
name and address has been taken out. It shows the difficulties
of this cumulative impact of arrears in that it is dealing with
2004-05, although reading it you would think there were two constituents
in 2004-05, they have got two different paragraphs on that, and
then it relates to the previous tax credit year and how they are
trying to sort that one out. One of the major impressions that
I hope I leave with you is with the best will in the world we
got into a huge mess on the Child Support Agency because we, as
politicians, wanted to keep putting our sticky fingers in it and
changing it and there is a huge danger that we may do the same
with tax credits. I think the Parliamentary Commissioner has posed,
I am not sure whether it was before your Committee or somewhere
else, that there are inherent faults in the system which, if we
are going to have a tax credit system, our constituents are going
to have to live with. There is no end of the rainbow here of somebody
coming before you and saying, "I have got the wonder reform
scheme" because there is not a reform scheme that is going
to deal with the problems which are inherent in the system.
Q222 Susan Kramer: Under her recommendation
11 the Ombudsman recommended, in effect, a right of appeal to
an independent tribunal where these disputes moved onwards based
on a statutory test for the recovery of excess. Do you think that
would have an administrative benefit to the system if there was
an awareness that in the end this could go to an independent body
rather than spending its entire life contained within the system?
Mr Field: It might give us less
work to do, Chairman, if there was an appeal. Again, I sound a
note of warning about that. In a sense it appeals to us to have
independent appeal tribunals but I see a real danger of trying
to develop the tax credit system into a social work agency. The
aim of the tax credit system is to keep the process as simple
as possible. The more stages where we think that somehow staff
have got to answer the inquiries, then having a review and then
having an appeal, it sounds neat on paper but we are trying to
keep a major reform on the road and I think there is a real danger
of derailing that major reform by putting even more weight on
an administrative system which was not designed to take that weight.
Q223 Susan Kramer: HMRC, as you were
saying a moment ago, is attempting to improve the clarity of award
notices and from April claimants will receive "a two-page
summary that explains the most important aspects of their award
and tells them what information on their award needs to be checked".
Is that going to be sufficient, in your view, considering the
constituents you have talked to, provided there is a detailed
calculation on request so they can go back and get that?
Mr Field: I think the detailed
calculation should be provided for everybody. What we do not know
is whether the IT is such that it could deliver that. I have brought
this form, not that I am sure any of you need it. When we look
at what our constituents go through, that is the claim form, and
we know lots of them have difficulty in compiling information
like that, and then they get a document like this telling them
how to complete it. This is mega stuff. Currently they then get
this claim form saying how it is set out but it does not do that
at all, it tells my constituent about all her previous overpayments
and how they are going to claw it back. They are very precise
on that. They do not say the specific information they have taken
into account. For example, if they had computed the tax credit
because she had got children with disabilities, if that was down
there on the side she would immediately know the award was wrong.
Then when the award comes through there is another one of these
huge documents telling people how it is worked out. I think it
is quite difficult for us as MPs to go through all of this, let
alone our constituents. Again, I come back to the worry that we
come up with such complicated reforms that the process gets into
even more difficulties. If the IT could provide the equivalent
of a wage slip setting out the main components, that would help
enormously in that immediately our constituents would know something
was wrong even if they did not quite know how the calculation
was wrong. It may be that the IT cannot do that. It would be very
interesting to know whether it could.
Chairman: We will ask.
Q224 Susan Kramer: You mentioned
a moment ago the problem of the number of award notices that people
get and one is different from the other and whatever else. Are
you seeing any improvement in that? Is that getting better or
are we still where we were?
Mr Field: It is getting better
in that fewer people are approaching me as their Member of Parliament.
The issues they raise are the same ones they have raised in the
past. What we do not know is to what extent will the big changes
before Christmas about the earnings changes make a real difference
to the ones coming to us. My feeling of those that have come is
the tax credit has been computed incorrectly because, as you know,
this system was designed to minimise the number of human beings
involved so the forms that our constituents fill in are read by
computers and you have only got to put lines in the wrong place.
For example, the person who for the third year had difficulties
claiming she does not have a child with disabilities put a line
through that area meaning it is not relevant and the computer
read it differently from what she meant. The system is based on
minimising the input of human beings to this and the real difficulties
are that we start unstitching it all because of the difficulties
our constituents are in. At the end of the day, this is a benefit
which has given huge amounts of monies generally speaking to people
on lower income and I see no way of improving it radically without
that money being stopped. If I had to choose, I would choose that
the money continues rather than being the person who advocates
my constituents lose out. I would be irresponsible, knowing what
I do and try and know about the running of the system, if I say
they should have the money but keep proposing reforms that the
system cannot deliver.
Q225 Susan Kramer: Can I ask you
one last question. You said just now that you were getting fewer
constituents coming to you. Is this because you think it is now
working for more people? Is it possible that some people have
been so discouraged they are not making the claim they should
make, or are people getting notices requiring repayment and simply
giving up and paying it because the system is so overwhelming?
We have always been more worried about the people who did not
contact us than the people who did.
Mr Field: I have no idea of the
numbers who have decided not to claim because of their treatment
in previous years. I will let you know after Friday, saying that
the numbers with tax credits queries has fallen, whether the trend
has reversed at my surgery on Friday evening.
Q226 Mr Mudie: You have mentioned
a wage-type slip if it could be produced. In your evidence you
suggest TC647 is produced but is not sent unless it is requested.
Surely it is not the computer, it is the matter of a decision
to issue that, is it not?
Mr Field: You are absolutely right,
George. It is still quite a complicated form, I just wonder whether
it might be simplified even further.
Q227 Mr Mudie: But it would give
the information you require?
Mr Field: Yes, but there is nothing
at the moment that automatically triggers it. You have to know
about it, or your Member of Parliament has to know about it, to
actually request it.
Q228 Lorely Burt: I would like to
continue on the theme of customer service, if I may. Talking about
the reduction in the number of constituents who are coming to
you, we took evidence from the CAB and others from Northern Ireland
last week and they were saying people had heard anecdotal evidence
of the difficulty of going through this and whole swathes of people
were being put off from applying for tax credits altogether, which
is extremely worrying. You said that the tax credit system should
not be a social work agency, however some of the other people
who have given evidence to us have suggested that it would be
better if there were more face-to-face meetings between the people
who are processing the awards and making the decisions and the
applicants. I just wondered if you have got any thoughts on that,
particularly in view of the fact that there are six million households
that it affects now. Would you see that as a possible way forward?
Mr Field: The Government is committed
to reducing the numbers working in the public sector. If we are
going to say that there should be an increase in face-to-face
contact I think we should suggest to the Government where they
might save the staff elsewhere so they could be deployed in this.
I am also wary of the fact that I do not believe even if we had
a whole army of people answering these queries we would overcome
the difficulties which I think are inherent in the scheme because,
on the one side, while we call it a tax credit scheme it is actually
a benefit. Taxation in this country is based on individual assessment,
this is based on family income and family needs. I think we have
a very hard choice to make at the end of the day. Are we so disconsolate
at the administrative problems that we think the system should
be scrapped? You will gather from my evidence I do not think that,
but I also think the area for reform is quite limited. When you
go through the significant numbers of introductions of tax credits
and their abolitions since 1999 I think a period of stability
is required, first of all to see how well the two big tranches
of reform last year work and, secondly, to try and press the Revenue
for information so that we can better understand what are the
causes of the disputes our constituents have with them, and we
are denied that information currently.
Q229 Lorely Burt: You say that Tax
Credit Office staff generally are not "competent enough to
support claimants through what is an exceedingly complicated process".
How do you think that lack of competence can be addressed?
Mr Field: I think it is two-fold.
One is the pressure they are under to answer queries. Secondly,
there are these specialist teams and when you are under pressure,
as I said earlier, there is always the tendency to say, "That
had better go to the specialist team". By having specialist
teams, in a sense it de-skills the people who are on the phone
because not all of us are bushy-tailed and literally learn everything
about our jobs. If you think there is another group of people
who might deal with an inquiry, the tendency must be—it
is human nature—for some people to say, "I will pass
it over to the clever boys and girls who are in the specialist
team". I do think if we are having a phone service we want
to try and get a phone service that can answer queries and not
refer them to somebody else.
Lorely Burt: Your comment earlier about
the 21 referrals back as a way of trying to offload the problem
because people are working under pressure, I can see that.
Q230 Mr Newmark: I am going to focus
on the administrative problems. I see a double-whammy here with
information. Does HMRC have the management information it needs
to enable it to administer the tax credit system effectively?
Compounding that problem of lack of information, are the IT systems
themselves, the management information systems themselves, adequate
to handle what is necessary to deliver to people who actually
need these benefits?
Mr Field: Chairman, I have been
following your proceedings as you would expect me to and these
questions have been asked of previous witnesses. The truthful
answer, although some of your witnesses did answer, is we have
not got the information to answer those questions.
Q231 Mr Newmark: On top of that,
looking at the systems themselves, do you think the IT systems
need a fundamental review?
Mr Field: Again, I am not in a
position to answer that question. If you look at the commitment
the Paymaster General gave about trying to prevent recovery until
a dispute has been decided, since she gave evidence to you at
the beginning you then had the Revenue along and the Revenue introduced
a totally new stage that I had never heard of before. I understood
from what the Paymaster General said that staff would manually
try and trip the system to prevent the overpayments being clawed
back immediately. When the Revenue came before you they were developing
an intermediate stage which would be partly automatic and partly
manual. As I understand it, there is then the promise to try and
deliver to all our constituents an automatic way of preventing
the computer clawing back, although the date for the introduction
of that is disappearing into the distance. If one just looks at
that one change, which I think is a very important one, that is
one which is worth concentrating on and we know about rather than
trying to double-guess information the Treasury either do not
have or will not give us.
Q232 Mr Newmark: You suggested that
there should be no recovery—I think you alluded to this
earlier—"until the claimant and his or her adviser
has had the chance to appeal against the overpayment and the Revenue
has assessed recovery under its own guidelines". Would delaying
recovery for, say, 30 days and providing better information about
the reasons for overpayment and how recovery can be challenged
be an adequate solution, in your view?
Mr Field: The first of the six
promises the House was given by the Paymaster General was to deliver
that. I do think it is reasonable to expect that people in a reasonable
but clearly defined time limit register any dispute and it does
not drag on for months and months and months. As you say, I think
a month is a reasonable time for people both to realise there
is a problem and seek advice.
Q233 Mr Newmark: You recommended
that tax credit staff "should be empowered to check a current
year's application form with a previous year's form where there
is a major difference in the size of the tax credit being awarded".
How satisfactory are current procedures to reduce rates of fraud
and error? On what evidence is this based?
Mr Field: There are two issues
here. I was not suggesting that because people's claims are different
that is in any way suggesting fraud. Many of our constituents'
circumstances change so dramatically we would expect their tax
credits to change. It is just that if there is a significant change
and we are trying to eliminate errors, one human way of doing
that would be for the staff to check. There is a separate question
about fraud. I have to say that when I was in what is now the
DWP I failed. I wanted us to undertake a special inquiry into
the main means of fraud of Family Credit so that the Chancellor
would have that information when he was designing this benefit,
so we did the maximum amount that we could to realise what the
clever Dicks were up to and make it difficult for them to do that
on this benefit. One of the ways has been to try and limit identity
fraud. The DWP has given a commitment that it is trying to clean
the National Insurance number system. One of the most alarming
pieces of evidence that I have had from constituents, but also
given before your Committee, is officials are issuing temporary
National Insurance numbers and they cannot tell us how many temporary
ones they have issued. That means there are all these spare numbers
now coming back into the system which can be used in future for
fraudulent applications. One of the anti-fraud mechanisms which
all departments ought to operate is regularly to check which of
its staff are claiming benefits and whether they are entitled
to them.
Q234 Susan Kramer: Can I stay on
this theme for a second and ask you your opinion about what we
have been terming the reasonable test rather than using the conventional
test that benefits have been using, this "could you have
reasonably known?" We have had mixed responses to that. What
is your view about what would be reasonable in the circumstances?
Mr Field: You are absolutely right
because what my constituents think are reasonable, the staff do
not always think are reasonable. Let us take the case of the mother
who crossed through the section about whether you have disabled
children. That is how most of us fill in forms, we cross through
the bits that we do not think are relevant to us. That was then
read as she had children with disabilities. I know I am not supposed
to put the question back, but in those circumstances is it reasonable,
particularly as she was questioning the size of her tax credit
as soon as it came, that she should have reasonable on her side
or, because she did not read those instructions at the top about
ticking rather than crossing through, is it unreasonable for her
to expect that the taxpayer should write off that error? She was
very careful because she put the money in a bank account, she
was terrified of spending it, as lots of our constituents are,
but the aim of this benefit is to get money to people so they
can spend it.
Q235 Mr Love: I understand that but
the contrary view, and let me put it to you, is there are such
large numbers of people involved in this system that if we were
to take the time and effort to look at everyone individually that
would throw out the whole system effectively, we could not use
that system, we would need to change to something more akin to
the orthodox benefit system. How do we find a modus operandi
that is fair to the client but recognises the limitations of the
system we are operating?
Mr Field: It comes back to the
point I made earlier. There is always a danger for us as politicians
to think we can get to the end of the rainbow and I think the
hard question we have to face and then come to a conclusion on
is I do not think it is possible to iron some of these difficulties
out by the very nature of our constituents' circumstances and
the wish to have a computer system which minimises human involvement
in delivering a tax credit or a benefit. There is a trade-off
here. You had evidence last [week I] think where the Institute
of Fiscal Studies said that they thought the Government were now
at the limit of the reforms that they could make to the structure
of the benefit without dire consequences. The Paymaster General
has put most of the effort on the size of people's wage packets.
Because we do not have the data on why people overall, as opposed
to our individual constituents, have difficulties in this, we
cannot say whether she has behaved as rationally as we might.
We must assume that she was given the data where she thought that
this is the one single move that would make the biggest change
to messing our constituents about by their wages moving, as we
know for many people on low wages their wages do change from week
to week and from month to month. As a politician, I think we have
to face this very, very hard choice in that we think the redistribution
of money from this system is so important that we are going to
have to defend an IT system which cannot deliver the individual
service that we would like, but on balance we think this is so
much better for our constituents generally, though we sympathise
with those poor constituents who get caught up in the tangle and
we do our best to disengage them.
Q236 Mr Love: Taking that as a solution,
and I understand why you would recommend that and would have some
sympathy for that position, is there a role for a manual work-based
portion of those cases that would be defined by criteria as being
so complex that they could not be dealt with simply through the
computer system but would have to be dealt with in a more orthodox
way in the benefit system and if we kept that to a relatively
small number of people it would be worked within the overall IT
system? Could that work?
Mr Field: I do not think it can,
nor do I think it would be acceptable to the Chancellor. As some
of the Members may know, Chairman, I did not think we should go
down this route but we have gone down this route and it has delivered
substantial monies to many of our poorer constituents. The difficulties
are with how this scheme is administered given that the circumstances
of our constituents change often. I cannot see how we can devise
a more perfect IT system to tailor make to individual constituent's
needs. I think there is this terribly hard trade-off that the
House of Commons has to make about this system.
Q237 Chairman: You could presumably
devise an improved IT system that distinguishes between a tick
and crossing through. That cannot be too hard.
Mr Field: The system we have now
does not. If you can make a recommendation which you think is
workable, I am sure the Chancellor would be very pleased to look
at it. It is because I do not believe the main structure is reformable
that the four reforms I put forward in my submission are modest
ones. One of them is if there is a really big change from one
year to another, not because I think there is fraud being suspected,
because I do not, it is just that constituents have their circumstances
change. It may be it is not possible to deliver that within the
restraints the Treasury have on manpower to do that reform.
Q238 Mr Newmark: I want to be clear.
I thought you were suggesting earlier that simplifying the information
that individuals receive is the best solution because part of
the problem is people do not understand what they get, so it goes
back to an IT issue. Why do we not simplify it in the same way
that with taxation my form VH1 sets out very clearly what I receive?
Surely it is not beyond the wit of man, or an IT consultant, to
deliver to an individual the information broken down on a monthly
basis exactly what they receive because then to unravel it would
be much simpler.
Mr Field: I do not think it could
be done on a monthly basis. George [Mudie] made a suggestion earlier
on, which I hope we will see in the recommendations of the report,
in the sense that a form is produced. It may be that when you
look at that as a Committee you might want to suggest changes
but it would be an improvement for our constituents to automatically
get that form. The second stage may be can it be improved. I do
not think anyone wants to try and so knock about the system in
making it even more perfect that you do not deliver what is deliverable,
which is a form which you can only get now if you know it exists
and you request it.
Q239 Ms Keeble: You said that you
think there should not be major reforms of the system, but I wonder
if you could say whether it would be worth looking at two things
in particular that have been suggested repeatedly. One is that
we should move back to a form of more fixed awards so that you
do not get overpayments. The second one is whether the children's
element should be dealt with separately because that is a huge
amount of money and it can lead to very big overpayments. I wonder
if you could comment on those two particular possible reforms.
Mr Field: Until the Revenue gives
us the data on the causes of under and overpayment, I do not think
anybody can sensibly say whether it would be better to have a
fixed system or to continue with the current system. It might
be if we had an analysis of all the difficulties rather than just
the ones we know from our constituents that you would have to
make a trade-off and say it would be better to go back to have
a fixed system even though a fixed system itself would have disadvantages.
We would have constituents coming to us saying, "It is unfair,
my circumstances have changed" and we would have to say,
"Sorry, that is the system. That is what we have now changed
to". I do not know whether on balance that would give more
justice to more people than the current system.
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