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House of Commons

Thursday 1 March 2007

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Tax Credits

Mr. Adam Holloway (Gravesham) (Con): What proportion of appeals against overpayment of tax credits have been refused since April 2006; and if he will make a statement. [124161]

The Paymaster General (Dawn Primarolo): Over the period April 2006 to the end of January 2007, there have been around 303,000 disputed overpayments. Over the same period, Her Majesty’s Revenue and Customs has written off 8,600.

Mr. Holloway: I thank the Minister for that reply, but the National Audit Office report states that, during 2005:

That is causing huge distress and unmanageable levels of debt to dozens of already disadvantaged families in my constituency. It is obviously a mess. What will the Government do about it?

Dawn Primarolo: As the hon. Gentleman will know, in his constituency, some 7,700 families are benefiting from tax credits, including 12,500 children. He himself has written to me in the past six months on six cases to do with overpayments. I agree that those matters need to be settled, but I ask him to keep the matter in proportion and to recognise the fact that hundreds of thousands of families across his region, and millions across the country, are benefiting. The latest figures on take-up show that the very poorest—those on £10,000 or less a year—now have a take-up rate of 97 per cent.

Keith Vaz (Leicester, East) (Lab): Of course thousands of my constituents have benefited from the scheme and I pay tribute to the work that my right hon. Friend has done on the matter, but the fact remains that, after a judgment has been made, many of my constituents are extremely anxious about having to repay immediately. What guidelines exist from her Department that will allow those in difficulties time to
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pay? Does she accept that there is a fundamental difference between a mistake in law and a mistake in fact?

Dawn Primarolo: I can confirm to my right hon. Friend that in his constituency, in the small number of cases—compared with the number of people who are benefiting—where people have to repay as a result of an overpayment, the Department offers time to pay and a graduated system of repayment, ranging from 10 per cent., 25 per cent. or 100 per cent of the sum required. In extreme circumstances of hardship, it will write off the overpayment. I am happy to send him details of that.

Mr. Roger Gale (North Thanet) (Con): Revenue and Customs bases its assessments on code of practice 26. Members who refer cases to the adjudicator find the adjudicator saying that the Revenue and Customs was right because it has adhered to code of practice 26. When they then refer the adjudicator’s findings to the ombudsman, the ombudsman says that the adjudicator was right because she adhered to, as Revenue and Customs adhered to, code of practice 26. That code is set down by the Treasury. It is the Treasury’s own guidelines. Fundamentally, it says, “We may have made a mistake, but you should have known we made a mistake so you are wrong.” When will we get some justice?

Dawn Primarolo: As the hon. Gentleman knows, COP 26 uses the reasonableness test—exactly the same test that has been applied within the tax system for a considerable time. It requires that the claimants ensure that the information that they have given is correct. When it is sent back to them on their award notice, they are expected to check that information and to confirm that it is correct. Where the error is made by the Department and it is clearly demonstrated that that is the case, the reasonableness test requires the overpayment to be written off.

David Taylor (North-West Leicestershire) (Lab/Co-op): Here we are on St. David's day, the final month of the first financial year in which major changes were made, particularly to income variations, with increases of 1,000 per cent.—the disregard is now £25,000. Can the Paymaster General assure the House that, as far as the figures that are available show at this stage, the level of overpayments will fall by at least a third, as was indicated when the changes were introduced quite some time ago?

Dawn Primarolo: I can confirm to my hon. Friend that the introduction of the changes that are now operational this year will have an impact on overpayments, as will the shortening of the period for renewal of tax credits, which was completed last year; it will be shortened again this year. I am sure that he would want to welcome the fact that, because of the tax credits, a family with two children do not start paying tax until they are earning £12,800 a year, or £420 a week. That has made an enormous contribution to reducing poverty, helping people into work and reducing the tax burden on the poorest families.

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Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The Paymaster General was asked what proportion of appeals against the overpayment of tax credits had been refused and she has not managed to answer that question yet. It would be helpful to the House if she did so, so we could see how well the system is working. She talks about the numbers being less and says that most people are benefiting, but individuals who are suffering a stressful experience deserve a better service. The Government must understand the system and not make mistakes, instead of individuals policing the Government to ensure that they get the system right.

Dawn Primarolo: The question of overpayments is linked to a number of factors—the increase in income in the year, an over-estimation of income by the claimant and provisional payments at the beginning of the payment year. Those are being addressed. I thought that it was helpful of me to tell the House that 303,000 overpayments were disputed, 8,600 of which were written off.

Mr. Mark Francois (Rayleigh) (Con): The House should note that, yet again, the Chancellor declines to defend at the Dispatch Box his over-complicated tax credit system. If everything is going so well with tax credits, will the Paymaster General tell me why almost 100 Labour Back Benchers signed an early-day motion protesting at the current method of adjudicating overpayments? Is not this over-complicated clunking mess crying out for wholesale reform?

Dawn Primarolo: I look forward to the hon. Gentleman explaining to the 6,300 families in his constituency, including 10,700 children, why he wants to take tax credits away from them. I also look forward to hearing the hon. Gentleman explain how he will ensure that children are lifted out of poverty and people helped into work by making work pay, and how the tax burden on the lowest income will be reduced by tax credits. The hon. Gentleman wants to dodge those questions and instead try to complain about issues that are being addressed.

G7 Finance Ministers

2. Ann McKechin (Glasgow, North) (Lab): If he will make a statement on the priorities identified by his Department for the forthcoming G7 meeting of Finance Ministers. [124162]

7. Meg Hillier (Hackney, South and Shoreditch) (Lab/Co-op): If he will make a statement on the discussions he had with G7 Finance Ministers on his education for all initiative for Africa. [124167]

The Chancellor of the Exchequer (Mr. Gordon Brown): Our international development priorities for the G7 are to support universal education for all children, including holding an international summit on the subject on 2 May, and to extend our new vaccination facility to malaria to prevent 1 million unnecessary deaths each year. Our domestic priorities as G7 members are to ensure low inflation and I can tell the House that we have today accepted the public sector pay review body reports to be implemented in
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two stages, and the armed forces in full, from 1 April. The overall awards come within the inflation target, at 1.9 per cent., demonstrating our total determination to maintain discipline and stability and to continue with an 11th year of sustained economic growth.

Ann McKechin: I know that my right hon. Friend will try to ensure that G7 Finance Ministers live up to the promises they made in 2005 at Gleneagles on the issue of funding international development. Does he agree that the G8 leaders should be looking at a variety of new social protection programmes that are being used in the least-developed countries to provide child benefit and pensions, which in many cases are the key to the world’s poorest people obtaining proper food and getting access to education and to proper health care?

Mr. Brown: I am grateful to my hon. Friend, who has taken a major lead in international development in Scotland and elsewhere. There has never been a year when international development payments by member Governments committed to overseas development have been higher but we must maintain that over the next few years. I agree that we have to deal with issues of child labour and child protection and that we have to build capacity in health care systems. Over the next two months, our two priorities at the G8 will be, first, to move forward with our plan for school education so that 80 million children who do not go to school get the chance to do so and, secondly, to build on what we have achieved by creating vaccination facilities to prevent, first, pneumoconiosis, and then tuberculosis, diphtheria and, in future, malaria. We are prepared to make substantial investments as a Government—with, I believe, the support of the whole House—to ensure that we can eradicate some of the worst diseases in the world.

Meg Hillier: My right hon. Friend mentioned the 80 million children who are currently not receiving primary education. I am sure that he is aware that around half of those are in war-torn states. If we do not get those children into education, we have no hope of reaching the millennium development goal. Will he support the work of Save the Children on this and will he try to make sure that this is on the agenda at the education for all donor conference on 2 May?

Mr. Brown: I assure my hon. Friend that that will be the case. There are about 40 million children in conflict zones or zones where failed states are unable to deliver the capacity to create education, far less train teachers, build schools and provide educational facilities for the future. We are discussing the idea that, behind frontiers, an international organisation similar to the Red Cross and Médecins sans Frontières could offer education, with the protection of international law, to children in conflict zones. That new idea must be properly developed, but I believe that there will be international support for it, and I hope that there will be all-party support in this country. If we were able to ensure that children in failed states and in areas of conflict received education, we could meet the international development target that every child has primary education by 2015.

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Sir Peter Tapsell (Louth and Horncastle) (Con): At the Chancellor’s meeting with the G7 Finance Ministers, will he advise that the International Monetary Fund, which is said to be close to insolvency, should, as recommended in the Andrew Crockett report dealing with the subject, sell part of its gold—its ultimate core of value—so that it can continue to pay its staff wages? If not, what will he recommend?

Mr. Brown: I am grateful for that question because it allows me to say that the International Monetary Fund is not going bankrupt, and that its role is changing from conflict resolution to the prevention of crises. I believe that, given that new role to perform, the IMF will need less money to do its job. Its emphasis will be on publicising, transparency, surveillance and making sure that the world knows the state of individual economies and of individual continents. In future, it will be engaged in fewer of the large lending operations in which it used to be involved. However, as chairman of the IMF committee, I can assure the hon. Gentleman that, far from being bankrupt, the IMF is extending its role into new areas.

Mr. Mark Field (Cities of London and Westminster) (Con): Do not worry, Mr. Speaker, I will not be suggesting that we go back on to the gold standard any time soon. [Interruption.] It is only a matter of time, of course.

No one would deny that the Chancellor has a strong commitment to African matters. However, will he ensure that, at their meeting, the G7 Finance Ministers hold that commitment close to their hearts so that we can try to ensure that we have free and open trade at the earliest possible opportunity, particularly in relation to agricultural produce, which offers a way out of poverty for many African nations?

Mr. Brown: There is absolutely no doubt about what we could achieve this year with an international trade deal. It would make it possible for large numbers of people in Africa to trade with the rest of the world, and it would enable them to escape from poverty. That is why we are working with other countries, and why we put so much emphasis on achieving an international trade deal over the next few months. As the hon. Gentleman might know, trade talks have started again on a formal basis, after the informal discussions that took place at Davos, and I believe that if Europe and America can make some of the concessions that are necessary, Brazil, India and other countries, which also have concessions to make, will come on board. The hon. Gentleman must also recognise that to make it possible for countries in Africa to trade, they need support to build up capacity to trade; they need support in infrastructure, transport and telecommunications. That is why, as part of a trade deal, we are prepared to lead the way with other countries with an aid-for-trade package that would enable African countries in particular to build up their resources for the future.

I am pleased, by the way, that the hon. Gentleman has announced that the Conservative party will not go back to the gold standard. That is about the only specific policy announcement that we have had from it.

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Mr. Dennis Skinner (Bolsover) (Lab): Can the Chancellor confirm that of all the G7 countries Britain comes out top on jobs, stable growth and Government debt? If we were a football team, we would have done the treble nine years in a row.

Mr. Brown: And it will be 10 years in a row.

I should tell the House that, as my hon. Friend said, when we came to power in 1997, Britain was seventh out of the seven G7 countries in terms of per capita income. Japan, Germany, the United States, France, Italy and Canada were ahead of us, and we were No. 7. Last year, the gross domestic product per capita income figures were as follows: the United States, £22,000; the UK, £19,000; France, £17,000; Germany, £17,000; Japan, £17,000; and Italy, £15,000. Far from being at the bottom of the G7 league, we are now near the top, and that is due to the policies of stability and employment pursued by this Government. It is unfortunate to note that a party that has proposals to increase spending, while cutting taxes and borrowing, and a fiscal rule to cut spending by £18 billion, would lead us back into the old problems of unemployment, recession and public spending cuts.

Dr. Vincent Cable (Twickenham) (LD): Given that the Germans have asked the G7 Finance Ministers to look at the issue of highly leveraged private companies, what are the Chancellor’s views on private equity? Does he share the enthusiasm of his Conservative shadow and the Prime Minister, or the serious reservations of the CBI, the TUC, his two declared leadership opponents and, I think, the Economic Secretary, who believe that there is a serious problem of lack of transparency, as well as a drain on Treasury funds in terms of tax relief?

Mr. Brown: I am sorry if the Liberal party is going down the road of doubting whether a whole category of business finance is capable of serving the nation. As is usual in many areas, there are companies that are short-termist and those that are long-termist. We want a British economy in which there is long-term investment in the future of our industry that will create jobs and opportunities for people. Where companies are too short-termist, we will speak out. Where private equity companies and others are operating in a long-termist way, we will congratulate them on what they do. The evidence is that private equity has created more jobs at a faster rate than some other institutional investments in the economy. It is about time that the Liberal party was prepared to have a balanced debate on this, as on other issues.

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): Does my right hon. Friend agree that giving education to 80 million young people is not the only priority for the G7? I agree that the Government have done much work in this area, but can he push the G7 to ensure that the money and resources get to the children, and do not bypass them and get into the hands of corrupt Governments and officials—that they reach bodies such as non-governmental organisations that deliver on the ground?

Mr. Brown: I am grateful to my hon. Friend, who has taken a long-term interest in education issues throughout the world, for that question. Britain’s proposal—that individual countries sign education
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plans that will build capacity, particularly teacher training—will be monitored by the World Bank’s fast-track education initiative and is the right way forward. I hosted a conference in Nigeria at which 20 African countries agreed to submit education plans. This is a major breakthrough, in that they are now proposing how they will spend their resources, as well as the international resources that are provided. We have support from a number of G7 Governments for the pledging conference that we will hold on 2 May. In advance of the G8 meeting in Germany, we can make very considerable progress, with a number of countries signing up to our initiative. However, our initiative alone—£1 billion a year for education—means that in the next few years, we alone will be educating 15 million additional children in some of the world’s poorest countries. That is thanks to the international support that has been given to this education initiative.

Mr. George Osborne (Tatton) (Con): One of the most important issues that the G7 Finance Ministers will be dealing with is of course climate change. Carbon emissions in Britain have risen in the past 10 years and continue to rise. We have discovered that this week, the Chancellor’s Smith Institute trustee, Deborah Mattinson, told a private Labour meeting that there is public

on the environment. Why does he think that is?

Mr. Brown: We introduced the climate change levy, which the Opposition opposed. We extended the aggregates levy, which the Opposition opposed. We extended the landfill tax, which the Opposition opposed. Every time that we tried to deal with the problems of the car industry, the Opposition opposed us. If anybody was taking an objective view of who had done more for the environment, I do not think that they would come down in favour of the Conservative party.

Of course, one reason why we can do better on the environment is co-operation within the European Union. [Interruption.] Oh yes. That is why we are signing agreements with other European countries to reduce carbon emissions. The hon. Gentleman spoke at the Centre for European Reform yesterday. At the beginning of his speech, he said “I’m a pro-European”, but within 12 minutes he said:

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