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Taking on the consequences of that situation is important. This partly involves re-examining the
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disregard and the causes of those fluctuations for that particular group in the tax credit system, and considering what can additionally be done to ensure that those people are supported and to ensure that their likelihood of exposure to overpayments is reduced.

The write-off of overpayments was also mentioned, and the hon. Member for Rayleigh came out with a conspiracy theory. HMRC might be able to do things that he sometimes finds incredible, but his conspiracy theory was not grounded in any of the facts. The policy has always been to write off an overpayment where there has been an official error.

I want to come back to the points made by my hon. Friend the Member for Leeds, East about the difference between the Department for Work and Pensions and HMRC. I have always said that on official error and on where the claimant could have reasonably believed that an award was correct, rights and responsibilities are in operation. People should inform the Department of the facts of the claim, check that they are right and then receive the payment.

It is true that the number of overpayments that have been written off due to official error reduced between 2005-06 and 2006-07. I can tell the hon. Member for Rayleigh that the latest figure, which covers up until the end of February, is 9,300. The figure of 8,600 that he gave covered until the end of January. The situation reflects the fact that there are time lags in the system and that the high number of cases written off in 2005-06 was because of early problems in the tax credits system—they have never been disputed. That explains the fluctuations.

My hon. Friend the Member for Leeds, East referred to contact centres and to the importance of our inquiry centres.

Mr. Francois: Is the Paymaster General honestly telling hon. Members that the number of overpayments being written off has fallen—we should bear it in mind that people need to meet two criteria to have an overpayment written off, whereas the Paymaster General has really mentioned only one—from virtually one in two to fewer than one in 20 purely because of a reduced error rate? Is she telling us that there is no financial pressure to claw the money back? If she is, I do not believe her.

Dawn Primarolo: I am afraid that the hon. Gentleman will have to rest at not believing me. He refuses to interpret correctly some of the facts that are staring him in the face, and there is not a lot that I can do about that. I am telling hon. Members precisely what he says.

Mr. Gale rose—

Mr. Gauke rose—

Dawn Primarolo: I shall give way to the two hon. Members who have stood up, but in fairness to the points that others have made, I shall then need to make progress in answering them.

Mr. Gale: This goes to the heart of the whole issue. The Paymaster General is saying that the performance of HMRC, as it is now known, has improved and
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therefore the overpayment reclaim rate is higher than it was before. That is patently not true. The cases that I have before me and those which I have referred to the adjudicator, to the ombudsman and to her, in some cases, almost invariably involve an acknowledgement of official error. The acknowledgment is to the point where compensatory payments are even made for those mistakes, but responses then go on to say, “You should have known that you were wrong.” That places an unfair and unjust burden on the claimant.

Dawn Primarolo: I want to come on to why the reasonableness test acts as it does and the statutory requirements that it involves. There is nothing new in the reasonableness test. One of the points that was fairly made yesterday—I cannot remember which member of the Sub-Committee made it, but I gave an acknowledgment and said that we were taking work forward—related to the constituency of application of the reasonableness test and how we can be assured that the test is operating as it should. I put aside the question of appeal, because I want to deal with that later, but I have explained to hon. Members precisely why the figures have changed.

Mr. Gauke: Let us assume, as the Paymaster General says, that the reason why the write-off rate has fallen so dramatically from 44 per cent. to 3 per cent.—it is possibly at 4 per cent. now—is the fall in the official error rate. Given that the official error rate is 5 per cent. and the write-off rate is 3 or 4 per cent., what was the level of official error rate when the write-off rate was 44 per cent?

Dawn Primarolo: The hon. Gentleman questioned us on this yesterday, so he knows about our ability to separate official error from claimant error and fraud. The way that the figures are produced means that those things are amalgamated in them. One of the discussions that we had—the issue has been raised again today—was about whether the Department can specifically separate the official error rate within its statistics.

Mr. Gauke rose—

Dawn Primarolo: I have answered the point, and it is late in the afternoon. The hon. Gentleman had an opportunity to question me closely yesterday, so, in order to be fair, I should respond to the points that have been made today.

My hon. Friend the Member for Leeds, East asked about access for particular groups, and said that telephone contact alone is not sufficient. Extensive work is taking place, and HMRC is running pilots in Jobcentre Plus. There are also pilots with Citizens Advice and the Department to look specifically at understanding that group of claimants, as my hon. Friend advocates, and we must make greater efforts to do so. There is a programme in Plymouth, in partnership with the local authority, Citizens Advice and Money Advice Plymouth. In different ways, we are trying to understand how to go beyond what we already make available to claimants to improve their situation.

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Mr. Mudie: I applaud the Paymaster General’s efforts, but I was simply saying that in Leeds we have tax offices where people can make an appointment to sort out tax difficulties and misunderstandings. Is it not possible to have a presence on the tax credit side in those same offices, so that there is a ready point of public access that people can take advantage of?

Dawn Primarolo: Yes, of course there is. An inquiry centre should do that, and if my hon. Friend is saying that that is not operating through the inquiry centre in his constituency and that such advice is not on offer face to face, I will pursue the matter. That is the point of inquiry centres, but I want to expand access beyond that.

My hon. Friend also asked about appeal on entitlement, and referred to what the Child Poverty Action Group said to him and to the Sub-Committee: that the Department acted as a gate-keeper to whether appeals on entitlement were passed to the tribunal. He was right in saying that there is an appeal procedure. I confirm that that is slightly different from acting as gate-keeper. It did not do that, but what was happening—he speculated on this—was that someone was given a notification of appeal and the Department then offered the final review on whether a settlement could be made before appeal.

Quite rightly, in my view, the CPAG said that that was not clear enough, because it could be misinterpreted, and that there should be a clear indication of appeal rights on entitlement and so on to the tribunal. If a review is offered before that, it should be made clear that the appeal can still take place subsequently. The text of the letter that will explain that to claimants will be shared with the CPAG to ensure that it is clear to everyone.

On the question of appeals and the difference between the structure in the Department for Work and Pensions and that in HMRC, I said yesterday that I would send the Sub-Committee my view on that, because there seem to be different interpretations. DWP’s policy is to ask for repayment when an overpayment is caused by official error but it is reasonable to expect that the claimant would have been aware of being overpaid. DWP has no statutory test or right to appeal to recovering overpayments caused solely by official error. That rests on common law application.

On tax credits, the reasonableness test is a principle that has operated in the tax system since 1971—the hon. Member for North Thanet (Mr. Gale) also raised this—and the tax credits legislation provides the Department with a statutory discretion to recover overpayments, hence the way the system operates. The codes of practice—COP26 in this case—are recognised as statements of departmental interpretation of the law across Departments. They are binding on Departments and can be used in evidence in court or before a tribunal. The legislation gives the Department discretion, and the discretion is then expressed in a code of practice. That is partly what my hon. Friend the Member for Leeds, East implored me to return to the primary legislation, if necessary, and that is where the operation of the reasonableness test is provided for.

My hon. Friend also touched on the pause. There is effectively an IT pause in the system, but I was unable
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yesterday to give a specific time for that release, and he suggested that I just instruct the Department. This is what the Department is saying to me, and this is what I am pushing back on the Department. It touches on the point made by my hon. Friend the Member for South Derbyshire (Mr. Todd) about what can be delivered in the system without causing untold consequences because of the way the system is constructed.

There is also a need to set priorities, given the wealth of recommendations—52 in the Sub-Committee’s report, and those from the ombudsman. The current advice to me is that the change would involve the risk that it might displace other enhancements to the system. Until I am satisfied that I have got to the bottom of that, I cannot take the matter further with commitments to the Sub-Committee. However, I want to make it clear, as I did yesterday, that that is exactly what I am attempting to do.

The hon. Member for North Thanet referred to a number of other matters, including the adjudicator and the ombudsman. The ombudsman’s press release on 13 July 2006 stated:

I do not have time to read for the record all 12 of the recommendations that the ombudsman made, but the vast majority have been implemented. Members of the Sub-Committee may remember that I explained to both the ombudsman and Parliament that I was unable to concede to one recommendation: the write-off of all payments up to a particular point. Otherwise, progress is being made, as the ombudsman recognises and as the hon. Member for Sevenoaks acknowledged in his opening comments.

I disagree with the hon. Member for North Thanet who said that the adjudicator has been compromised. Working with the adjudicator, for example, we are considering possible improvements to the system beyond those that are already before the House. I met the adjudicator a few weeks ago, and we discussed some cases. She felt that there were difficulties with the reasonable belief test, and she said that she would return with examples of cases that could be clarified, or that could assist with the way in which we determine disputed overpayments. [Interruption.] I really must leave a few minutes at the end, so I shall speed up my comments.

My hon. Friend the Member for South Derbyshire also made points about the reasonableness test, and he referred to the persisting difficulties that error in historical data causes. I have always acknowledged that problem, and on several occasions I have also told him that it is important to ensure that we get the best, incremental improvement in the system. Tax credits are an annual system, and he is quite right that inevitably, therefore, there is a time lag in producing the comprehensive statistics. I have pressed the Department on how we can provide quicker information, and particularly information about official error in disputed overpayments.

We referred yesterday to the fact that the Department has examined a sample—the 5 per cent.
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official error figure comes from it, but it is small and therefore unreliable—and that from April it will complete the sample systematically for a full year. In that way, the Department will begin to understand the way in which the figures for official error and the separation of the components can be produced reliably.

A great deal of the speech of the hon. Member for South-West Hertfordshire (Mr. Gauke) covered information that he will send to me, so we will deal with it when he does. He referred to the lone parent figure, and it was said at the time that the difference in numbers reflected a difference in definitions, not fraud. The IFS research used definitions from the family resource survey. Tax credit claimants are asked whether they live together as husband and wife, and whether they pool their finances. There are ways of checking the situation—a potential vulnerability—and that is clearly carried out. There are sometimes differences in the definitions of lone parent, and that example applies.

The hon. Gentleman referred to a tougher line and to writing off overpayments, and I have dealt with that. [Laughter.] Well, I could say, “I have responded to those points,” if he would prefer it in a slightly softer fashion. I am watching the clock carefully and trying to hurry to give the hon. Member for Sevenoaks time to make his concluding remarks.

Finally, there were some questions about process, including whether the helpline operators are properly trained and whether they provide enough information. If I were to go through the Select Committee’s 52 recommendations, we would be here considerably longer, but most of the recommendations either have been, or are in the process of being, dealt with. It was recommended that we update the process, and we are reviewing the scripts that our contact centre advisors use and the advice that they provide. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) expressed views about children who reach 16 years old but remain in full-time education, and we are giving particular consideration to how we can deal properly with that move from one area to another.

In response to another recommendation, from next Monday at two separate centres we will run time-limited pilots on relationship breakdown, because hon. Members rightly referred to the fact that if one’s relationship breaks down, the last thing one thinks is, “Goodness me, I must ring HMRC to let them know my tax position.” The tax credit system copes with that situation by allowing payments to run on and then by backdating the claim, but we are exploring ways in which we can deal with the issue. We are also using proactive questioning about changes in circumstances, so that our material is much more timely, specific and able to deal with the very points that hon. Members have raised today.

The tax credit system has helped families enormously, and with child care in particular. There are issues that must be addressed, and I am grateful for the continuing assistance not only of the Treasury Committee, but of other Committees and of hon. Members. I assure them that progress is being made.

Mr. David Marshall (in the Chair): With the leave of the House, I call the Chairman of the Sub-Committee.
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5.26 pm

Mr. Fallon: With that leave, I shall reply briefly to the debate that you have so ably chaired, Mr. Marshall.

I am grateful to all who have participated, including the four Treasury Committee colleagues who have attended today’s debate. They all made important points. The hon. Member for Leeds, East (Mr. Mudie) pressed his point on appeals, to which I am sure we will return. My hon. Friend the Member for North Thanet (Mr. Gale) spoke of his own preference for fixed awards, and it is interesting that it has never been definitively ruled out. The hon. Member for South Derbyshire (Mr. Todd) drew attention to some of the management weaknesses in the tax credit system, and my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) pressed the Government on the scale of the error, to which we will no doubt return.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) referred not only to our criticisms, but to those of the ombudsman, and he added a menu of his own suggestions for reforming the
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system, which we will want to study in more detail. My hon. Friend the Member for Rayleigh (Mr. Francois) developed a harsher critique, and if I have him right, he made the important allegation that HMRC is now under pressure to recoup the increased cost of the disregard through the harsh decisions that it now takes. The Paymaster General then did her best to defend the case that she has to defend.

This has been an important debate on tax credits, and it will clearly not be the last. Given the scale of the tax credit system, its importance in helping people back into work, which we have accepted, and its huge cost to the Exchequer, the onus is still firmly on the Government, HMRC and the Minister responsible to make it work more efficiently and effectively. Some progress has clearly been made, but there is a long way to go. Further reforms of the system will be needed, and I assure the Paymaster General that the Treasury Committee will continue to keep an eye on it.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Five o’clock.

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