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16 May 2007 : Column 278WH—continued

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Mr. Keith Simpson: On a point of clarification, I welcome warmly the extra money to Norfolk PCT, but can it use it to wipe out its deficit, or must that be met separately?

Andy Burnham: The PCT is agreeing a recovery plan with the strategic health authority so that it can get itself to a sustainable position. I am informed that by the end of the next financial year that recovery plan should have been implemented fully. No new national targets are being handed down through the system this financial year. Admittedly, there is the 18-week target and there are other challenging targets on MRSA, but over and above those we want people to use the money to respond to local priorities and needs. The hon. Gentleman’s PCT is no different from any other; we want it to have that freedom.

On a further point of context, hospital lengths of stay have fallen by 20 per cent. in the last few years, and 70 per cent. of surgery is now carried out on day cases, with no need to stay in overnight. More and more people do not have to go to hospital at all, and up to half of the 45 million out-patient appointments each year can be provided in the community, along with minor surgery. It is recognised that people greatly value their local community hospitals; I hear what the hon. Gentleman says. St. Michael’s Hospital is no exception. However, the public are telling us also that they want more convenient and appropriate services available at times and in places more convenient to them. That was very much the conclusion of the Government’s White Paper of the same title as the local consultation that his PCT is running. After extensive consultation with patients, that became the paper’s main theme. It is not some policy diktat from Whitehall; it is the message that has come over repeatedly to the Department through public consultation.

We want more services in the community and, where possible, in the home, but in that regard we do not compare well with other countries. For example, in Germany all out-patient appointments take place in the community, and that is true in other countries as well. Public consultation on the PCT’s proposals began on 6 March and will end on 5 June. The PCT’s aims in taking those proposals forward are to provide flexible, patient-centred care delivered at home, or as close to home as possible; to provide health care in the most suitable place, and not, for example, in a hospital just because it is the only option available; to achieve a balanced and consistent range of services across the whole PCT area; and to achieve better outcomes for patients, helping them to maintain an independent life for longer.

I want to dwell on that point for a moment because, without commenting directly on the proposals and whether they are right or wrong from a departmental point of view, it is important to draw attention to the fact that the PCT is saying that it can provide care to 25 per cent. more patients than is currently the case. Although I understand the strength of local feeling, it is important that the message is heard that the proposals are about providing people with more convenient services. They will allow 700 people to be cared for in their homes, rather than in a hospital. I accept that we have some way to go before we can convince the public conclusively that that is better, but
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the more that patients experience those kinds of services, where proper support is provided in patients’ homes, the more minds will be changed. Some of the proposals announced yesterday demonstrate that lots of PCTs are taking forward the idea of the “virtual ward” where intensive support is provided for more elderly patients, or those suffering from a long-term condition, with the specific aim of preventing unnecessary admissions to hospital.

In my view, that must be the aim of the health service. It should not just be about building big hospitals and filling them, but about keeping people out of hospital in the first place, which the health service has not always done particularly well. It is right to move money around the system with that aim in mind—that is human progress and health progress.

I understand that the PCT has organised a series of public meetings throughout Norfolk to give people the opportunity to express their views on the proposals, and I have been informed that they have been well attended; clearly, people are engaging with the process. I believe that I have signed many letters to the hon. Gentleman responding to his constituents, and obviously we will continue to respond to concerns raised.

I shall address some of the specific points that the hon. Gentleman raised. He asked whether the PCT will be further reorganised. I recognise that the more recent changes caused disappointment among some NHS staff. There were good reasons for those changes—for example, to make them more coterminous with local government services. That was a very important part of the rationale for those changes. At the moment, I cannot envisage any reason for further changes or reorganisation of the PCT. Indeed, I would not welcome that at all, as he would not. I cannot tie the hands of a successor Minister, but from my point of view, there will be no discussion of that, and nor should there be. We want the new PCTs to bed down and work closely with their local authorities in order to provide the kind of co-ordinated services that I am talking about.

The hon. Gentleman asked how the deficit can be reduced. I hope that he will agree that we are working with the SHA, which believes that there is a way forward for the PCT to tackle its overspending, but at the same time improve services to patients. That might require some difficult decisions, but I believe that a good plan is being formulated to ensure that it happens. He asked also about population growth in his area. I can assure him that in the next round of PCT allocations, adjustments will be made and consideration given to areas experiencing population growth, or likely to. The formula can be adjusted to pick up those pressures.

The hon. Gentleman talked about the difficulties of people travelling around the county. I understand that fully and know that many of the villages are some distance apart. It can be difficult to get older people to use public transport, but let us remember that, as I understand it, the proposal is to provide many more services in patients’ homes and greater convenience, thereby avoiding the need for the individual to be in hospital and for their family to visit them. So there are potentially huge benefits.

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I cannot say a great deal more because it is a live consultation. I know that the hon. Gentleman is representing his constituents’ views clearly and directly in the consultation. I hope that he will allow it to run its course and then take the right decision in the best interests of his constituency.

11.30 am

Sitting suspended until 2.30 pm.

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Tax Credits

2.30 pm

John Barrett (Edinburgh, West) (LD): This is not the first time that I have had to initiate a debate on the problems with the tax credits system on behalf of my constituents. I would love to believe that today is the last time that I will be required to do so. On the previous occasion, I was very grateful to the Paymaster General for the speedy resolution of the cases that I raised. I hope for a similarly positive response today. I would also like to send her my best wishes for a speedy recovery.

When I last had the opportunity to speak in the House on the issue, I and other hon. Members raised a number of key concerns: the unfair way in which Her Majesty’s Revenue and Customs is attempting to claw back funds; the complexity of the system; the fragile and failing IT system; and fears that the tax credit office is acting improperly in some cases in its attempts to reclaim overpayments. I cannot help but feel a sense of déj vu today, as in many areas the problems remain.

Last week was a week of change in British politics, with the Prime Minister announcing that he was stepping down and the Blair era drawing to a close. However, last week’s report on tax credits from the Public Accounts Committee showed that some things in British politics never seem to change. The tax credits system remains in disarray. It is still failing to help properly many of the families whom it was set up to help.

Perhaps most worrying of all is the nagging feeling that, despite all the damning reports and newspaper headlines, the Government have still not fully accepted the scale of the problem. I am not alone in saying that the Government, crucially, are dragging their heels over essential reforms. Hardly a week goes by without constituents of mine turning up to advice surgeries having experienced problems with tax credits. I am sure that most hon. Members here today could say the same. However, for every constituent who contacts their MP, asking them to take up a case, there are many more who in effect decide to suffer in silence. Today’s debate should not be just for our current casework issues; it must also be for our constituents who have had problems with tax credits, but have decided to accept the failings of the system when their overpayments have been clawed back—they have decided simply to pay up.

I hope that the Minister will not attempt to pretend that I or others are blowing problems out of proportion. The scale of the problem is considerable, and real people are paying the price. One clear example of that is the number of people who do not want to claim tax credits for fear of discovering at a later date that money that they have spent must be repaid. I cannot estimate their number. If the Minister can, I hope that he will share it with us today.

The other number that I cannot give is the number of claimants who are spending their tax credits today in the belief that it is their money, but who will find out in the future that they should not have been given it and they are expected to repay it, even when they supplied all the information asked for, and in proper time. I will come later to the possible scale of the problem.

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I will not be so churlish today as to suggest that the tax credits system has not helped people; of course it has. However, I hope that the Minister in his reply will accept that it has made life a misery for too many families and that the Government must take responsibility for the failings that have still not been dealt with.

The figures will be all too familiar to most hon. Members, but it is worth reminding ourselves of the scale of the problems facing the system. As last week’s Public Accounts Committee report outlined, overpayments totalled about £5.8 billion over the first three years—a staggering total. The Department has attempted to recoup some of those overpayments, but has not always been able to do so. As a result, more than £500 million has so far been written off, and it is estimated that in excess of another £1 billion-worth of debt might be impossible to recover.

In my own city of Edinburgh, the most recent figures for overpayments show that 11,200 of 34,000 tax credit awards were overpaid—about one third of all awards. Figures from 2004-05 show that a total of £9.5 million is due to be repaid by Edinburgh recipients whose tax credit awards have been overpaid. That will result in an average due repayment across the city of about £850—enough to throw the budgets of most families out of the window.

I could give numerous examples of individuals who have contacted me since 2003, but today I will give just one or two, because they capture what is at the heart of the problem. Deborah Karimi, a 48-year-old mother of two who lives at 72 Muirhouse green in my constituency, is one example of a person who works hard—she is employed in a Sainsbury’s supermarket—but who has been through such a bad experience that when advised recently that she might qualify for other benefits, she said that she would not apply for them after her experience with tax credits.

Mrs. Karimi was earning about £10,000 a year when she was granted a rent rebate from her local authority. She had supplied her three most recent wage slips to the authority and was advised by it that she might qualify for tax credits. Her most recent P60 at the time was only about one month old. It was just after the end of the tax year and the document showed her earnings at about £10,000, yet she was asked for the details of her previous P60, for the previous year, when she worked part-time and her earnings were between £6,000 and £7,000. She repeatedly offered details of her current pay, but was told that that was not how the system worked. She was told that her award would be calculated using the old P60. Some four months later, she would be asked for details of her current P60, showing that she was earning £10,000 a year.

At the same time, Mrs. Karimi received correspondence from the tax credit office saying that the payments would stop, and more correspondence confirming that the payments would continue. She was receiving £115.28 a month, which was thankfully received and spent every month. She was a low earner in full-time employment—exactly the kind of person who needed help to stay in work, rather than living on benefits. She was earning about £11,000 a year and was told that her overpayment total was £1,280.47, based on the fact that her income
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was too high to qualify. That is the income on the P60 that Mrs. Karimi offered to supply in the first instance, but which was refused. One has to ask just exactly how she could have been more helpful. She is an honest individual.

Jo Swinson (East Dunbartonshire) (LD): I sympathise with my hon. Friend’s constituent. I wonder what his view is of the case of one of my constituents, who was told that they had been overpaid to the tune of £5,300 and that that had to be repaid within one year. Surely by definition families who are in receipt of tax credits cannot find the money required to repay sums of £400-plus a month. That causes huge stress and in some cases makes people ill with worry. The system is so complicated and is letting people down.

John Barrett: The case that my hon. Friend raises is, sadly, all too typical. Some people have not only spent the money; they may also have taken on hire purchase agreements, based on the estimated new income. They cannot live on the basic income, which is obviously low in order for them to qualify for tax credits. They have then spent that money and taken on further debts. They have the worst of both worlds. It is perfectly reasonable to accept, as is in the rules, that if hardship will be caused, in some cases these debts must be written off.

Mrs. Karimi is an honest individual who is working hard to this day. She is repaying her debts by working every alternate weekend and she is currently paying off an outstanding council tax debt at £50 a month. That is no mean feat on earnings of about £11,000 a year, but as she has told me, “You can’t get blood out of a stone” and the threat to take her to court for the money will result in legal fees for lawyers and nothing much else. If ever there was a case of a debt causing hardship and needing to be written off, that case and the case raised by my hon. Friend are two examples.

Mrs. Karimi had gone to the tax credit office with the correct up-to-date information and was told that no, she needed to provide out-of-date information, which both she and the tax credit office knew would result in overpayments. Yet because that is the way in which the system operates, she is told that that is the way it has to be. It is surely a recipe for disaster.

Just yesterday, I was contacted by Citizens Advice, which is increasingly concerned about the rising number of cases in which citizens advice bureaux are having to advise clients about overpayments when the clients have no idea why they have been overpaid and find it difficult to obtain explanations. In many cases, even the amount owed is unclear. At the same time, in the past few months the number of clients who have been threatened with legal action for recovery of overpayments, even in those circumstances, has increased.

The Minister might be interested to know that Citizens Advice is conducting an online survey asking the public to report their experiences of the tax credit system. So far, 80 per cent. of respondents have reported being overpaid, most of whom did not find it easy to understand why.

Mr. Mark Francois (Rayleigh) (Con): I am listening carefully to the detailed case that the hon. Gentleman is making. Does he accept that one of the system’s great weaknesses is that when people receive a notification
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telling them that they have been overpaid, there is usually no breakdown of the relevant calculations? Those people are then suddenly required to pay back the money, which is sometimes quite a large sum, without even knowing how the debt was arrived at.

John Barrett: It must be very simple to supply people for whom an overpayment has been calculated with details about payments. One of the tests as to whether overpayments should be paid back is whether the individual could reasonably have worked out the correct amount. I would say that it is reasonable for an applicant to presume that the Government’s calculations are correct, and that it is unreasonable to expect a low earner who receives tax credits to assume that the Government have made a miscalculation. If details about payments were supplied, more people would know right away what the calculations were, and the problem would be solved. While overpayments remain so common, there is an urgent need for an improvement in the way in which overpayments are explained, as the hon. Gentleman suggests.

Citizens Advice is calling for a 30-day delay before the recovery of the overpaid amount starts. I entirely agree. If constituents of mine have been open and honest in their dealings with the tax credit office, but internal mistakes have led to an overpayment, it is simply unacceptable to demand large amounts of money back from those people, who reasonably assumed that the Government got their sums right. It is nothing short of outrageous that decent, honest, hard-working people are being forced into financial hardship as a direct result of incompetence in the system.

Several of my constituents who have had their fingers burnt by the tax credit system tell me that they will not bother to apply for tax credits again, not because they do not need the extra help, but because they cannot cope with another round of wrangling with the tax credit office about entirely avoidable overpayments. Evidence from Citizens Advice shows that more and more eligible families who have had problems are now reluctant to claim what they are entitled to. Some 2 million people who are eligible for tax credits do not claim them. I wonder how many of them have simply decided that the short-term benefits are not worth the headaches in the long-term.

I could list more examples of overpayments, but it is more important to discuss what the Government are doing to get to grips with the problems, and whether they have been effective. The most important change that Ministers have made to reduce overpayments has been to raise from £2,500 to £25,000 the threshold for in-year income increases that are ignored when awards are finalised. The Government contend that that change will eventually reduce overpayments by a third. However, a recurring complaint is that there is not enough data about the problems in the system to be able to say definitively what difference such a measure will make. Either way, the move does nothing to address the failure and unfairness at the heart of the system. What is needed is a fundamental rethink of the benefits system and a move towards a fairer system of fixed awards and clearer notices. I am sure that my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) will go into that in detail when he sums up on behalf of the Liberal Democrats.

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