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House of Commons

Thursday 18 October 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

1. John Barrett (Edinburgh, West) (LD): If he will make a statement on the findings of the Parliamentary Commissioner for Administration’s report “Tax Credits: Getting it Wrong”. [158859]

The Financial Secretary to the Treasury (Jane Kennedy): As the House knows, tax credits benefit some 6 million families and nearly 20 million people. We remain committed to continually improving the operational delivery of tax credits. I intend to respond positively to the ombudsman’s report which, for example, makes useful recommendations on the changes to the proposed procedures for recovering overpayments. In the introduction to her report, the ombudsman states:

I assure the House that I welcome the ombudsman’s second report. It is a helpful and valuable tool that we will use to inform the development of the tax credit system.

John Barrett: I thank the Minister for that answer, but errors are still made in approximately 2 million of the 6 million claims for tax credits. As a result, many people entitled to tax credits do not apply for them. Will the Minister give the figures for my constituency—or for the whole of Edinburgh, including the Chancellor’s constituency—for those who are entitled to, but do not receive, tax credits?

Jane Kennedy: I do not have that specific breakdown, but I can tell the hon. Gentleman that, in Edinburgh, West, 7,300 families and 12,200 children benefit from tax credits. He may also like to know that, in families with children whose household income is under £10,000, 97 per cent. of those entitled to the benefit and support of tax credits are receiving them.

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Hugh Bayley (City of York) (Lab): In my constituency, 9,500 families get tax credits, worth an average of £3,000 a year. Recently, I surveyed the almost 150 constituents who have contacted me about tax credit problems: 94 per cent. said that they were satisfied with how their complaint was dealt with, and three quarters of the cases were resolved in the constituents’ favour. Does my right hon. Friend agree that the real threat to tax credits is not miscalculation, which affects relatively few people, but the fact that everybody’s tax credit would be at risk if the Conservatives were ever to get back to power?

Jane Kennedy: I agree with my hon. Friend, and am grateful for the detail that he has provided about customer satisfaction. However, I acknowledge that the ombudsman’s report was highly critical, in particular of Her Majesty’s Revenue and Customs’ decision making about recovery of overpayments. I can tell the House that HMRC will replace the so-called and very disliked “reasonable belief test” with a clearer test that will set out customers’ responsibilities for checking factual information. HMRC will play that information back to customers but, importantly, it will have a time limit for action on mistakes reported to it. I believe that that will lead to a fairer allocation of responsibilities between the customer and the Department.

Peter Viggers (Gosport) (Con): This is the most damning report, and all of us know from constituency experience that every word is justified—indeed, the language is very moderate. Do not the Government realise that if they give a couple of thousand pounds to a family, that is agreeable to the family, but if they want a thousand pounds back, that causes financial disaster? Will the Government recognise that with this complicated system, it is those who most need help who are least capable of dealing with its complexities?

Jane Kennedy: I acknowledge a degree of justice in what the hon. Gentleman says, but HMRC has taken note of customers’ experiences and feedback in its response to the problem. That response has also been informed by the first report from the ombudsman and by the issues that hon. Members have raised with Ministers in this House. As my hon. Friend the Member for City of York (Hugh Bayley) rightly pointed out, the HMRC is responding in a way that is improving customers’ experience, although I accept that we are not where we want to be when it comes to the delivery of services. A further improvement will follow from the pilot that HMRC began in March and, under the transformation programme, people who report that their household has broken down will be allowed from November to terminate their old joint claim and make new, single claims in one telephone call. So far, more than 70 per cent. of customers involved in the pilot suffered no break in their payments and their new claims were processed within a week. I think that the result will be a material benefit to the more than 170,000 tax credit customers who, unfortunately, find themselves in those circumstances, and we are working to improve the system all the time.

Mr. Lindsay Hoyle (Chorley) (Lab): May I say to my right hon. Friend that, when tax credits work, they work very well and are welcomed by everyone, but that the big problem arises when they go wrong, as they stay wrong even when every effort is made to put them
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right? I look forward to hearing her say that more money will be made available for training and that the software involved will be refined. That is needed because, at present, it fails to recognise when a problem has been rectified. Those are the difficulties that we need to concentrate on, so will she use her good offices to put them right?

Jane Kennedy: I will certainly do that. I assure my hon. Friend that we acknowledge and accept that training is an important aspect of the improvements that HMRC can bring to the customer experience. Indeed, training will be ongoing over the next few weeks to deal with a number of issues across tax credits. However, that is not the only area that we will improve. A lot of work is going on, and I commend the staff of the tax credit offices for their enthusiasm in bringing about improvements to the tax credits customer experience.

Mr. David Laws (Yeovil) (LD): Does the Minister accept that there is absolutely nothing in the ombudsman’s report that we and the Prime Minister have not known about for the past two or three years? Why has it taken so long for the Government to get on top of the shambles that has seriously affected many of the people whom the tax credit system was designed to serve? When will the Minister give this new guidance, and will she assure us that she will first consult hon. Members who are concerned about the issue? Will she respond to the ombudsman’s recommendation—

Mr. Speaker: Order.

Jane Kennedy: The hon. Gentleman asks a series of questions. I will have to check Hansard if I am to respond to all of them—obviously they were part of his leadership campaign.

The take-up of tax credits is at an unprecedented level. New figures that were published in March showed that 97 per cent. of families on incomes below £10,000 were claiming their entitlement to child tax credits. The changes that I have proposed today, the detail of which will become public after we have finished the consultation with the ombudsman and other organisations with which we are engaged, will improve the way in which customers of the tax credit system are dealt with when overpayments are made. There is a range of reasons why an overpayment can occur. However, the House acknowledges—indeed, the Conservative party has come to acknowledge—the value of tax credits in tackling the serious problem of poverty in society.

Justine Greening (Putney) (Con): For the past two years, HMRC accounts have had to be qualified by the Auditor General because of the tax credit shambles that the ombudsman described in her latest report. The Minister does not sound confident, but can she assure the House that it will be possible to sign off next year’s accounts?

Jane Kennedy: I accept that a position in which the accounts are not signed off is not a good place to be. We are working to bring about changes that will enable the tax credits office to correct that situation. I welcome the Conservative party’s acknowledgment that poverty is a threat that challenges society. It also now accepts that
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tax credits are proving highly successful in combating child poverty. I go further and welcome the comments of the right hon. Member for Witney (Mr. Cameron) on Tuesday 16 October:

That is precisely what we in government are doing.

Education and Training

2. Laura Moffatt (Crawley) (Lab): What recent assessment he made of the impact on the economy of providing education and training for 16 to 18-year-olds. [158860]

The Exchequer Secretary to the Treasury (Angela Eagle): By 2020 the economy will need 5 million more people with higher-level skills. Since 1997, 150,000 more 16 to 18-year-olds are in education or training, and the number of young people in apprenticeships has more than trebled to 250,000. Over the same period, the UK’s gross domestic product per capita has risen from being last in the G7 in 1996 to second only to the US in 2006. To close the gap further, we have committed to expanding the scope of educational and development opportunities for all. We will therefore deliver 3.7 million adult qualifications over the forthcoming comprehensive spending review period.

Laura Moffatt: I am grateful for my hon. Friend’s reply because with the excellent stewardship of Russell Strutt, the principal of Central Sussex college, which has a campus in Crawley, 34 per cent. of 16 to 18-year-olds attending that college receive education maintenance allowances. The allowances have played a significant role in keeping our 16 to 18-year-olds in education, which improves not only their life chances, but the economy of the Gatwick diamond area. Does my hon. Friend agree that that is wise spending for any Government?

Angela Eagle: My hon. Friend is exactly right. The positive effect of education maintenance allowances is there for all to see—I see it in my constituency. They enable those who might not have been motivated in the past to stay on and get the qualifications and training needed in a modern economy to do just that. That benefits not only those individuals and their potential earning power later in life, but our economy.

Mr. Mark Field (Cities of London and Westminster) (Con): I know that the Minister makes great play of the success of the new deal, but does she not recognise the importance of skills that people in their 20s and 30s can take forward? Does she not agree that one of the biggest social concerns here in the capital city is that while literally hundreds of thousands of people come from eastern Europe to take on relatively unskilled jobs, we have the highest level of unemployment— 8.5 per cent.—of any region in the UK?

Angela Eagle: To drive down rates of unemployment, it is important that we give our young people and young adults the education, training and access to opportunities
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that they need in a modern economy. I am surprised that the hon. Gentleman did not welcome the fact that we have created 2.6 million extra jobs, and that levels of employment are the highest seen in the economy for many years. I would have expected him to at least acknowledge the Government’s success in terms of employment.

Dr. Ashok Kumar (Middlesbrough, South and East Cleveland) (Lab): Given the importance of engineering to the economy, what efforts is the Minister making to promote engineering among 16 to 18-year-olds, so that we can ensure that our youngsters have those skills in future, and take them up in the economy?

Angela Eagle: As we move forwards, it is important to ensure that education and skills training fits high-value jobs and employment opportunities. We and colleagues in the Department for Innovation, Universities and Skills are working closely with employers involved in the train to gain initiative to develop the new diploma, and to ensure that our 250,000 apprenticeships are properly based and focused on high-value jobs. Those are the jobs that we wish our youngsters to be trained for in future. I assure my hon. Friend that manufacturing, technology and engineering feature strongly in our efforts.

Mr. Graham Stuart (Beverley and Holderness) (Con): The number of 16 to 18-year-olds who are not in education, employment or training rose by 40 per cent. between 1997 and 2006. Given the increase in the number of 16 to 18-year-olds in that invidious position, and in light of those unacceptable facts, how can the Minister justify the spending on the new deal for young people?

Angela Eagle: First, I would question the hon. Gentleman’s facts. There has in fact been a fall in the number of people who are not in education, employment or training as a percentage of the population concerned in the past 10 years. He also has to recognise that 625,000 more youngsters are in education and training than were 10 years ago, and 189,000 more are in work. He needs to remember that the category of those not in education, employment or training includes parents who are caring for their children, people who are in part-time training, people who have disabilities, and people who are off on gap years.

Financial Advice

3. Dr. Ian Gibson (Norwich, North) (Lab): What steps he is taking to promote the provision of high-quality financial advice. [158861]

The Economic Secretary to the Treasury (Kitty Ussher): The Government are committed to providing high-quality financial advice to all sections of society. That is why we commissioned the independent expert, Otto Thoresen, to examine the feasibility of a high-quality national generic financial advice service. His interim report is due shortly, and his final report is due in the new year. We will respond next spring.

Dr. Gibson: I thank my hon. Friend for that answer, but I am extremely concerned about the situation that the Norwich and District citizens advice bureau faces, and I am sure that what I say about Norwich is true of
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other places across the country. The number of cases dealt with by the debt advisory services has gone from 24,000—that is the average at Carrow road, which is where Norwich City football club’s ground is—to more than 30,000 in the past year. We need guidance on keeping the services going, on helping the advisers, on credit unions, perhaps, and on informing the public of what is available to them. The services are in crisis management and it is not tolerable.

Kitty Ussher: I agree with my hon. Friend, and that is one of the reasons why last week’s pre-Budget report included, I am delighted to say, an announcement of £130 million for our financial inclusion fund over the comprehensive spending review period. That is up from £120 million in the current period. The current fund has been used to pay for about 500 debt advisers across the country. I do not know about the situation in Norwich, but I am happy to look into it. We will decide how to spend the additional money by the end of the year. I would have thought that the availability of those funds would enable us to continue, if not increase, the provision of advice that is already available.

Sir Peter Tapsell (Louth and Horncastle) (Con): Do the Chancellor and the other Treasury Ministers recall that in past years, their party attached tremendous importance to the ownership of the commanding heights of the economy? What is their policy now towards sovereign wealth funds? Are they taking expert legal advice on how to treat them, bearing in mind that the United States, Germany, France and Japan will not allow their major companies to be bought by foreign Governments, but we, apparently, are contemplating doing so?

Kitty Ussher: I was wondering when the hon. Gentleman would get to the European examples. I was not part of Militant Tendency myself, but I am clear about our current policy. As my right hon. Friend the Chancellor made clear earlier this year, we welcome investment into Britain. We think our country is richer as a result of having open borders, inward investment and open trade. That is our policy, whether it is a sovereign wealth fund or any other that invests in Britain.

John McFall (West Dunbartonshire) (Lab/Co-op): The Minister may be aware that the Treasury Committee produced three reports on financial inclusion in 2006 alone. We are pleased to note that the Government have taken up a number of the initiatives proposed. The main conclusion of those reports is that poorer people are excluded from financial services. With that in mind and in advance of Otto Thoresen’s report, does my hon. Friend agree that generic financial advice not tied to particular sales products is the most effective building block in creating an effective financial inclusion strategy?

Kitty Ussher: I agree with my right hon. Friend, and I congratulate him and his Committee on the important work that they are undertaking. The answer to his question is yes, and that is why we have commissioned Otto Thoresen to do his work. He has made it clear that he sees a need for so-called generic financial advice that is not tied to a particular product. We are currently working out the best means of
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providing that in a way that is accessible to everyone, with different delivery channels depending on the needs of the individual. I look forward to working with him and his Committee in developing these proposals further.

Julia Goldsworthy (Falmouth and Camborne) (LD): Of course we welcome the Government’s belated attempts to ensure that all families have access to genuinely independent generic advice, but surely that is just one side of the coin when some banks are behaving so irresponsibly? In light of the Chancellor’s comments in the Daily Mail this morning, does the Minister agree that when her Department made the decision to bail out Northern Rock with taxpayers’ money, it should have done so on the condition that the board and senior management were dismissed?

Kitty Ussher: No, absolutely not, because it is the board and the management that are responsible for the company. We are not interested in acting as shadow directors or in any way limiting the freedom of the private sector to work effectively. We took the actions that we took in the public interest to guarantee deposits and prevent contagion in that bank.

Mr. Dennis Skinner (Bolsover) (Lab): On behalf of my hon. Friend the Member for North-East Derbyshire (Natascha Engel) and myself, I congratulate the Government on accepting our sound financial and employment advice, with the result that we have saved the jobs at the Markham tax office from today. It is a wonderful achievement. Whatever she does, my hon. Friend the Minister should not take any financial advice from the Notting Hill finance group. Therein lies a problem. We would finish up with 3 million unemployed, mortgage rates at 10 per cent. and Black Wednesday.

Kitty Ussher: I could not agree more. I congratulate my hon. Friend and my hon. Friend the Member for North-East Derbyshire (Natascha Engel) on the success of their local campaign. I can reassure my hon. Friend the Member for Bolsover (Mr. Skinner) that I have no intention of taking any financial advice from the Opposition, particularly their leader, who I understand was advising the then Government on Black Wednesday.

Mr. Mark Hoban (Fareham) (Con): The Minister and I agree on the need for people to have access to high-quality financial advice, but did she read last week about the tragic case of a Mr. D of Westminster who, following poor advice from his neighbour, increased capital gains tax paid by successful entrepreneurs and cut it for those who sell their second homes? What does she think she can do to make sure that Mr. D and his colleagues get better advice next time round?

Kitty Ussher: I am entirely confident that we acted on the best possible advice. I remind the hon. Gentleman that the headline rate of capital gains tax, even after the changes, is still half what it was when his party was in power. Capital gains tax is now simple and sustainable, and it is one of the most competitive rates internationally. The annual exemption remains at £9,200.

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