Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 80-99)


23 OCTOBER 2006

  Q80  Mr Williams: Well, it says "teams" in our briefing. I am not sure whether that is a correct definition of how you work. Is it just an overall group?

  Mr Gray: I mean, would it be more helpful to give you a total number of the staff engaged, which I am sure Mr Hartlib can give you?

  Mr Williams: Okay, give me the total number of staff.

  Mr Hartlib: We are increasing the number of Tax Credit compliance staff from 1,200 to 1,400.

  Mr Williams: Yes, that is where I am going next.

  Mr Hartlib: The position is complicated, given that we are in the middle of a planned restructuring, as the organisation was very dispersed, although I shall not bother the Committee by going through the history.

  Q81  Mr Williams: With respect, that is not what I am asking you. You gave the information that I wanted, but have you worked out the marginal benefit of the increase in the size of the compliance teams? Are you just saying, "We'll increase the number by 200", or have you arrived at that figure by working out what you might get for employing 10, 20, 30, 40 or 50 extra people?

  Mr Hartlib: Yes, there is a cost-yield ratio that can be derived from our compliance effort. Arriving at the figure of 200 meant taking into account the marginal benefit from increasing the staff engaged on the work.

  Mr Williams: Perhaps you will give us a further note on that as well.[8]

  Q82  Mr Bacon: Mr Gray, I am looking at the trust statement in the certificate by Sir John Bourn to the House, which says: "claimant error and fraud accounted for incorrect payments in claimants favour of between £1.06 billion and £1.28 billion (8.8% to 10.6% of finalised entitlement). The Department currently has no estimate of the total level of claimant error and fraud in the Tax Credit awards made since 2003-04." Is that still the case?

  Mr Gray: That is still the case.

  Q83  Mr Bacon: Are you planning to get an estimate?

  Mr Gray: We are certainly planning to get an estimate. We plan to produce those figures annually. We will produce the estimate for 2004-05 in the spring of 2007.

  Mr Bacon: Right, so next spring?

  Mr Gray: Next spring.

  Q84  Mr Bacon: What do you think the figure is roughly, without signing your name in blood?

  Mr Gray: I do not know, which lies behind my initial answer to the Chairman that I wished to see what the error figure was in year two of the operation before reaching a view on whether it was sensible to target particular reductions in the years beyond that.

  Q85  Mr Bacon: What is your target date for producing a set of accounts that are not qualified because of fraud?

  Mr Gray: I do not have a precise target for that, but I am extremely keen to get to that position as soon as we can.

  Q86  Mr Bacon: And you are unable at the moment to account to Parliament for how the moneys that Parliament voted for you are spent, are you not? You are failing in your duty to Parliament, basically.

  Mr Gray: In respect of Tax Credits—although not in other aspects of the trust account—we indeed have a qualified account.

  Q87  Mr Bacon: Why do you think you are failing in your duty to Parliament?

  Mr Gray: Because we have not yet reached a position where we have driven down error and fraud to a satisfactory level.

  Q88  Mr Bacon: As you know, this Committee does not look at policy, but there is always a wafer-thin membrane at certain points, where the policy comes under scrutiny because it appears to be the cause of your being unable to account to Parliament for how money is spent. Although it is distributing thousands of millions of pounds, it could be that it is the policy itself and its complexity that causes you, as the chairman of HMRC, to be unable to account to Parliament for how money is spent and whether it is spent effectively, efficiently and economically. Would you agree with that?

  Mr Gray: As you say, there is a wafer-thin issue, but I do not think that I am here to account to you for the policy. I am here to account for my administration of the policy. I am committed to getting into a position where we substantially drive down the level of error and fraud, within the context of the current policy.

  Q89  Mr Bacon: Even if you do not have a specific date for producing a set of clean accounts, what might be a reasonable time horizon within which to do so?

  Mr Gray: We are in a difficulty over time lags. We are halfway through 2006-07. Because of the inevitable lags, given the nature of the system, at this stage we have only the fraud and error estimate for 2003-04. We will have an estimate for 2004 next spring. As I said earlier, at that point, I want to consider carefully whether we will then be in a position, having had two years of figures as well as all the other intermediate targets we are adopting, to set targets going forward that have a reasonable basis and which may provide a point of reference for our discussions with the NAO about a reasonable timetable for us getting the accounts to a non-qualified basis.

  Q90  Mr Bacon: How many HMRC employees are currently under criminal investigation?

  Mr Gray: I do not have that figure with me at the moment. I do not know if Mr Hartlib can help.

  Mr Hartlib: Do you mean in relation to all potential areas of criminal investigation?

  Q91  Mr Bacon: How many HMRC employees are currently under criminal investigation? It could be for murdering their colleagues. I am not distinguishing—

  Mr Gray: So you are not just talking about anything in relation to Tax Credits?

  Q92  Mr Bacon: I am actually talking about in relation to their duties as HMRC employees, for the purposes of this question, although, obviously, an HMRC employee is capable of stealing a car just like anybody else, but that is not really what I am referring to.

  Mr Gray: No, I am just seeking to clarify if you are asking a broader question than about Tax Credits, which I think you are.

  Mr Hartlib: Since 2003, there have been 11 cases of Tax Credit fraud involving HMRC employees.[9]

  Q93  Mr Bacon: Eleven; and how many other cases? I remember that when we were looking at hydrocarbon oils fraud and tobacco smuggling there were HMRC, or Revenue and Customs, as it then was, employees involved. How many other employees, apart from the 11 specifically in Tax Credits?

  Mr Hartlib: I am afraid that I only have the information relating to Tax Credits.

  Mr Bacon: But it is 11 relating specifically to Tax Credits?

  Mr Hartlib: Since 2003.

  Q94  Mr Bacon: Have they all been prosecuted?

  Mr Hartlib: These are the people going through prosecution, yes.

  Mr Bacon: I am sorry.

  Mr Hartlib: Yes.

  Q95  Mr Bacon: Is it possible that you could write to us with a note setting out the offences they were charged with, what has happened to those people and what convictions they have been given?[10]

  Mr Hartlib: Some may be going through the court process, and so it would be extremely difficult in those cases for obvious reasons.

  Mr Gray: I think that in relation to cases that are completely finalised, we can certainly do that.

  Q96  Mr Bacon: Well, if you can do that, and then put an addendum saying that there are five other cases, or whatever the number is, still going through. Did any of them involve the issue that you were talking about earlier, Mr Hartlib, which Mr Davidson was asking about: migrant workers?

  Mr Hartlib: Not that I am aware of.

  Q97  Mr Bacon: You said earlier that you had looked at the category of migrant workers. When did that work start?

  Mr Hartlib: In August of this year.

  Q98  Mr Bacon: Was it in response to all the press coverage that you mentioned?

  Mr Hartlib: Obviously we take note of any evidence in areas that are likely to indicate risk. That is why we started that in August of this year.

  Q99  Mr Bacon: Was it a response to press coverage or to your own internal compliance systems?

  Mr Hartlib: We get information from all sources—members of the public and elsewhere—and it was a combination of all these factors that led us to take a closer look at migrant workers.

8   Note by witness: The additional staff will allow us to action an additional 20,000 compliance interventions. Back

9   Note by witness: Since 2003 there have in fact been 12 investigations of Tax Credit fraud involving HMRC employees, including current investigations, those in the prosecution process and two successful prosecutions. Back

10   Ev 24-25 Back

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