Examination of Witnesses (Questions 80-99)
HM REVENUE AND
CUSTOMS
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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