Examination of Witnesses (Questions 280-299)|
12 DECEMBER 2006
Q280 Mr Mudie: In her statement she
actually says "introducing fully automatic limits remains
a key priority" but then says "and from April 2007 I
have instructed HMRC to introduce an IT solution to ensure that
claimants will benefit from reduced rates of recovery without
them having to ask for this service." That wording when you
look at it closely does not exactly say it will happen in 2007.
If she is asking them to do and she spells it out, why is she
just not saying that this will happen in April 2007? Is she asking
the Revenue people to actually have that as an objective but in
the meantime do something else from April 2007?
Mr Neale: The Paymaster General
is asking HMRC to try to ensure that by April there is an IT solution
that ensures that these rebated recoveries are in place and, yes,
there is an interim solution meanwhile. HMRC from January will
be identifying members of the public who might need this service
and be offering it to them, but not using the IT.
Q281 Mr Mudie: Okay. The Paymaster
General said that a small proportion of claimants may experience
disruption in their payments following the processing of changes
in their circumstances. Which claimants are affected and why?
Mr Neale: I am afraid I cannot
Q282 Mr Mudie: Has the Government
considered cancelling all demands for repayments until these automatic
limits are put in place?
Mr Neale: I do not think it would
be appropriate to cancel all demands for repayment because not
all households will be facing hardship and difficulty. I am afraid
I cannot answer your first question; we can let you have a note
on that. 
Q283 Mr Mudie: There is this business
of the migration of the families on income support or jobseeker's
allowance. Tax credits have been running for four years. They
are supposed to be migrated across. When will they be migrated
Mr Neale: They will be migrated
across as soon as the IT is robust enough to permit that to happen
without risk or any interruption to their income.
Q284 Mr Mudie: This has been promised
and promised or threatened and threatened. In other words you
are still not able to give us a date, time and place?
Mr Neale: I cannot give you a
date. The most important thing is that these people do not suffer
an interruption to their income and we are not willing to take
risks until we are sure the IT will work.
Q285 Mr Mudie: Adam Sharples, Director
General, Work, Welfare and Equalityone of your protégés
I think, I remember he graced these tablesis at DWP now
and on 6 February he said he had a timetable with HMRC. The plan
was to migrate the remaining families between July of this year
2006 and April of next year 2000. Which part of the Government
is accurate? He says he has a timetable with you; you say you
do not have a timetable.
Mr Neale: The Paymaster General
is accurate because that is the timetable that we have elected
to change in the light of what we now know about the IT and its
Q286 Mr Mudie: Let us be clear. Adam
Sharples is right, he is singing off the same hymn sheet as you,
so by April of next year they will be migrated?
Mr Neale: No, the timetable has
been changed because we cannot be confident
Q287 Mr Mudie: Since February this
Mr Neale: Yes since February because
we cannot be confident that the IT is robust enough to permit
that transfer to take place without interrupting people's income.
Q288 Mr Mudie: Why is the extension
of child benefit to mothers-to-be set for April 2009 instead of
implemented? Is it finance or is it IT?
Mr Neale: I do not know whether
there is an IT issue there. We will let you have a note on that.
Mr Mudie: Thank you, Chairman.
Q289 Jim Cousins: George, you are
still Deputy Chief Whip material! Alternatively secured pensions:
how much extra tax revenue are you going to raise by introducing
the punitive regime for alternatively secured pensions that was
set out in the Pre-Budget Report?
Mr Neale: I cannot tell you off
the top of my head what the revenue implication of that is but
what it is not is a punitive regime. The Government introduced
alternatively secured pensions for a specific purpose, namely
to provide an alternative way of guaranteeing an income for people
who have a principled objection to pooling mortality risk. It
was not designed to enable tax reliefs to be used to build up
capital sums for people to pass on when they die.
Q290 Jim Cousins: Of course it is
very difficult sometimes to see what the design framework of some
of the Government's proposals is. You tell me that alternatively
secured pensions were apparently introduced to meet the needs
of one particular, rather small religious group. Did it not occur
to anyone, Mr Neale, in government that they would also meet the
needs of people who had serious terminal or chronic illness and
might find the annuity regime very restrictive for them and might
find the alternatively secured pension regime a much fairer and
more attractive one? Did that not occur to anyone in government?
Mr Neale: I do not think, if I
may say so, that alternatively secured pensions have primarily
been marketed to people with severe illnesses. They have been
Q291 Jim Cousins: Do you think the
Government should introduce tax regimes that are specific to members
of small religious groups and not realise that they also meet
the needs of people who have terminal and chronic serious illness?
Did that not occur to anyone?
Mr Neale: The Government's intention
in introducing alternatively secured pensions was quite clear.
It was to provide a facility for certain religious groups who
do have a principled objection to pooling mortality risk. The
reason the Government has taken the action they have is because
they have been marketed primarily to wealthy people as a way of
using tax relief to build up large capital sums to pass on on
Q292 Jim Cousins: Do you not recognise,
Mr Neale, that they have been marketed as you put itand
I hope you are not suggesting that the Treasury has any ideological
dislike of marketingbut they have been taken up by people
who have serious illness, chronic illness, terminal illness and
for whom the existing annuity regime was deeply discriminatory
for them? Do you not realise that that has happened?
Mr Neale: Alternatively secured
pensions are still there; they have not been removed. What the
Government has announced in these measures are certain steps to
prevent the use of tax relief to build up large capital sums to
pass on on death. The Association of British Insurers has welcomed
the fact that we have retained alternatively secured pensions
in that facility.
Q293 Jim Cousins: Mr Neale, I quite
understand the Treasury's desire to micro-engineer people's behaviour
and to pass judgment upon it. I think it is an extremely unfortunate
tendency but one that I recognise is now widespread. Can I ask
you simply to say what extra revenue this punitive regime that
has now been linked to alternatively secured pensions is going
to produce? Surely you must know that?
Mr Neale: I think the revenue
impact is fairly small but we will let you have a note on the
revenue impact of the measures we have taken on alternatively
secured pensions. 
Q294 Jim Cousins: What about missing
trader fraud; can you give an estimate of how much it is costing
you and how much it is going to go on costing you?
Mr Neale: The PBR document sets
out our latest estimates based on HMRC advice for 2005-06. It
says that the revenue at risk, that is to say the level of attempted
fraud, accounted for about £3.75 to £4.75 billion and
the actual revenue lost was between £2 and £3 billion.
Q295 Jim Cousins: And you have no
present useful plans to do anything about that, do you?
Mr Neale: HMRC has a comprehensive
strategy for tackling MTIC fraud with a number of different elements
to it. First of all, HMRC has an operational strategy, which is
proving very successful, which consists of blocking repayments
to businesses that are suspected to be implicated in MTIC fraud;
blocking registrations of businesses that are suspected of being
implicated; and tagging goods as they cross our borders to ensure
that they cannot be used in a carousel and come round time and
time again. That is the operational strategy. There is a comprehensive
strategy of international law enforcement co-operation and we
will be hosting a conference of our major European Union partners
on MTIC fraud early next year. We signed earlier this month a
bilateral agreement with the UAE to address MTIC fraud. Finally,
there is a legislative leg which involves us getting a derogation
from the European Union.
Q296 Jim Cousins: Mr Neale, all of
that is reassuring. We now know the airlines are going to claw
back some of the air passenger duty with the extra flights that
are going to be taken as people implement these wonderful international
strategies. Could you tell me how much revenue is going to be
Mr Neale: I think the PBR does
contain some numbers on that, at least the Budget document contains
some numbers on that which we have not changed. Those numbers
are associated with HMRC's operational strategy and with the obtaining
of the derogation from the European Union bearing on those goods
most commonly used in MTIC fraud.
Q297 Jim Cousins: Mr Cunliffe, can
you tell me whether there has been any discussion inside the Treasury
of the rate of corporation tax that will be variable in different
parts of the United Kingdom tax jurisdiction?
Mr Cunliffe: I know of no such
Mr Neale: There is no such discussion,
Q298 Jim Cousins: Thank you, Mr Neale.
There is not even a strategy for it?
Mr Neale: There is no such discussion.
Q299 Angela Eagle: The Stern Report
recently heaped praise on the EU Emissions Trading Scheme as a
very innovative way of beginning to put in place some of the market-based
structures that we need to move from a high to a low carbon economy,
and yet when we look at the way it is operating, only four out
of the 25 Member States actually issued permits that were at or
below their current emissions levels, which has meant that in
reality in its first year of operation there is a huge transfer
of about 1.5 billion from UK business to Europe in having to buy
up carbon emissions. What can be done to reverse this because
we are being penalised for doing the right thing and the rest
of Europe, including some very big producers like Germany, is
not exactly rushing to make this system bite?
Mr Kingman: We entirely agree
that there have been very significant teething problems with the
development of the ETS and the Stern Review is also clear about
that. I think we draw very significant comfort from the Commission's
recent announcements on the national allocations where every country
other than the UK had their provisional allocations rejected and
the Commission is proposing to tighten up their allocations. That
is absolutely vital to the working of the scheme.
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