Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 20-39)


14 MARCH 2007

  Q20  Mr Gauke: Okay, let us move on to the IT solution to one of the problems. In your written ministerial statement of 6 December 2006 you stated that: "....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 has now slipped to June 2007 as I understand it. Can we be sure that it will be happening in June or will there be further slippage?

  Dawn Primarolo: I can say to the Committee that all the information I have is that it will happen in June. Of course it is regrettable that it has slipped but I am sure you would agree, Mr Gauke, that it is important in implementing the change that we make sure that it is actually working in the way that we are intending it to, so I share your disappointment but it will be implemented in June.

  Q21  Mr Gauke: Just a quick question of fact: what proportion of eligible claimants have contacted HMRC to request an adjustment of their payments? Do you have those figures?

  Dawn Primarolo: We have in place a manual process for adjustments in-year and although greater resource is needed for it that means that from January claimants did not have to ask for the adjustment, it automatically happens on a manual basis in order to deliver that outcome. So there is a manual process at the moment that will be superseded by—

  Q22  Mr Gauke: But do we have the proportion for whom this is relevant?

  Dawn Primarolo: I believe I have the figure for how many people have been in January and February automatically given that and I think the figure is 22,000 who have automatically had the adjustment made for in-year adjustments. I will double check that. It is in all these papers somewhere but that is correct, I am sure.

  Q23  Mr Gauke: Also in December you announced that remaining families receiving income support or jobseeker's allowance would not be migrated to child tax credit in 2007. Originally they were going to be migrated in 2004. How many families are affected by this and what is the target date when this migration is finally going to happen?

  Dawn Primarolo: There are approximately 600,000 migrations happening automatically as well as people moving into work.[2] The reason why I have delayed it again is because there is rather a lot of work going on with the releases and changes to the system and I want to be sure before I transfer this last tranche of claimants that the releases on the playback and all of the IT changes that we have talked about in this Committee are actually in place. It does not make any difference to them, they are still receiving their full entitlement, but we have got another two specified releases and then further releases to be completed on IT and I want those in—and working.

  Q24 Mr Gauke: But does it not concern you, given that we are talking about the most vulnerable families, that you do not have confidence about the tax credits system as it is currently set up which for administrative reasons is not appropriate for these families?

  Dawn Primarolo: With respect, it is not about whether I have confidence in the system itself; what I am trying to do is make a practical assessment on advice from my officials, and given the scope of change that we are managing in the tax credits system, and from all the recommendations that have been made to us and the changes that we have made, and I judged that we needed to make sure that that was done before we added further workload to ensure that the Department stayed focused on that delivery. That is the reason why there is no compulsion or pressure to move those people. This completes the system.

  Q25  Mr Gauke: Do you see it as a litmus test? Do you see it as an important, almost symbolic thing for tax credits that this finally happens at some point?

  Dawn Primarolo: I see the litmus test for tax credits as its phenomenal take-up and the fact that there are something like 700,000 or 800,000 people a year who as a result of this flexible system are better off than they would have been under a fixed or any other system, so I judge tax credits on that basis and I think it is prudent to make judgments about how much change I can expect the Department to manage at any one point successfully, and that is what I have done and announced it to Parliament.

  Q26  Jim Cousins: Paymaster, you just now referred to take-up rates and you did give the Committee just a while back a figure of a take-up rate of 97% for people earning under £10,000 a year. I wonder if you could fill that out, either verbally or, if it is quicker, by circulating it to the Committee?

  Dawn Primarolo: I can certainly provide the Committee with the statistics which were published at the beginning of March which give take-up of the credits by income, by total amount available, by population, and you will be able to scrutinise that. It is available publicly and it shows that it was increased from 93% to 97% for that range, which is the lowest income range.

  Q27  Jim Cousins: Is that child tax credits or working tax credits?

  Dawn Primarolo: That is child tax credits.

  Q28  Jim Cousins: What about working tax credits?

  Dawn Primarolo: I do not have the figure for the working tax credits in front of me but all that information is available.

  Q29  Jim Cousins: Perhaps you would make that available.

  Dawn Primarolo: And the childcare element and the various elements that make it up, yes.

  Q30  Jim Cousins: I am grateful to you. I wonder if I could ask Sarah Walker what the limitations are of the IT system that you are working with at the present moment?

  Ms Walker: The IT system is working well. Generally it is—

  Q31  Jim Cousins: What does it not allow you to do?

  Ms Walker: There are the problems with introducing the restricted recovery of overpayments, which the Paymaster mentioned in her statement. As we said, we are dealing with that with a semi-manual process at the moment. In June we will bring in a fully automatic system to do that. Generally there are still more day-to-day problems than we would like which affect individual cases but as a general rule the system is stable, it is available—

  Q32  Jim Cousins: What is the scale of those day-to-day problems?

  Ms Walker: I would have to give you a note on that.

  Q33  Jim Cousins: You will give us a note on that?

  Ms Walker: That will be fine.

  Q34  Jim Cousins: Sarah, the Minister gave us a figure of 22,000 automatic manual adjustments in January and February. What is the total figure for manual adjustments in January and February?

  Ms Walker: The 22,000 is the number where we were using a system where people had to come and ask us to implement the restriction.[3]

  Q35 Jim Cousins: Indeed, I am asking you for the total.

  Ms Walker: I do not have that figure but I can get it for you. I think the important thing is that since January the effect for customers has been the same as it would have been if we had had an automatic process in place. It is costing us more to operate it because we have manual steps in that process but as far as the customer is concerned since January they will have had exactly the same service as if the automatic system had been in place.

  Q36  Jim Cousins: And you will send the Committee the figure for the total number of adjustments in January and February?

  Ms Walker: Yes.

  Q37  Jim Cousins: Paymaster, the Department for Work and Pensions does publish estimates of fraud and error for each category of benefits. When are you going to be able to do the same for tax credits?

  Dawn Primarolo: We have started with a small sample which is now going to take us forward—and I will ask Sarah to expand on that—where we looked at disputed overpayments and then worked through to see what percentage of those were as a result of official or IT error as opposed to any other cause. The information from that pilot means that from April there will be a tracking of those cases so that we can try to get to the position of identifying exactly what you say. But perhaps as Sarah has been working on the detail she can answer.

  Ms Walker: The figures for fraud and error as measured in the standard report are based on a random inquiry process that we are doing. We published figures for total fraud and error in finalised awards last summer—

  Q38  Jim Cousins: Do forgive me, I have just pointed out to you that the Department for Work and Pensions is able to publish for every category of benefits an estimate of fraud and error broken down into fraud, customer error and official error. When are you going to be able to do the same for tax credits?

  Ms Walker: For fraud and customer error we published the first set of figures last summer which relate to 2003-04. The 2004-05 figures will be published next summer. On official error and IT error, as the Paymaster General has said, we have started to measure the proportion of cases that are disputed which actually represent genuine, official errors. That is about 5%. We have done that on a pilot basis—

  Q39  Jim Cousins: 5%?

  Ms Walker: 5%. We did that on a pilot basis as a sample. We have now put in place processes so that we will collect those on a systemic basis starting this April.

2   Note by witness: If migration were to happen now, around ½ million families receiving the child premium in income support or job seeker's allowance would be automatically migrated to receive Child Tax Credit. Back

3   Note by witness: 22,000 is the total number of adjustments. HMRC identify cases where a restriction was appropriate and apply the restricted rate of recovery without the claimant having to ask for this. Back

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