Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 40-59)


14 MARCH 2007

  Q40  Jim Cousins: I do accept that the figure of 5% which you have just now given us, which I think is the first figure of that kind that I can recognise seeing, is only an estimate based on a pilot, but can I ask you to agree with me that is more than twice the rate of official error for income support and jobseeker's allowance?

  Ms Walker: Can I make clear that that is not on the same basis as the DWP figures. What we have done is measure the cases where the customer has raised a dispute, so where they have come to us and said, "We think there is an error," only in 5% of those cases do we actually identify an error having been made. The DWP figures that they have published are on the basis of a sample of all cases in the benefit and not just the ones where a dispute has been raised.

  Q41  Jim Cousins: When will you be able to publish comparable figures to those the Department for Work and Pensions is already publishing?

  Ms Walker: I do not know is the answer, but we will certainly look at whether we can.

  Q42  Jim Cousins: Within the next 12 months?

  Dawn Primarolo: Look at it or do it?

  Q43  Jim Cousins: Do it. The Department for Work and Pensions is already producing these figures for every single category of benefit. When are you going to be able to do the same for tax credits?

  Ms Walker: We are concentrating on looking at the disputed cases first because that is where the issues are general going to arise.

  Q44  Jim Cousins: Is there no date that you are working to to publish such figures which the Department for Work and Pensions are already routinely publishing?

  Dawn Primarolo: We do not currently have a plan to do that, but there is no reason why we should not be able to do that and we will look at doing that.

  Q45  Jim Cousins: Can I ask you, the amount of money overpaid and the extent of the overpayments; the last figure we have is for 2004-05. Paymaster, are you in a position where you can give us a figure for 2005-06 or a current figure?

  Dawn Primarolo: I do not have that figure. Those figures will be published in May on a date to be announced. It is not actually a matter for me as Minister. I do not see those figures until a short period before publication, I think that is limited to 24 hours, and that is a matter that is sorted out between the ONS and the Department.

  Q46  Jim Cousins: It is very difficult because we are dealing with a very serious matter which is affecting millions of people and it does concern me that we are not able to get the recent extent of this problem. Can I now draw your attention to the last set of figures we have which are for 2004-05. What these show is that there are five million families benefiting and two million who are affected by overpayments; that is 40%. Minister, you have just told this Committee that 97% of families earning less than £10,000 a year are receiving tax credits. Is it reasonable for the Committee to draw the conclusion that on the basis of the best information we have now that 40% of such families will be involved with difficulties about overpayment?

  Dawn Primarolo: The statistics showed that the number of awards has risen—that is a matter of national statistics—and therefore the proportion of award with overpayments has declined slightly as has the amount that is overpaid. The figures are compiled not to my specification but under the requirements to look over the whole year when it has been finalised. When those figures are produced they will be for the year before the PBR changes have been implemented. I hope that the figure will go down but I do not have access to them. My Department monitors in-year for me but these are statistics that are produced under certain conditions—

  Q47  Jim Cousins: Look, this is extremely serious. You have just given this Committee a figure that shows that 97% of people earning less than £10,000 a year are receiving working or child tax credits and on the basis of the last figures this Committee has one in five of them will be affected by underpayments and two in five of them might be affected by overpayments, and this is happening to people and to families many of whom have gone back to work and are earning £10,000 a year. This is just not acceptable.

  Dawn Primarolo: But, as you said, Mr Cousins, it might show that; it might not, and the work of this Committee and the Ombudsman and the PAC in terms of changes to the system, and how we progress with those, is to deal precisely with those points.

  Q48  Jim Cousins: Hang on, if that is not correct, if the contemporary figures are better than the ones that I have just distilled from the information that is available, it is absolutely essentially that that is made known. Can I ask Mr Orhnial, you are responsible for the Government's welfare reform policies; do you not see that it is going to be very difficult to convince people to go back to work if something like 60% of the very lowest income people returning to work are likely to be caught up with either under or overpayments of tax credits? That undermines the whole policy.

  Mr Orhnial: Can I just take you back to the some of the principles of the system—

  Q49  Jim Cousins: No, do not take me back to the principles of the system, Mr Orhnial, I am trying to get you to recognise that these administrative deficiencies have a major impact on the Government's welfare reform policies.

  Mr Orhnial: I think end-of-year adjustments are a feature of a system that is based on annual awards. That is also why we cannot give you the figure for the year that has just ended on tax credits because we do not have those numbers until the process is completely finalised for the year.

  Q50  Jim Cousins: Do you accept, Mr Orhnial, that if we have a policy of encouraging people to go back to work, quite properly, earning very low incomes, as they do, depending as they do on tax credits, to have a situation where 60% of them may be affected either by under or overpayments of tax credits is a shocking, devastating damage to the whole welfare reform policy? Do you suppose people are not aware of the difficulties they might face when they return to work?

  Mr Orhnial: It is not a figure that I recognise as being current.

  Q51  Jim Cousins: The last figure that this Committee or indeed anyone else has shows that two million families out of five are affected by overpayments and nearly a million families out of five are affected by underpayments. Imagine yourself to be a family on £10,000 a year going back to work and look at the implications of that.

  Dawn Primarolo: But the implications are also demonstrated by the continued take-up and the figures demonstrate that there are some 700,000 families who would be worse off if the system did not exist as it is. You made a series of propositions based on how you think people would react to the information. The statistics do not indicate that that is going on. However, we are not sitting in front of you today, Mr Cousins, saying that we are not doing a great deal of work—hence all the changes that are going on—to ensure that the overpayments problem, whilst keeping the flexibility of the system, is considerably reduced by all of the changes that are being made. You pray in aid one set of statistics and we pray in aid alongside that other statistics saying that it may not be as straight forward as—

  Q52  Jim Cousins: Paymaster General, I was hoping very much that you would come here this afternoon and pray in aid a new set of statistics which would demonstrate these very obvious difficulties were now going down. I am extremely concerned that you are unable to do that.

  Dawn Primarolo: Well, you will need to take that up with National Statistics then because these are not—

  Q53  Jim Cousins: It is not a matter for National Statistics.

  Dawn Primarolo: —Because these are figures produced under arrangements for showing how it is assessed on the complete year.

  Q54  Jim Cousins: This is not an issue for National Statistics.

  Dawn Primarolo: This is not an issue of me saying I have the information and I will not give it to you. It is the way the information is collected and reported on and produced, and that is just as difficult for me as it is for you.

  Q55  Mr Newmark: Are you saying the figures are wrong; this is what I am not clear about?

  Dawn Primarolo: No, I am not saying the figures are wrong. Mr Cousins wants me to give figures now that I am not privy to.

  Mr Newmark: They are either right or they are wrong. You cannot throw your hands up in the air. The buck stops with you and the Chancellor. The Chancellor has decided to say it is your responsibility, Paymaster General, which is why you are before us and not he. It is a serious allegation.

  Chairman: Colin Breed?

  Q56  Mr Breed: Can I say, Paymaster General, that the emotion of the outrage that Mr Cousins has demonstrated is but minor to that of some of the people who phone us up, I suspect, who are without money and without the means sometimes to pay for their family's food on the weekend that they have been promised a cheque or promised a payment. We have got lots of fresh evidence from the voluntary sector that there still are very significant numbers of people who are disputing overpayment who are getting an absolutely lousy service. They write an extremely long letter explaining in huge detail what is actually happening and they get back months and months later a few lines which often do not seem to refer to the case they are talking about. People are promised payments on a regular basis and then nothing happens. What actually are you doing to ensure that the senior management of your service actually knows what is happening on the ground and does not just receive information from HMRC in some sort of statistical manner? These are real people, as you know.

  Dawn Primarolo: I do know that and I also know what provisions are in the system to make sure that the issues you are talking about do not occur. I think that the interaction—and I am not going to speak for them, I am going to ask Sarah to do it herself—between the management of HMRC and representative groups and directly with claimants is developing all the time. There are a number of pilots that have been running and contact methods used in order to speak directly to claimants. I am happy to give you a note on it as well, but Sarah?

  Ms Walker: I have to say that I do recognise that there have been a lot of problems and cases such as you describe and it is nothing that we are happy about, but perhaps I could just say two things that we have done recently to address those specific issues. One is after an instruction from the Paymaster General last year, we have put work into reducing the turnaround times for disputes so that the vast majority of disputes are now dealt with within four weeks and not the months that may are happened in the past that you suggest. The other thing is that we have put in a lot of effort to improving the explanations we send out to people to help them understand why their disputes are not successful. As I say, only 5% of the disputes that we are dealing with at the moment turn out to be justified in terms of mistaken overpayments, but in all those cases we need to do better to explain to people why it is that the overpayment has arisen. In November, we introduced new guidance and new scripts for the letters that we send out so that we can improve the explanations we give to people when the dispute is resolved. I personally think that is a very important thing and we will keep watching that and make sure that the improvements continue.

  Q57  Mr Breed: Can I ask are levels of disputed claims going up or levelling off or are they actually coming down? From my experience, and I suspect from others' experience, there seems to be no discernable change in the whole level of the number of people who are disputing overpayments.

  Ms Walker: It is roughly the same, it is roughly constant.

  Q58  Mr Breed: It is roughly the same, so more resource has gone in, there are more opportunities for people to speak and more explanation, and yet still the disputes are at about the same sorts of levels.

  Ms Walker: I think it is understandable that people do not like being told they have an overpayment that they have to pay back and a proportion of people will always ask for an explanation and will want to dispute it and know why that overpayment has arisen. As I say, what we need to do is deal with those cases quickly and give them a good explanation of what has actually happened.

  Q59  Mr Breed: One of the other anecdotal figures on that is that in recent times the proportion of disputes that have been settled in the claimants' favour has dramatically dropped away. We are talking about relatively small numbers of those and now it seems to be that you have become much harder or much more robust and there is very little now that is being settled in the claimants' favour.

  Ms Walker: It is not a change in our attitude. It is a reflection of the fact that we are actually making fewer errors. As I say, only 5% of the cases we are getting in now are genuinely reflecting errors that we have made. Where there is an error we will examine that and again we will apply the test which we use, which is could the customer reasonably have realised that the payment was wrong? If they should have realised it was wrong having checked some specific things that we asked them to check, we would have expected them to tell us. If having checked those things, they thought it was right but actually because of our error it was wrong, we will write off the overpayment.

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