Examination of Witnesses (Questions 60-79)
DAWN PRIMAROLO
MP, MR TONY
ORHNIAL AND
MS SARAH
WALKER
14 MARCH 2007
Q60 Mr Breed: So in terms of the
actual figures, in 2005-06 there were 160,000 disputed overpayments
which were written off and that has now in the current year dropped
to 8,600 which is, by any measure, a massive reduction and that
is all down to the fact that you now explain things in a way which
means you have not made the error?
Ms Walker: No, it is not that.
What it is, is the cases we were dealing with in 2005-06 largely
related to the very early days of the system. We did have a backlog
that accumulated which we were then dealing with and in the very
early days of the system, regrettably, we were making a lot more
mistakes and therefore a lot more of those disputes were justified
and we then did write off the overpayments. We have now got into
a state where because we are turning these round in four weeks
we are dealing with current issues and our current accuracy rates
are much better and the level of mistakes is a lot smaller.
Q61 Mr Todd: Just returning to a
point that was raised earlier, in the trip that the Committee
made to Preston, one of the absolutely clear impressions we gained
was of a team with wholly inadequate management information to
support their decision-making. I think actually some of the questioning
that has come up has continued to confirm that. There is a lack
of certainty as to how this system is working and that gives you
a poor tool set to deal with problems that remain. I want to dwell
on one or two of those problems. Firstly, can I talk about compliance
arrangements with you. HMRC have increased the resources put into
compliance checks and between 2004-05 and 2005-06 raised the number
of checks by around 40%. The yield from the activity has increased
by something like 300%. Can you explain the difference between
those figures? What are you doing differently? Are you targeting
it better? Are you finding more fraud? What is actually happening?
Dawn Primarolo: The e-portal is
closed and that would be a significant amount of that and I think,
yes, the balance between pre and post award check, which has changed,
enables better compliance and more information is available, so
that produces that result and I think the figures are in the NAO
table.
Q62 Mr Todd: So you are saying the
reason for that very large increase in 2005-06 of the yield was
simply the identification of the fraud being perpetrated through
the portal use?
Dawn Primarolo: Yes.
Ms Walker: A large element.
Dawn Primarolo: Not all but a
large element of it, yes.
Q63 Mr Todd: Compliance checking
is only a tiny proportion of the total number of claims, about
2% to 3% or something like that. How is that targeted?
Dawn Primarolo: On a risk assessment
the Department does.
Ms Walker: We have a series of
risk rules which are in our automatic systems which pick up characteristics
of claims which suggest they need further checking.
Q64 Mr Todd: I see and so there is
a pretty scientific basis for the choice of 146,000, is there?
Ms Walker: Absolutely.
Q65 Mr Todd: On the basis that that
complies with your risk analysis of your claim pool, you think
there are about 146,000 that need to be checked more intensively?
Ms Walker: Yes, we provide the
resources that are necessary to check high-risk cases.
Q66 Mr Todd: When you examine the
track record of error which was discussed earlier in other questions,
there appears still to be a relatively high prevalence of official
error but also of claimant error as well, which of course compliance
checks are supposed to address too; it is not purely an attempt
to deal with mass fraud, it is also to deal with those who have
genuinely put in the wrong information. Would the level of error
that is known to us—and I have to say we do not know a lot—suggest
that the compliance activity is too low?
Ms Walker: The figures that we
have for error and fraud, the ones that were published last year,
relate only to 2003-04 which was the first year of the system,
and we would hope that is not typical of the steady state, but,
yes, it is true that the majority of that is error rather than
deliberate fraud. We do to some extent use our compliance staff
to pick up error but errors are also picked up within the normal
processing.
Q67 Mr Todd: What I am hinting at
is whether this is a cost-based activity and you are putting in
a certain amount of resource because that is what you think you
can afford to do, bearing in mind the yield that appears to be
being produced by compliance would suggest that you should be
putting in rather more.
Dawn Primarolo: It is based on
the risk assessment that the Department gives me.
Q68 Mr Todd: We only have the figures
for 2005-06 so we do not have a particularly current position.
What is your impression of compliance activity in the year just
coming to an end?
Ms Walker: We are continuing risk-based
compliance activity, particularly in relation to—
Q69 Mr Todd: Has it gone up, do you
think?
Ms Walker: The level of activity
or the amount of non-compliance?
Q70 Mr Todd: No, the level of activity.
You did 146,000 checks in 2005-06. Do you think you will have
increased that level in the year that you are just finishing?
Ms Walker: We have done more I
think because we were given more resources to do it in the current
year.
Q71 Mr Todd: Which slightly goes
back on the point you just made, if I may be cruel. That contradicts
what you have just said.
Ms Walker: That was our assessment
of the need.
Q72 Mr Todd: I will be charitable.
Dawn Primarolo: That is very kind
of you but the assessment of the need is done on a risk assessment
and the resources are put in, if the risk assessment indicates
other resources are required, and that is what happens.
Q73 Chairman: Can I just be clear
about this 146,000; you are paying five million people and you
are paying 98% of those claims without checking them?
Dawn Primarolo: No, the tax credit
system has a series of checks and balances in it and there is
also a series of assessments on risk. I have said this before
to the Committee so I will not go back over it. The attempts specifically
looking at particular types of fraud and risk assessment were
around pre checks, around the portal, around restricting the availability
of paper claims, and those issues were directed specifically at
a perceived threat on a risk assessment which the Department provides
to me, a recommendation that they should do something. The tax
credits system itself has compliance checks within it. I have
done a note before on it but I am happy to do it again. As things
go through the system, checks are made. For instance, I cannot
remember whether it was one of the recommendations from this Committee
or not, but the Department has undertaken a written exercise to
two million families who are on the highest award or in the first
taper going through with them and reminding them changes of circumstances
that they should notify to the Department or changes of income.
It was piloted first and that process is now underway, so there
is a whole range, including the pilots that are going to be run—I
think they start next Monday—on relationship breakup and
whether or not there are improvements in procedure there that
would speed things up. That is one of the issues that Mr Cousins
has raised before. And we are looking at how we can make sure
that the information is more timely and therefore changes are
made quickly to act as a downward pressure on error.
Ms Walker: Perhaps I can just
add that the compliance checks are not the only checks we make
to guard against error. All the claims that we get in are run
against internal consistency checks so errors that are on the
claim form will be picked up at that stage.
Q74 Mr Todd: I am assuming there
is some sort of process. I suppose I should not assume that based
on what I have seen, but I am assuming that even this setup has
some routine checks. I also noted the balance between the checks
on claims that have not yet been paid and the ones that have been
paid also changed between the two years, so we have started seeing
a greater number of checks on claims that had not been paid at
that point. Is there any legal obstruction to investigating an
award before it has actually been finalised, because what we certainly
found in the previous year was that the overwhelming majority
of the compliance checks were on awards that had already been
made and therefore you were already into attempting to recover
from people or deal with a criminal act which had had some success.
Ms Walker: We are legally entitled
to check the information before we make a decision.
Q75 Mr Todd: Even the process of
investigating someone's circumstances in some detail?
Ms Walker: Yes.
Q76 Mr Todd: Such as obtaining information
about their income and domestic circumstances and so on, if you
suspect that that may be—
Ms Walker: Yes, if we have reason
to believe that the information in the claim is not correct then
we are entitled to check it.
Q77 Mr Todd: Okay. What do you think
is a reasonable figure to aim for? We have had the earlier discussion
about the levels of fraud and error in the system. What do you
think is a reasonable target for the system?
Dawn Primarolo: I think it should
be as low as it possibly can be and we should be driving—
Q78 Mr Todd: I am sure you would.
Dawn Primarolo: The PAC requires
1% as the benchmark.
Q79 Mr Todd: We do not know where
we are in relation to that?
Dawn Primarolo: But we should
drive it down as hard as we can using the tools that we have to
do that, and that is what is going on. I do not have a figure
that I think will be all right for error and fraud because I do
not think that would be acceptable to Parliament.
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