Examination of Witnesses (Questions 100-119)|
MP, MR TONY
14 MARCH 2007
Q100 Mr Newmark: If I move to what
Sarah said earlier, when you said the level of mistakes are now
much smaller, if I sit here in a year's time, and I hope I have
the pleasure of the Paymaster General in front of me, the number
I am going to see is going to be perhaps smaller than the 397
million of write-offs of debt that we have seen in this past year,
is that right? Do you have confidence in the system now?
Ms Walker: Absolutely, yes. If
you look at the figures in table three of the NAO memorandum it
shows that by 5 April 2006 we had written off £0.3 billion
in respect of 2003-04 and £0.2 billion in respect of 2004-05.
If you look at it in respect of the years that we were dealing
with that amount is going down.
Q101 Mr Newmark: But you have still
got this provision of doubtful debts, this elephant in the room
in your accounts that is £0.9 billion.
Ms Walker: There are two things
going on here. One is the write-offs that we make in respect of
official error and the other is the amounts that we may have to
write-off in time because we are not able to collect the money
that is owed to us. The provision for doubtful debts is a prudent
and possibly generous provision for the amounts of outstanding
debt that may not even be recoverable.
Q102 Mr Newmark: Whether it is generous
or prudent, it is a big number, okay.
Ms Walker: Absolutely.
Q103 Mr Newmark: So you could be
out 10% maybe and things will go to your benefit, 10%, maybe 15%,
but you are still talking about total debt of £1.2 billion,
£1.3 billion having to be written off from overpayments of
£4 billion. That is about 33%, so about one in three pounds
of overpayments, that you are stuck with that you are having to
write-off, or have I got my maths wrong?
Dawn Primarolo: It is not written
off yet, it is in the accounts as debt that might not be recovered.
You are adding together figures that have definitely been written
off because the error was accepted in what we are required to
do under prudent assumptions in terms of what might not be collected
in the future.
Q104 Mr Newmark: I am assuming that
if prudent was a figure half that they would have put that in
but clearly they are expecting it to be somewhere around that
figure. I am giving you 10% or 15% room for error there.
Dawn Primarolo: That is kind of
Q105 Mr Newmark: It is not half a
billion, it is almost a billion extra. I am saying to you, do
you think that is a good sign? Is this something you are proud
of, that one in three billion of taxpayers' money is being written
Dawn Primarolo: I do not accept
your proposition that adding together what definitely is being
written off with what we are required to put in our accounts as
doubtful debt that might not be recovered is necessarily
Mr Newmark: I guess we are talking at
cross-purposes because you are talking about
Chairman: Let us have a question.
Q106 Mr Newmark: I am just getting
to the question. You are talking about the accounting standards
that you are living by and I am asking you a question about the
fact that the numbers I am looking at are showing £1.3 billion
out of £4 billion that you are going to have to write-off
as overpayments, give or take 100 million. That is a bad number.
I am saying to you, is that something that the Government is raising
a flag about, is it something it is proud of or do you think there
is a problem here?
Dawn Primarolo: No. I have answered
the question about the accounting of doubtful debt and the actual
writing-off. There were some in the House who took the view that
we should have written off all the debt and the Government did
not take that view because it believed that under certain circumstances
it was recoverable and that is a matter that continues to be of
Q107 Mr Newmark: This is to do with
the same issue Colin was talking about, which is the causes of
overpayment and communicating with the public. Citizens Advice
have told us that HMRC has "no routine method for explaining
the cause of an overpayment" and that it is "frequently
unclear how an overpayment has arisen or even how much it is".
Why is there no routine method for explaining the cause of an
Dawn Primarolo: There is the improved
award notice and the issue of playback by which change is being
made into the system that will continue to improve the system
and assist with those matters. As Mr Todd rightly said earlier
on, in terms of IT releases and having those in the system, they
were a priority and are now there. What the Department also has
to do is to discuss regularly with the organisations which are
part of the consultation framework about issues in the operation
of the tax credit system and how to improve that system, and that
goes on well with feedback so work is being conducted to ensure
Q108 Mr Newmark: Okay, but, again,
moving forward a year from now, if I am sitting here before you
is there going to be more clarity from those at the receiving
end of the notices and letters and everything else that they have
as to what is going on? Will the communication be better than
it is today?
Dawn Primarolo: Yes. I have followed
the recommendations that have been made to me both on award notices
and playback and style of communication to the claimants, and
I believe, as do several recommendations from different committees,
that will produce a better system whereby there is greater clarity.
Q109 Kerry McCarthy: We supported
in our report the idea that taxpayers should be given 30 days'
notice before recovery commenced, and I think in your response
to the report you said you entirely supported that, and made a
statement to the House that you supported that, but that you would
"try and develop opportunities to implement" the pause.
Can you explain what you are doing to try to implement that, what
the timescale is and what the difficulties are because I understand
you described it as technically challenging.
Dawn Primarolo: It is technically
challenging, yes. Again it comes back to the point that Mr Todd
made about what is the highest priority in terms of making the
system work. Where an overpayment is disputed, in effect the suspension
of recovery happens now for the period that the dispute is being
investigated and the result sent to the claimant. I am in discussion
with the Department who tell me that the introduction of the pause
on an IT basis is very complicated in terms of the system and
is not as straightforward as it seemed and, therefore, they are
considering that. What I have also said to some organisations
I have met with the consultation group is all round in the work,
both with the Ombudsman and the Adjudicator, in improving what
we call Tiers 1, 2 and 3 of the complaints procedure, the correct
route is to deal with the complaints promptly at the right time
so that they do not escalate into a dispute procedure. I do not
have a specific IT release where I will be able to say I want
the pause to go in. I am still asking the Department to consider
it and look at what the consequences would be.
Q110 Kerry McCarthy: Am I correct
in understanding that at the moment if you identify there has
been an overpayment you immediately go into recovery mode and
at the same that you tell somebody you are going to recover you
start recovering the money?
Dawn Primarolo: Yes, that is what
the system does.
Q111 Kerry McCarthy: Have you undertaken
any analysis as to how long it tends to take people to contact
you to say that they want to dispute the overpayment?
Ms Walker: I do not think we have
ever analysed the time lapse between issuing the award notice
and people coming with a dispute. I do not know the answer to
Q112 Kerry McCarthy: I just wondered
because I can imagine that in some cases it is only when they
start seeing how much money comes into their bank account and
wonder how long it takes them formally to register there is a
dispute rather than making inquiries to try to find out on an
informal basis that is something has gone wrong.
Dawn Primarolo: We do not have
that information but it would not make any difference to their
dispute. The time period that I have said before to the Committee
Q113 Kerry McCarthy: They might have
had a period of some weeks in which the money was being recovered
from their account.
Dawn Primarolo: It would depend
how they were paid, weekly or monthly.
Q114 Kerry McCarthy: On this general
idea of the burden of proof being on the claimant to prove that
they reasonably did not realise they were receiving an overpayment,
we are getting quite a lot of evidence from the voluntary sector
that this is not being applied consistently, that in some cases
the decision is being made on a different basis as to whether
the claimant was reasonable in accepting a payment that they were
not entitled to. Have you done much analysis of that? People have
contacted us from specific organisations, such as the Citizens
Advice Bureau, where they have had two people come in to them
in very similar situations but in one case you accepted it was
reasonable for them to not have realised that an overpayment was
being made but in a very similar case it was not reasonable.
Ms Walker: I am not aware of a
problem with that. What we have done over the last few months
is first of all clarified exactly what we mean by the reasonableness
test, so we are making it clear to people what we expect them
to check around their award and what we do not. We do not expect
them to be able to understand the whole calculation because that
can be quite difficult but we do expect
Q115 Kerry McCarthy: It is basic
things like they have got the number of children down correctly,
the date they started work and things like that?
Ms Walker: Exactly, and the amount
that it says on the award notice is the amount that is going into
their bank account. It is a simple thing to check. If they have
checked those things and let us know if there is a problem and
we have not acted on it then we would accept they should reasonably
be able to expect that is right and they have done all they need
Q116 Kerry McCarthy: That is quite
straightforward. I can understand if they have not checked things
on the checklist, if the number of children is wrong or something
like that, and you say "you should have realised this",
but once you have exhausted the checklist, say, and everything
on that is accurate, are there examples beyond that where you
would still hold that they should reasonably have known?
Ms Walker: I think there are cases,
and it does not happen very much now. In the past there have been
cases where, for instance, an unexplained payment of £10,000
has turned up in a bank account and there we would expect the
person to query that. Generally, so long as they have checked
that the information we played back to them matches what they
have given to us then that is all we expect them to check. What
we have done over the last few months is extra training for the
staff doing those cases and more checking by managers. I can give
you a note if you like on the new processes we have got which
are trying to ensure consistency in that process.
Q117 Kerry McCarthy: Yes, please.
The percentage of the disputed overpayments that are written off
has fallen off fairly dramatically. Is that because on the reasonableness
test you have now got firmer procedures in terms of using the
checklist and so on and there is less subjectivity in the process?
Ms Walker: It is partly that.
As I say, only 5% of disputed cases actually represent an error.
Obviously the first hurdle is that it should be a mistake and
then out of those 5% roughly half will meet the reasonable belief
test in our experience, so to half of those people we will say,
"It was reasonable for you to have thought that was right
and we will write it off" and to the other half we will say,
"There is something there you should have checked and told
us and you did not, therefore we are not going to write it off".
Q118 Kerry McCarthy: There will be
some people, particularly people with language difficulties, where
even though the checklist may be quite a simplified procedure
now they will not necessarily be able to follow that. Do you take
that into account or do you assume if somebody receives something
in the post they do not understand then the obligation is on them
to go and have it explained to them by somebody else?
Ms Walker: It is difficult to
give a hard and fast rule on those cases but, yes, we do take
exceptional circumstances into account.
Q119 Mr Breed: Carrying on from the
reasonableness test, why is the Government still resisting the
opportunity for claimants to have a right of appeal to an independent
tribunal? Are you basically running away from something or are
you not prepared to stand up for the quality of your decision-making?
Dawn Primarolo: No. The tax credits
system operates on the basis that there is an automatic balancing
so that is provided for in terms of when an overpayment occurs
and then the Department has to make clear on what basis it decides
that an overpayment, hence the reasonable test 26