Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 120-139)


14 MARCH 2007

  Q120  Mr Breed: Reasonableness is a bit subjective at times.

  Dawn Primarolo: We are talking about rights and responsibilities. The responsibilities of the claimant are to notify the Department of the correct information and have obligations on when to notify change of circumstance and that is what should happen. If the error is on that side then the reasonableness test, which is the test in the tax system, I believe it was introduced in 1971 by the then Conservative Government and has operated perfectly well in the tax system, which is where the tax credits are, is the basis on which we do it. What we have said, and I think it was in the note to the Committee, is that we will run a pilot, the details of which we are still discussing with the Adjudicator but I am happy to give the Committee a note on it, on whether we could have an expressed appeals procedure there that took something out of the Department and ran it straight to the Adjudicator.

  Q121  Mr Breed: We will come on to that in a moment, that is the fast track mechanism. Essentially we have had recommendations and evidence from huge numbers of organisations, ourselves recommended, yet still the Government resists that right of appeal.

  Dawn Primarolo: There is a right of appeal to entitlement.

  Q122  Mr Breed: You have not really explained to us why that resistance is there.

  Dawn Primarolo: There is a right of appeal to entitlement.

  Q123  Mr Breed: Right of appeal to an independent tribunal.

  Dawn Primarolo: To an independent tribunal on entitlement, that is present whether or not somebody gets the tax credit.

  Q124  Mr Breed: This is to do with overpayments.

  Dawn Primarolo: On the overpayments, what went through the House of Commons in terms of the Bill put certain arrangements in place for automatic recovery of overpayments because of the flexible system and it is on that basis, given the arrangements for recovery that are in the Bill, that the Government continues on all the points about improving the different levels of when a complaint is dealt with, making sure people have confidence in the system, investigating and the Adjudicator point. That is why the case rests on that basis. That was how the system was designed and that is how it operates. It is in the tax system and that is how the rest of the tax system operates.

  Q125  Mr Breed: You have not actually told us why.

  Dawn Primarolo: I have told you.

  Q126  Mr Breed: You have not told us whether it is because you do not have any confidence in the quality of your decision-making on your subjectivity on the reasonableness test. Quite frankly, if you are prepared to stand by those why were you not prepared to have them submitted to an individual tribunal?

  Dawn Primarolo: No, that is not what I am saying. I am saying that the system is designed to operate in this way. It is a sensible system given that it is flexible to respond to people's change in circumstances. That was the way the system was designed and accepted by the House. In terms of making that system work properly, that is the work we are undertaking now.

  Q127  Mr Breed: Experience has shown, and all those people who have come to us, and indeed I suspect to you, have said the system should have that in it yet you do not take their recommendations, you have continued with your resistance. Can we move on to the fast track process which you told us you were going to pilot in a few months some few months ago. Where are we? When is it going to start?

  Dawn Primarolo: We are just in the final negotiations with the Adjudicator on how to handle this, I understand it is in the next couple of months. Exactly how it will run I am happy to do a note to the Committee on. I understand the pilot will run for three months to give us the information and then I will be in a stronger position to send the outcomes to the Committee as well.

  Q128  Mr Breed: Is this not just a means of you trying to avoid an independent tribunal? It is no more, in effect, than a scheme through which a claimant can bypass HMRC's complaints procedures by complaining directly to the Adjudicator.

  Dawn Primarolo: No, it is about making sure that at all levels the Department deals correctly with complaints speedily and accurately. If it can be done better through the Adjudicator on this type of procedure then that is what the pilot is designed to inform us.

  Q129  Mr Breed: Just to test its robustness, what would be the effect of a decision by the Adjudicator which is adverse to HMRC? Will HMRC be required to take action as a result of what the Adjudicator says?

  Dawn Primarolo: Yes.

  Q130  Mr Breed: On all cases?

  Dawn Primarolo: Yes.

  Q131  Mr Breed: Is the Adjudicator empowered to examine cases which you personally as Paymaster General have considered already?

  Dawn Primarolo: I never consider cases, I am not empowered to do that, and that is protected under taxpayer confidentiality. All of the consideration of cases is done by HMRC and the Adjudicator will be able to look at cases and her decision will then be binding on the Department.

  Q132  Mr Breed: So is the Adjudicator going to be able to look at some retrospective cases or is it only going to start from—

  Dawn Primarolo: No, it will start from now in those disputed overpayment claims.

  Q133  Mr Mudie: There is a very hard Scottish football manager I admire. I am speaking about recovery pauses. In your response to us when we said that you should have a pause, you said, "We will try". This Scottish football manager said, "There's no such as trying, you either do or you don't". Are you going to do? Are you going to introduce a pause or are you just playing for time with no intention of doing it? We have now waited a year and that is a long enough bloody pause as it is, is it not?

  Dawn Primarolo: No, I am not playing for time. If I had the information that told me it simply was not possible I would tell the Committee now. I agreed that the introduction of a pause was desirable. To date the Department have told me that it is complex and may put at risk other releases but I have not taken the principle of the pause off the table. There would be no point in me stringing the Committee along, I might as well just tell you, and I would. That is the position now. Mr Todd made the point about IT releases and, given that is not my field, if I am told it is complex and will put elements of the system at risk I need to take note of that and to get the information that substantiates that.

  Q134  Mr Mudie: I am just thinking of the amazing things we can do with computers and I am amazed you accept what computer people are telling you and after a year you are still not able to tell us when you are going to do it. It comes back to either you saying it is going to be done or are you just keeping the principle on the table to avoid an argument?

  Dawn Primarolo: Well, Mr Mudie, I do not think I have been avoiding an argument either this afternoon or in my frequent appearances in the House and—

  Q135  Mr Mudie: It is always a pleasure to see you, Minister.

  Dawn Primarolo: I know! If life was so easy that only I had to decide and it was done, it would be wonderful. I want to assure you again that there is no point, and I would not do it, in stringing the Committee along.

  Q136  Mr Mudie: It is hard to believe, but in your case, Minister. Let us take this business of appeals. The Child Poverty Action Group say the Treasury in its response to us are not exactly giving the full picture because they claim that the DWP do not legally have a case under the Social Security Regulations to take back overpayments, so there is never a need to appeal. I would be happy for you to correct the Child Poverty Action Group who have specified under the Act the only way you can appeal when there is an overpayment is because the Department thinks there is fraud or something similar so they are going to take it back and the person can appeal, but if it is official error they claim that DWP do not legally claim it back. That is their evidence to us. If you want to take on the Child Poverty Action Group be my guest, but I think they have made a very valid point.

  Ms Walker: Let me try and explain the legal position. The legal position is exactly the same for tax credits as it is for the DWP benefits. There is no right of appeal against a discretionary decision by DWP whether to recover an overpayment or not. If they use their discretion not to recover an overpayment or to recover it, there is no appeal against that discretion.

  Q137  Mr Mudie: They say that section 71 of the Social Security Administration Act 1992 is the basis on which Social Security operates and you operate under the Tax Credits Act 2002, which is different. They, therefore, are not looking at like-for-like and say under that the DWP do not take it when there is official error because they have no grounds. They are simply saying if you were to amend the Tax Credits Act to bring it in line with the Social Security Administration Act 1992 we could stop this business of pauses and the overpayments would not be claimed back if it were official error.

  Ms Walker: I think the position is that in both cases there is a discretion under the Act whether to recover or not.[5] DWP may operate their discretion in a different way, and in the past I think they have operated it in a different way from the way that we have for good reasons, which the Paymaster has explained, about the balance of responsibilities between us and the customer, but I do not think the legal position is different.

  Q138 Mr Mudie: That is a very important point. There was some debate, if I remember correctly, as to whether this should be administered through DWP or the Treasury. If you are saying this discretion would have been exercised if the decision had been taken to leave it in Social Security and DWP, claimants are actually harmed by it being placed in the Treasury.

  Dawn Primarolo: No.

  Q139  Mr Mudie: That is what you said. You both have discretion, they operate it and you do not. We are saying why do you not operate it when they do?

  Dawn Primarolo: The information that I have been given, and I understand this was an exchange between the Committee and Paul Gray in a written reply, is that DWP's policy is always to seek recovery where it is reasonable to expect the claimant to have been aware that they were being overpaid.

5   Note by witness: For Tax Credits the discretion to recover is set out in Section 28 Tax Credits Act 2002. For Social security benefits discretion to recover overpayments caused by official error is under the Common Law. Back

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