Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 140-159)


14 MARCH 2007

  Q140  Mr Mudie: Yes, that is fraud. We are not arguing about that, Minister.

  Dawn Primarolo: We operate that on the reasonableness test where the claimant was aware that they were being overpaid, whether it was reasonable for them to have thought that when they were told they were going to get one amount and got another. Since April 2006 I am informed that DWP have increasingly sought recovery of official error overpayments, so the operation in terms of HMRC is where there is an official error and it is reasonable that the claimant did not know that error had occurred then there is more—

  Q141  Mr Mudie: I think that is not entirely correct. That latter part is the DWP inferring or being strong enough to suggest that was misrepresentation where they do have the ability to go ahead. Where it is official error that gives them the excuse for not recovering. You get official error, there should be no recovery, but where there is fraud or misrepresentation or lacking in material facts there is no difference between us, if the DWP think the latter is there under the Social Security legislation they can go for a recovery but if it is not there, if it is official error, then they actually— You are not doing that. It is not that you are not doing it, you are not willing to tie your legislation up to their legislation so that claimants are treated in exactly the same way. You would need an amendment to the Tax Credits Act 2002.

  Dawn Primarolo: I do not know how this can be resolved in terms of a dispute about the interpretation of how DWP operates. I am informed that DWP increasingly seek to recover where there is official error.

  Q142  Mr Mudie: Why speculate, Minister? Why do we not just ask the Treasury Solicitor to actually examine how both Acts operate as far as claimants are concerned and we can have a definitive look at it.

  Dawn Primarolo: Okay.

  Q143  Mr Mudie: Let us take you to where you are on good behaviour and then you spoil yourself.

  Dawn Primarolo: Thank you.

  Q144  Mr Mudie: A person apparently has an appeal when your award is challenged, when they do not think you have paid enough. You very nicely, on the one hand, give them the right of appeal but then you decide whether the appeal is valid.

  Dawn Primarolo: I am sorry, I do not understand that.

  Q145  Mr Mudie: I think you had better consult either side of you. That is the complaint we receive in great number, that you decide whether it is valid and goes to the tribunal.

  Dawn Primarolo: I think it is on the award notice, it is on the letter that they are informed they have a right of appeal against entitlement.

  Q146  Mr Mudie: No, CPAG—this is true, according to my right—have given us written evidence with figures. If I challenge your entitlement you decide whether it goes to the tribunal, you decide whether it is valid, and if it is valid you first of all attempt to negotiate with me and, if not—A penny is dropping somewhere.

  Ms Walker: Perhaps I can help. We have been in discussion with the CPAG about the handling of some appeal cases within the Department where they have not been happy with the details of the way that we have handled cases. I think we have now reached an agreement with them.

  Q147  Mr Mudie: Can we just be clear then. If I challenge your award and I wish to challenge the validity of it, is it like an immigration appeal where it is immediately off the Department's desk and off to a tribunal without the Department having any right to decide whether it goes to a tribunal?

  Ms Walker: Yes.[6]

  Q148 Mr Mudie: You are absolutely certain?

  Ms Walker: Yes, you have got a right to appeal.

  Q149  Mr Mudie: So CPAG are wrong again?

  Ms Walker: There have been some problems in the past but we have resolved them and that is what will happen now.

  Q150  Mr Mudie: I have a last question. This is the inter-relationship between benefits and tax credit. Both the Citizens Advice Bureau and One Parent Families have given us examples of where the interaction between the two benefits can cause difficulties: somebody comes off Jobseeker's on to income support, working tax credit do not immediately stop that and the claimant ends up very much worse off in the very short-term once the mistake is realised. If we supply you with details will you agree to have a look at this?

  Dawn Primarolo: Yes.

  Q151  Mr Mudie: We will ask both organisations to pass you details.

  Dawn Primarolo: Yes.

  Q152  Jim Cousins: This is an issue I have raised before on previous occasions. Pension contributions are disregarded in the assessments of tax credits but I think very few people know that. Do you have any idea, if I could ask you, Sarah, how many claimants of tax credits are actually claiming such a disregard of their pension contributions?

  Ms Walker: I think it would be difficult for us to tell. We ask people to put on their claims their taxable income from their P60 or from their tax return and that ought to be net of pension contributions where those are netted off by their employer or personal contributions, so we would only see the net figure.

  Q153  Jim Cousins: There is a facility for people to set out when they make a claim for working tax credit to specifically make a claim for disregard of pension contributions, but I think it is only on about page 30 of the big booklet. Do you know how many people actually do that?

  Ms Walker: I am afraid I do not know.

  Q154  Jim Cousins: The Government is about to introduce the personal pension accounts to which people will be auto-enrolled. Will you have a system of auto-disregarding the contributions that people make? Are you thinking ahead for such an eventuality?

  Mr Orhnial: I suspect it will work in exactly the same way as they are disregarded on a payslip. If you are an employee and you are making contributions to your employer's pension arrangements that is taken off your gross pay, which is essentially the point Sarah made earlier. So the pay that you enter on to your tax credits claim form will essentially be net of that contribution in the first place. The only cases where the point you make arises will be if they are independently making contributions, for example if they are self-employed. It is certainly something we will need to bear in mind.

  Q155  Jim Cousins: As a matter of fact, I think the point I am raising is rather more widespread than that because some people will find themselves in a situation where their job changes and the pension contributions they make are made in different ways. You are just simply relying on the P60 to automatically disregard the pension contributions.

  Mr Orhnial: Yes. If that person stayed in the new scheme, the NPSS or whatever it is called, they would stay in the scheme, provided they did not opt-out, as they moved from one employer to another, that would be my understanding. We can certainly bear in mind the point and make sure that tax credit claimants are not disadvantaged by the move. My understanding is that it will work pretty much as the occupational pension scheme does now except for the fact that it is a common pot so if you move from one employer to another employer you have still got your pension pot and the money is being deducted.

  Q156  Jim Cousins: But if somebody was making a contribution, say, to a stakeholder pension it would not necessarily show up in their P60.

  Mr Orhnial: That is true, if they are doing that independent of their employer. I am sorry, I had forgotten that particular case. Presumably that was what your question was relating to.

  Q157  Jim Cousins: So there could be quite large numbers of these people?

  Mr Orhnial: There could be a number, I have no idea.

  Q158  Jim Cousins: People who have taken out stakeholder pensions following the Government's advice might find their contributions are not disregarded for the tax credits that they are getting?

  Mr Orhnial: It rather depends on whether they are doing it through their employer or not.

  Q159  Jim Cousins: Let us be clear about this. If people are making payments other than through their employer, which will show up on the P60, then it is quite possible that their tax credit assessment will not be right.

  Dawn Primarolo: If they do not tell us.

  Mr Orhnial: The facility to tell us—

6   Note by witness: When a customer appeals against entitlement, HMRC will try and reach a settlement with them before the case goes to a Tribunal. But there is no question of the Department having the right to decide whether it goes to the Tribunal. Back

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