Mr.
Davidson: I very much suspect that more people listened to
me on “Good Morning Scotland” than watched my right hon.
Friend on
GMTV.
Mr.
Timms: I do not know the viewing figures for GMTV at that
time in the morning, but my hon. Friend may well be right.
I was pleased
to see in the PAC report an acknowledgment of the progress we have made
in reducing overpayments, which are down to £1 billion from a
level that was more than double that when the system started. It is
worth explaining how overpayments arise. Typically, the circumstances
of someone receiving tax credits will change in some way, leading to a
reduction in entitlement. Despite the best will in the world, there is
a period, usually short, before that information gets back to the tax
credit office, and in the meantime there is an overpayment. Normally
the overpayment is clawed back
over time in a way that causes no difficulty. The problem arises if the
overpayment continues for a long period, and that is the kind of case
that we have all seen in our
constituencies. The hon.
Member for Taunton is absolutely right that there has been good
progress in reducing the scale of that problem, but I will not say to
the Committee that those problems no longer occur, because they
certainly do, and my right hon. Friend the Member for Makerfield is
right about that. I hope that we will make further progress, but we
have certainly made a lot of progress in reducing the incidence of
overpayment.
Mr.
Gauke: Does the Minister accept the PAC’s comment
that HMRC has not given claimants the support they need when making
claims and reporting changes in circumstances? He is absolutely right
to say that that is where the problem is, but does he accept that
criticism and agree that, although overpayments have declined to
£1 billion, that is still more than was originally estimated
when the system was set up? I accept that some overpayment is an
inherent part of the system, but has the decline been a consequence of
policies such as the increase in the disregard, or due to improved
administration?
Mr.
Timms: The PAC in its report recognises that HMRC is
putting additional support in place, and it makes the fair point that
it would have been pleased to see it in place earlier. For example, we
are giving extra help to people whom we know find it difficult to
complete a renewal. That is probably one reason why the problem is
being reduced. The increase in the disregard has had a big impact, but
better administration has also helped. The combination is the
reason.
Mr.
Davidson: Does the Minister accept that a substantial
amount of overclaiming arises because EDS failed to provide adequate
hardware and software? Does he also accept that much of the overpayment
occurs because people who were correctly allocated tax credits do not
always complete the forms at the end of the year, so are deemed to have
been overpaid and are asked for repayment? If they had simply filled in
the form, they would not have been asked to repay anything. The issue
is technical and the Government should address
it.
Mr.
Timms: I do not entirely agree. There have undoubtedly
been some challenges with the tax credit computer system, but it now
works reasonably well. I agree that it is important that people
complete the forms, and that when their circumstances change they tell
us about that quickly. If they do so, many of the problems can be
avoided.
Mr.
McCartney: To put this in its proper context, will the
Minister say what percentage of claims are consistently paid correctly?
That might help to show the system in a proper light. It is an
effective system in preventing and tackling
poverty.
Mr.
Timms: I am grateful to my right hon. Friend for that, and
for what he said earlier. He is absolutely right to highlight the value
of the changes, particularly for hard-pressed families with children.
The system is powerful, and has done a lot to reduce child poverty. It
will continue to be important in our aim of eradicating child poverty
throughout the country by 2020.
Hon. Members
from both sides of the Committee have acknowledged that overpayments
are inherent in the system. At the moment, we are seeing the real
benefit of the flexibility in the tax credit system. As I said, many
people are now seeing a reduction in their incomes because hours are
being cut and overtime is not as readily available. The tax credit
system, because of its flexibility, can respond quickly and effectively
to provide help. Between April and December last year, 400,000
households had an increase in their tax credit award because of a
reduction in their
income. The
hon. Member for South-West Hertfordshire asked about fraud and error.
The number of incidents is overwhelmingly due to error, but the PAC has
welcomed our target to reduce fraud and error to 5 per cent. by 2011. I
am confident that that will lead to further welcome
improvements.
Mr.
Gauke: I am grateful to the Minister for giving way; he is
being
generous.
The
Chairman: Order. I have allowed fair latitude to all
speakers in the Committee, but I remind the hon. Gentleman, as I remind
all other hon. Members, that he must speak to the particular issues of
the order when he asks brief questions of the
Minister.
Mr.
Gauke: There is concern that an element of the
£1.77 billion that we will authorise with this order may go in
fraud and error. Let me follow up the Minister’s point about the
majority of fraud and error overwhelmingly being error, with 90 per
cent. error and 10 per cent. fraud. According to the Public Accounts
Committee, that is using quite a narrow definition of fraud. Does the
Minister accept
that?
Mr.
Timms: I think the normal definition is used, not a new
one. I do not think there is anything novel there, but if the hon.
Gentleman wants to suggest a different definition, I should be happy to
consider
it. Given
your helpful guidance to the Committee, Mr. Fraser, let me
accelerate through some of the points I was going to make. I need to
answer the points made by the hon. Members for South-West Hertfordshire
and for Taunton about what will happen if the retail prices index
becomes negative this year. At the pre-Budget report, we forecast that
there would be a negative RPI in September, but we also said that if
that happened we would maintain the cash value of tax allowances and
thresholds and RPI-indexed benefits, thereby not reducing those
values.
Mr.
Browne: On a procedural point, if the cash value is
retained at exactly the same level, will the Committee be convened to
consider that, because that will effectively be a public spending
commitment, even though the numbers will be retained at the previous
year’s
level?
Mr.
Timms: That is an interesting point for those who study
these matters. I suspect that the answer is no—if it
is not going to change, I doubt we will need an order—but I may
be advised to the contrary. We certainly would not anticipate any
clawing back of the additional £25 mentioned
here.
To answer
another point made by the hon. Member for South-West Hertfordshire, I
would not claim that the system is now perfect, but it is much better
than it was. The administration is working a great deal better, and I
hope that we will improve it further.
The right
hon. Member for Fylde, who is one of my predecessors as Financial
Secretary—indeed, I think the right hon. Member for North-West
Hampshire is too—asked me about guardian’s allowance. I
am sure that he will recall, from his period in this office, that the
allowance was introduced in 1946 under national insurance legislation,
and was payable at the same rate as a child dependency increase in the
contributory benefits. However, following the introduction of child
benefit in 1977, the annual increases to the rate of guardian’s
allowance were effectively eroded by corresponding increases in child
benefit, because those benefits were treated as overlapping. In 2003,
that erosion was brought to an end, and people looking after children
in the kind of tragic circumstances in which guardian’s
allowance is payable now receive an annual increase in line with
prices. Some 3,000 families receive that non-income-related payment for
looking after about 4,000 children whose parents have
died. I
am happy to take up the suggestion of my right hon. Friend the Member
for Makerfield about ensuring that Members of the House are fully
informed about the improvements reflected here and in changes
elsewhere. It is not only my Department that is involved, but the
Department for Work and Pensions. Perhaps my right hon. Friend and I
can discuss the best way to do that.
I am grateful
to the Committee for its welcome interest in the orders, which are
particularly helpful to our determination to bring child poverty to an
end. I commend them to the Committee.
Question
put and agreed
to. Resolved,
That the
Committee has considered the draft Guardian’s Allowance
Up-rating Order
2009. Draft
Guardian’s Allowance Up-rating (Northern Ireland) Order
2009Resolved,
That the
Committee has considered the draft Guardian’s Allowance
Up-rating (Northern Ireland) Order
2009.—(Mr.
Timms.) Draft
Tax Credits Up-rating Regulations
2009Resolved,
That the
Committee has considered the draft Tax Credits Up-rating Regulations
2009.—(Mr.
Timms.) 5.20
pm Committee
rose.
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