Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 220 - 239)



  Q220  Ms Keeble: How much of your improvement in the performance on overpayments do you attribute to the rule changes and how much do you attribute to your own administrative improvements?

  Mr Summersgill: We said at the time it was going to be about a third reduction in the value of overpayments relating to the PBR 2005 change and that is broadly what the statistics do show. There have been further improvements besides.

  Q221  Ms Keeble: What I am interested to know is what you have done in administrative terms to improve the position on overpayments. Underpayments have actually got worse but what have you done to improve your performance there over and above the rule changes? It was very sweeping and was always going to lead to improvements.

  Mr Summersgill: A huge amount of the things we have done under the banner of the tax credit transformation programme have been entirely focused on helping customers avoid overpayment so many of the products we have rolled out like the service for households that are breaking down, where couples are splitting up and so on and we have given them fast track services, the in and out of work projects, assisted renewals—there have been about a dozen different offerings over the last couple of years which have helped people manage their overpayments. To some extent that has also helped customers manage themselves into an underpayment which is why underpayments and overpayments are now in broad equilibrium. An underpayment of course effectively means that at the end of the financial year that customer will get a cash payment.

  Q222  Ms Keeble: Looking at your tax credits debt for recovery, which is in your report at our page 39, you have got a very sharp increase in total debt for direct recovery and a very gentle increase and then a plateauing off of direct recoveries in a year. How do you explain those figures?

  Mr Summersgill: Over time the ideal is that we try to recover debts from an ongoing award where we are taking a small amount from an ongoing payment. When that ongoing award ceases, either because the family lose entitlement or because the household breaks up and new households are formed then the debt goes into our direct recovery. All of the evidence shows that once we do put debts into debt recovery it becomes increasingly difficult over time to collect them.

  Q223  Ms Keeble: I just wanted to ask one final thing which was that in some research that I did in my constituency over the impact of the recession it showed that just under 50% of the families who took part in the work I did actually received tax credits, so it is an astonishing number in an area where people work but they have been impacted by loss of hours, loss of overtime, one person earning and so on. What is your estimate nationally of the impact that the recession is going to have and what are you doing to meet those challenges because the tax credits have been incredibly important and, personally, I would like to see lots more benefits pulled into them, but it does rely on your being able to run the system in a very robust fashion and that means having some proper projections as to what is going to happen.

  Mr Summersgill: I do not think we have an estimate of how the recession has affected the increase;[5] there undoubtedly has been an increase with people's hours reducing and so their entitlement to tax credits has increased. We have also done quite a lot of work in terms of helping people, both through the work we were talking about a little earlier in terms of encouraging the take-up of working tax credit, also the joint working we are doing with the DWP and local authorities on in and out of work so that as people move from tax credits or benefits or vice versa we have devised fast track procedures to help them get into tax credits or benefits more quickly. There is more work to be done though.

  Q224  Mr Todd: I want to look at IT in HMRC. Firstly you were urging people to use the online self assessment system; is it working?

  Ms Strathie: The online system is indeed working.

  Q225  Mr Todd: There have been some reports of problems.

  Ms Strathie: I saw that in the media today and we update on the system explaining what any issues are. We have probably about 7,000 people affected with some of the HMRC software rather than agents or anybody else who are using it differently and we will have it fixed pretty quickly now that we have got to the bottom of the problem.

  Q226  Mr Todd: You have identified the problem and can fix it.

  Ms Strathie: Yes, we are absolutely confident of that.

  Q227  Mr Todd: You are obviously aware that confidence in that system is absolutely critical to its use.

  Ms Strathie: Absolutely.

  Q228  Mr Todd: If your reports become more prolific you will have difficulty getting people to use it.

  Ms Strathie: Given that at the 31 January deadline we had 69% of people who filed online while this year, year-on-year, we are already ahead at this time—the take-up is huge so we monitor it daily.

  Q229  Mr Todd: We have made some recommendations in the recent past over IT and HMRC and I want to pick out one or two and find out what has happened. We noted the proportion of cases that you have in open case where they are clerically handled; the data that we had at the time we looked, which was at the very end of last year, was that you had 16.2 million open tax cases and we suggested that there should be performance targets monitoring your ability to bring that number down. We have not seen any data suggesting that there has been an improvement, has there been?

  Ms Strathie: This is a start which might not sound very good news but moves the conversation on. The constant growth in open cases would only be reversed when HMRC implemented the modernisation of the PAYE system and the release 3 which then merged 12 databases into one, very high risk and very successful. That does not cure the open cases but it stops the creation of the majority of all open cases. Those cases rose to around 30 million and we managed that back to 17 million in preparation to release MPPC3, bearing in mind this had been deferred and had not delivered on time.

  Q230  Mr Todd: And we very kindly did not criticise you for that deferral; I remember amending the recommendations so that we did not.

  Ms Strathie: I take responsibility for everything in HMRC but I arrived last November after this programme was running late. An enormous amount of work went into the entire business, not just the programme, to give a clear runway and we did. We are now working with the National Audit Office on those cases because release 4 comes on 24 November and we have release 5 in April; once we get to April we have then got the facility to start working the rest of the open cases. We are frozen in time now as we close down the old system. Some of those cases will be written off, I am pretty confident, but we are determined that we will clear them all.

  Q231  Mr Todd: Can I gently criticise your lack of candour?

  Ms Strathie: Please do.

  Q232  Mr Todd: We have in this report a reference to your achievements in IT.

  Ms Strathie: Yes.

  Q233  Mr Todd: I do not think any of what you have just told us features in your annual report; that gives a wholly unbalanced picture of what has been happening in a critical part of your business. Let me just read the point that is in here: "HMRC has been hailed as a shining example of how to use technology to take government services to a new level for its self assessment online." You do target it at one particular thing but one might get the impression that this was the general picture of IT performance within HMRC and it would be fair to say that would be a very partial picture, would it not?

  Ms Strathie: Absolutely, but if I can just push back a little on that.

  Q234  Mr Todd: Go on.

  Ms Strathie: We did land MPPC3 at the end of June so it was three months beyond the completion of the annual report. There probably is—but I will stand to be corrected—a record of open cases there. HMRC has got over 200 IT systems; we had a huge legacy from two very large departments and there is masses for us yet to do before all of our systems will have moved on from 1970s technology.

  Q235  Mr Todd: Can I let you instead send us a note which actually gives a more accurate summary of what is happening in your IT resources in HMRC than the somewhat partial picture that one might get from the document that we have in front of us?

  Ms Strathie: I shall give you a full update on that but I stand by every word of that in terms of what HMRC has achieved.[6]

  Q236  Mr Todd: I am sure. Can I turn to something that is in your annual report?

  Ms Strathie: Are you going to stay with IT?

  Q237  Mr Todd: Yes, I am.

  Ms Strathie: I would like to brief the Committee on our IT contract and a press release that we will be releasing tomorrow, so you might want to come back to that, Chairman. It is in terms of our relationship and our costs but we can cover it.

  Q238  Mr Todd: We are aware that something may be imminent but you are presumably not able to tell us what your announcement will be.

  Ms Strathie: I can tell you there will be a press release tomorrow stating what new agreement we have worked with our current contract, with our Aspire contract, and the suppliers that are part of that ecosystem, which will significantly reduce cost for the department over the coming years.

  Q239  Mr Todd: Maybe it will cover the point that I was about to ask which is about disaster recovery, which is referred to in your annual report and where the risk profile remains high. What is being done to address that?

  Ms Strathie: We are actually working very closely, taking this from a business continuity perspective, not just starting with disaster recovery, and reviewing all of our systems in terms of the cost versus the potential risk mitigation and satisfying ourselves of what we can ultimately afford and what we believe, based on what other organisations have done in reducing that. Our new chief information officer who joined us on 2 September is undertaking that work with our head of risk who was appointed a few months back in the entire business. There are systems identified that do not have an IT solution in disaster recovery but I would contend from all of my experience and for other companies that a vast amount of money spent on these will not give a vast amount of risk reduction and we need to look at the other mitigations.

5   Note by witness: HMRC is currently forecasting that as a result of the recession an additional net spend on tax credits of up to £500 million annually. HMRC does not have an estimate of the impact on take-up rates. Back

6   Ev 94 Back

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