Examination of Witnesses (Questions 220
- 239)
WEDNESDAY 28 OCTOBER 2009
MS LESLEY
STRATHIE, MR
SIMON BOWLES
AND MR
RICHARD SUMMERSGILL
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
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