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

Examination of Witnesses (Questions 440 - 459)



  Q440  Jim Cousins: Surely it is not for the MPC to choose which of those risks it regards as being the more significant and let the Government know?

  Sarah McCarthy-Fry: All I can say is that it is a matter for the MPC. We have their published minutes: we can see how they reach their conclusions. They have a remit for their inflation target and if they do not meet that they have to write to us.

  Q441  Jim Cousins: The other matter I wanted to raise with you, which is more a matter for your comment, was on this issue of pensioners, who of course are not reflected in the Annual Report. I did ask about that, and more information was very kindly supplied to the Committee in which it was pointed out that of the three million pensioners plus who were not claiming the higher rate pension personal tax allowance for pensioners, most had incomes so low that it did not matter whether they claimed it or not. You will see straightaway that, however reassuring that might be on the technical point, it does raise slightly broader issues. Could you in any way enlighten the Committee as to how many of the three million plus pensioners who are not claiming the personal tax allowance to which they are entitled would have benefited from so doing?

  Mr Timms: I think the issue is how much they would have benefited rather than that they would have benefited at all. I can give some information that might shed some light on this. As you know, we launched our Taxback Campaign on 26 October.

  Q442  Jim Cousins: That is the savings issue which I was going to come on to later.

  Mr Timms: Yes, the tax reclaim issue.

  Q443  Jim Cousins: Large numbers of pensioners are paying tax on their savings when, probably speaking, they should not.

  Mr Timms: That is right. That is why we are writing to 3.4 million Pension Credit recipients over a six-week period. So far (by 27 November) we have issued 2.9 million letters, we have received 13,205 claims, we have processed 1,591 of them, and the average repayment is £53.19. That gives some indication of the extent to which pensioners in the past were not getting the full benefit to which they were entitled.

  Q444  Jim Cousins: Thirteen thousand out of 2.9 million have responded.

  Mr Timms: So far.

  Q445  Jim Cousins: So far, yes.

  Mr Timms: This is a continuing campaign.

  Q446  Jim Cousins: Will you write to people again next year about this?

  Mr Timms: There are periodic Taxback Campaigns. This is the ninth. The last one was in November of last year. No firm decision has been made, but I would certainly expect these efforts to continue.

  Q447  Jim Cousins: You will appreciate that the tariff income schedule, which measures the value of pensioners' savings for the purposes of means-tested benefits, assumes an interest rate of something like 25%, so to have large numbers of pensioners cheated of their money by overpaying tax on their savings on the other hand is obviously an important point.

  Mr Timms: I certainly agree. It is an extremely important point. That is the reason for this campaign and the campaign of advertising and the other steps we are taking, working with Citizens Advice, Age Concern, Help the Aged and so on, to ensure that everybody has the opportunity to reclaim their tax back.

  Q448  Jim Cousins: Do you regard the average repayment of £53 as being an important figure or not?

  Mr Timms: It is certainly important for those who receive it, absolutely.

  Q449  Jim Cousins: Exactly.

  Mr Timms: I want to take issue though with your point about the implied interest rate of 25%. I do not think that is accurate because the assumptions allow for the fact that it is reasonable to expect that people will be able to use some of their savings for meeting their needs, so it is not assumed that people are simply living on interest from their savings.

  Q450  Jim Cousins: Coming back to the issue of the three million pensioners who are not claiming the personal tax allowances to which they are entitled, how many of those pensioners do you think would benefit from so doing?

  Mr Timms: As I understand our assessment of the data, the great majority have income below the tax allowance figure.

  Q451  Jim Cousins: How many do not?

  Mr Timms: Our estimate is that it is about half a million. Of the 3.2 million total, 2.7 million have income below the tax allowance figure.

  Q452  Jim Cousins: So out there are half a million pensioners, you think, who would benefit from claiming the higher rate of personal tax allowance but are not doing so.

  Mr Timms: That is the best figure that I have.

  Q453  Jim Cousins: What are you doing about that?

  Mr Timms: As I was saying on the earlier topic, we are working with organisations like Citizens Advice and Help the Aged to ensure that as many people as possible understand the opportunity that there is and take advantage of it, and we will continue to work at that.

  Q454  Jim Cousins: How many of the people who are overpaying tax on their savings and not claiming the tax allowances that would help them, are in fact older women living on their own, which is typically the group who most lose out in this because they simply do not understand it?

  Mr Timms: I am not able to give you a precise figure but you are undoubtedly right that a very significant proportion will be.

  Jim Cousins: Thank you.

  Q455  Ms Keeble: Are you concerned about the stall in progress on the relative poverty target?

  Mr Timms: Yes. We made very substantial progress on reducing child poverty in the early years after the commitment was made in 1999. Since then there has been a plateau, but we have made, particularly in the Budget last year, further announcements. As you know, on the most recent figures child poverty since 1999 has fallen by half a million. Our assessment, and I think the assessment of independent analysts, is that the additional announcements we have made will reduce the figure by a further half million. We will see further substantial progress.

  Q456  Ms Keeble: But will we reach the 2010 target?

  Mr Timms: Hitting the 2010 target would be a stretch. Clearly there is an opportunity for the Chancellor to make an announcement this week and further opportunity in the Budget next year. The assessment that the IFS has made is that, by the time at which that target will be assessed, we will have reduced child poverty by 1.1 million, which means we will be almost two-thirds of the way towards the target but not actually hit it.

  Q457  Ms Keeble: In the measures that were announced in 2007 that were going to roll forward, all but one has been completely implemented. The only one remaining is a Housing Benefit change. The Permanent Secretary was unable to say what the progress was. He said he just assumed it was going okay, although in fact implementation had been knocked back a month without anybody being told, I think. What is your assessment of the success of the implementation of that particular change, given it is the last one before an election comes and before the target date?

  Mr Timms: I am rather in the same boat as the Permanent Secretary on this. It is not a concern that has been raised with me.

  Q458  Ms Keeble: Perhaps I can raise some particular concerns with you then. Can you confirm the number of families that were supposed to be helped? I see here that we have 200,000 getting £20 a week, which is £200 million, I think, if my maths is right. I thought it was more than that. I thought it was either £250 million or £350 million that was originally announced when these were first announced back in 2007. Can you confirm the figure?

  Mr Timms: I am afraid I do not have those figures in front of me, but I can certainly come back having checked those.[6]

  Q459  Ms Keeble: That would be helpful. Something again which I raised with the Permanent Secretary—and he was not able to say and his note is not clear—is that, whilst there are changes in Housing Benefit, they only affect social housing tenants, they do not affect people on Rent Allowance, and they do not affect people who are now on Local Housing Allowance. For both of those groups the pressures are massive, and certainly for those with Local Housing Allowance the recent changes will tip some families into poverty because of the claw-back. Why have those not been factored into the figures? Is there not a real risk of the numbers starting to go in the wrong direction because of those particular issues?

  Mr Timms: I am not sure which figures you are suggesting they should factored into. The projection—

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