Examination of Witnesses (Questions 440
- 459)
TUESDAY 8 DECEMBER 2009
RT HON
STEPHEN TIMMS
MP AND SARAH
MCCARTHY-FRY
MP
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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