Written evidence submitted by VocaLink
SUMMARY
1. VocaLink is pleased to make a short submission
on the government's proposed Universal Credit. As requested by
the Committee, this submission focuses on an aspect of the government's
proposals which requires continuing development, and one in which
VocaLink has particular and highly relevant expertise.
ABOUT VOCALINK
2. Having pioneered electronic payments for over
four decades, many of the world's top banks and their customers,
including the UK Government, rely on VocaLink to meet their transaction
needs. Our platforms process over 90 million transactions on a
peak day, including 98% of benefit payments, and connect the world's
busiest ATM network of over 60,000 ATMs.
3. We provide the central infrastructure for
Bacs and the UK Faster Payments service and process payments throughout
the Single Euro Payments Area (SEPA). Our services operate on
"never fail" technology which ensures total reliability
and availability, 24 hours a day.
KEY POINTS
4. The White Paper notes (Chapter 4, para. 15
- "How Universal Credit will be calculated and paid")
that DWP "intend[s] to use HM Revenue & Customs proposed
real-time information system to identify earnings and to calculate
the net Universal Credit payment.This means that those recipients
who receive earnings through Pay As You Earn will not need to
inform us for payment purposes if the amount of their earnings
change[s]."
5. Since the publication of the White Paper on
the Universal Credit, HMRC have published a further consultation
document on PAYE reform, which confirmed that in principle Ministers
have decided to adopt a system of collecting real-time information
on employees' earnings (RTI). The document defines RTI in the
following terms: "RTI will collect information about tax
and other deductions automatically each time employers run their
payroll. This information will be submitted automatically to HMRC
at the same time the employees are paid. Where employers pay their
employees via Bacs, the RTI data will form part of the Bacs submission."
(Improving the Operation of PAYE: Collecting Real - Time Information:
Executive Summary, 1.3)
6. The HMRC document also notes (1.10): "RTI
is a key component in the Department of Work and Pensions' (DWP)
plans for the introduction of Universal Credits from 2013. DWP
will use RTI to award and adjust Universal Credit to take account
of employment and pension income. To support DWP's plans, RTI
will be introduced from Spring 2012."
7. The Committee may therefore wish to take into
account in its inquiry into the Universal Credit that, according
to DWP itself, the introduction of the Universal Credit is intended
to be delivered on the back of the successful and timely development
of the PAYE RTI system. This is because the collection of earnings
information in real-time offers the first opportunity to
make use of accurate and up-to-date data about a claimant's income
at the time that a decision is made about a claim. The
Committee will be only too aware that what has bedevilled the
payment of benefits (and collection of taxes) in recent years
has been the timelag in the collection of information about a
citizen's circumstances.
8. DWP also believes that the introduction of
the Universal Credit, based on RTI, should lead to a significant
reduction in the losses suffered to fraudsters. The White Paper
notes that misreporting [of earnings] can be deliberate and fraudulent,
and that "the real-time earnings system presents us with
a real opportunity to reduce misreported earnings by giving us
timely and accurate information on most people's earnings, rather
than relying on cumbersome paper-based self-reporting" (Chapter
5, paras. 7 and 8).
9. It does therefore appear to VocaLink to be
essential, from the viewpoint of developing the Universal Credit
on the timetable envisaged, that DWP should engage with HMRC:
- to ensure that PAYE Reform remains on track to
be delivered in time to underpin the Universal Credit;
- to ensure that the interface between DWP's and
HMRC's systems enables DWP to make efficient and effective use
of RTI;
- to ensure that PAYE Reform is taken forward in
such a way that it can straightforwardly both achieve the aspirations
of HMRC to improve the functioning of PAYE and meet the requirements
of DWP in respect of the Universal Credit; and
- to ensure the underlying payment infrastructure
operated by VocaLink is utilized in the most efficient and cost
effective way in supporting both DWP and HMRC in delivering their
respective welfare and tax reforms.
December 2010
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