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Baroness Noakes: My Lords, I thank the Minister for repeating the Statement made in another place. Let me state for the record, since it was absent from the Minister's Statement, that for 2003–04 nearly 1.9 million families were overpaid amounts totalling £1.9 billion and more than 800,000 families were underpaid by nearly £500 million. That is an error rate of 46 per cent.

The cases cited in the reports of the CAB and the ombudsman are truly dreadful. Families had to be rescued with Salvation Army food parcels because forced repayments left them destitute. At the end of May, the Paymaster General announced a six-point action plan, but it was full of administrative procedures and reviews and gave no indication of how long it would take to bring about real change. It was a bureaucrat's response; it was not about relieving human misery or distress. What will the Government do now about the people whose lives they have already damaged by repayment demands, including those who have already been forced to repay at huge personal cost?

It is all very well for the Government to say, as the Minister said two weeks ago, that nearly £1 billion of the overpayment resulted from increases in family income of £10,000 or more, as if that somehow excused the Government from responsibility. People who qualify for tax credits are not rich. They may well have made a mistake or failed to spot an Inland Revenue mistake in dealing with their income changes but they will almost certainly have spent the tax credits and will face hardship when any overpayment is demanded. As today's Statement revealed, 300,000 families are in that category. Will the Government do anything at all for that group of victims in the system?
 
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One of the big lessons is that the tax credit scheme is just too complicated. The ombudsman asked, at paragraph 1.20 of her report, in typically understated language,

"whether the degree of financial uncertainty built into the design of tax credits can ever truly work for families on modest means".

Let me put it more plainly: the system is just too damned complicated for ordinary people. Do the Government recognise that complexity is the worm at the heart of the system? Will they now carry out a root-and-branch review of the tax credit system?

It is expected that, later this year, Her Majesty's Revenue and Customs will take on a further 800,000 families transferred from Jobcentre Plus. What action will the Government take before deciding whether it is safe to let those particularly vulnerable people be exposed? What monitoring systems will they put in place to ensure that, if any problems occur, they are dealt with rapidly and sensitively? Will the Minister assure the House that none of those families will be allowed to suffer in the same way as the 1.9 million families tormented to date?

The ombudsman made 12 recommendations in her report. How many of them do the Government accept? When will they be implemented? If any of the recommendations are not to be accepted, will the Minister say clearly why not?

In the private sector, the introduction of a critical system that generated a 46 per cent error rate would result in heads rolling. Will the Minister say what action has been taken against the individuals who had responsibility for the introduction of the tax credit system? I hope that he can assure the House that those individuals no longer hold positions of authority in HM Revenue and Customs.

There were yet more IT failures in this case. I understand that the IT partner for HMRC was EDS. In the past few days, we have been treated to the unedifying sight of the Inland Revenue attempting to negotiate an out-of-court settlement with EDS through the medium of the newspapers. Leaving aside the question of whether that was a wise way in which to negotiate, I ask the Minister to tell us what outcome has been reached with EDS. How much of the £1.9 billion overpaid does HMRC expect to get back from EDS?

Only two weeks ago, the Minister answered my Starred Question on the tax credit system. I asked him then whether he would apologise for the fact that 1.9 million hard-working families had been caught up in the overpayment mess. He refused to do so. The Paymaster General has also never apologised. If there is one aspect of this miserable affair that leaves a nasty taste, it is that. I ask the Minister one more time to apologise to the 2.7 million families whose lives have been affected—severely, in many cases—by the Government's incompetence.

5.12 pm

Lord Oakeshott of Seagrove Bay: My Lords, I too thank the noble Lord for repeating the Statement made in another place. As this is the first time that I have faced the noble Lord on the Front Bench, I
 
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welcome him and wish him well in his new role. The noble Lord, Lord McIntosh of Haringey, was, quite simply, a Stakhanovite, and he will be a hard act to follow.

The faces on the Government Front Bench may change, but, not for the first time, they are here trying to defend the indefensible in the face of the devastating criticisms of the failure of the tax credit system by the Parliamentary Ombudsman and the Citizens Advice Bureaux. Has the Minister read the chilling examples given by the CAB? I was most struck by the example of the lone parent who called at a CAB one Friday after her weekly child credit payments had been stopped without warning. She had £2 to get home and buy food for her two children and herself. I read of another lone parent who had had no tax credit payments for a few weeks; the CAB had to give her a food parcel from the Salvation Army to feed her children, as she had spent her last money on gas and electricity meters and baby foods. That happened in the fourth richest country in the world, while Gordon Brown holds us up to the rest of Europe as a shining example of a productive economy and inclusive society. Can we for one moment imagine Sweden, Holland or even France treating their vulnerable citizens like that?

I turn to the detailed criticisms. Do the Government accept the call in the ombudsman's report for much improved communication and easier and quicker customer complaint handling? Do they accept that the Inland Revenue's assurances given to the ombudsman a year ago were over-optimistic? Do they accept the ombudsman's view that cases considered by the office represent the tip of an iceberg? Do they accept the ombudsman's suggestion that, whenever a revenue mistake or error that has led to too much tax credit being paid is identified, the customer should be immediately notified of exactly what has happened and informed of the circumstances in which recovery can be waived?

Do the Government accept the most important practical recommendation in the ombudsman's report—it is mirrored to some extent in the CAB report, although it does not go quite so far—which is that consideration should be given to writing off all excess payment and overpayment caused by official error in 2003 and 2004? We are talking about unacceptable levels of official error. The Office for National Statistics recently reported that, of £13.5 billion paid out last year, £1.9 billion consisted of overpayments. The noble Lord heard the noble Baroness, Lady Noakes, say that, in a private business, heads would roll. Speaking from personal financial experience of running a business, I take the view that any business with such a payment system would have gone bust years ago.

My final question is probably the most significant from the point of view of the health of the public finances and of getting Britain's system working properly as a whole. Can the Minister confirm that the contractor responsible for the serious problems with the computer system was EDS? Can he assure us that it will not be allowed anywhere near the Identity Cards Bill that the Government are trying to force through, the Second
 
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Reading of which in the House of Commons takes place next week? I look forward to hearing the Minister's answers.

5.16 pm

Lord McKenzie of Luton: My Lords, I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Oakeshott of Seagrove Bay, for their input. I shall start by putting the matter in context. There was a lot of criticism in the reports, and it has been repeated from the Benches opposite and in another place. However, the tax credit system introduced by the Government has had a profound and beneficial impact on the lives of many families, helping to lift their children out of poverty, making work pay and supporting families. We ought to hear a little more about that, alongside the criticism.

The noble Baroness, Lady Noakes, raised several points, and I shall try to deal with each of them. Should we apologise? Absolutely not; we have nothing to apologise for about the tax credit system. It has had a profound impact on the lives of many. There are challenges in its introduction; those have been recognised, and steps are already being taken to address them.

Baroness Noakes: My Lords, could the Minister say what the error rate would have to be, before the Government would apologise?

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