Tax and Benefits

Oral Answers to Questions — Wales – in the House of Commons at 11:30 am on 20 July 2005.

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Photo of Betty Williams Betty Williams Labour, Conwy 11:30, 20 July 2005

What recent discussions he has had with Cabinet colleagues on financial support through the tax and benefits systems to parents in Wales.

Photo of Nick Ainger Nick Ainger Parliamentary Under-Secretary, Office of the Secretary of State for Wales

My right hon. Friend the Secretary of State and I regularly hold discussions with ministerial colleagues on a range of issues, including support to parents in Wales through the tax and benefits systems. Far more parents in Wales are benefiting from the financial support under the working tax credit and child tax credit than under any preceding income-related financial support system. In 2003–04, more than 220,000 in-work families with children in Wales were benefiting from tax credits, with an average award of £2,792.

Photo of Betty Williams Betty Williams Labour, Conwy

My hon. Friend will be aware that families in Wales have widely welcomed the tax credit system, which has definitely been a contributory factor in lifting families out of poverty. However, many families are still experiencing hardship caused by errors made by Her Majesty's Revenue and Customs when calculating their entitlement. Will my hon. Friend undertake to have further discussions with his Treasury colleagues to ensure that a way is found to help those families out of their difficulties?

Photo of Nick Ainger Nick Ainger Parliamentary Under-Secretary, Office of the Secretary of State for Wales

My hon. Friend is right to highlight the great benefit of the tax credit system to families in Wales. In her own constituency, 5,000 in-work families are in receipt of tax credits, and the average amount involved in her constituency is £3,080 per family. In relation to the problems caused by overpayment, the Government recognise the difficulties that have been caused by administrative problems in the tax credit system, but that should not detract from the fact that millions of families across Britain are much better off as a result of the system.

The Paymaster General has announced a series of measures to build on the reforms that we have already introduced, including measures to streamline the procedures for recipients to inform Her Majesty's Revenue and Customs of changes in their income, and to simplify the information provided to families. She has also announced a review of changes to the procedures for dealing with disputed awards, and I am sure that she will respond to the points raised by my hon. Friend Mrs. Williams, which I shall draw to her attention.

Photo of Wayne David Wayne David Labour, Caerphilly

Following what the Minister has just said, does he agree that, although there have been problems in the tax credit system, we have to keep things in perspective? We need to recognise that the tax credit system is probably the most effective means that we have of tackling child poverty.

Photo of Nick Ainger Nick Ainger Parliamentary Under-Secretary, Office of the Secretary of State for Wales

Indeed. Before 1997, when this Government first came to power, one in every three babies in Britain was born into poverty. Under the previous Conservative Government, the number of children growing up in households in which no one had a job rose to almost 20 per cent. We have not only had great economic success in creating 2 million jobs since 1997; we have also made work pay, and taken more than 1 million children out of poverty. That is a success.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

Wales has the highest rate of child poverty in the UK, affecting one in every three children. Yet Citizens Advice has recently condemned the tax credit system for being subject to "completely unacceptable errors". One in three recipients have been overpaid and pushed into deeper poverty when forced to repay the money. What will the Minister do to stop the failures of the tax credit system putting even more pressure on struggling Welsh families?

Photo of Nick Ainger Nick Ainger Parliamentary Under-Secretary, Office of the Secretary of State for Wales

As I have already said in response to my hon. Friend Mrs. Williams, the Government are already tackling those administrative problems. Moreover, it is worth noting what Citizens Advice said in its report:

"We firmly support tax credits as a vehicle for directing substantial extra money towards lower income families, and we want the system to work effectively for all who are entitled to the extra help."

That is something that those families are getting now, and that they never did when the hon. Gentleman's party was in power.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

A man from Bridgend reported that he had received a bill for £4,000 following overpayment of child tax credits, despite the fact that that tax credit agency admitted that he had provided the correct information at every point. Another man, from Abergele, was paid £400 too much each month, despite making numerous phone calls to query the amount that the family were being paid. Nearly 2 billion of the tax credits paid out over the past year were overpayments, and the Government are hounding people into a financial nightmare. How can the Minister expect to improve the standard of living for children in Wales if this continues?

Photo of Nick Ainger Nick Ainger Parliamentary Under-Secretary, Office of the Secretary of State for Wales

As I said in response to an earlier question, it is clear that substantial errors have been made, and the Government do not deny that fact. The parliamentary ombudsman's report and the Citizens Advice report identified serious errors. The Government have a duty, however, to try to reclaim overpayments where it is reasonable to do so. Anyone who disputes whether they should repay such an overpayment has a procedure to follow. The Paymaster General has given assurances that she is considering those disputes procedures.