Clause 33 - Offence of fraud
Tax Credits Bill
2:00 pm
Mr James Clappison (Hertsmere, Conservative)
I welcome the Paymaster General to our deliberations on this important clause. The Financial Secretary was present for the debate this morning, but we entirely understand that he cannot be in two places at the same time and he has to be in the Chamber to reply to the debate on the Public Accounts Committee. He is not with us, but the Paymaster General is with us instead and they will have liaised on the points that were made this morning. I raised some detailed points to which I did not necessarily expect the Financial Secretary to have answers to at his fingertips and I said that it would be satisfactory if he wrote to me in good time.
However, some general points remain on which I seek an answer from the Paymaster General. It is apt that she is here for this debate, because she and I have debated the incidence of fraud in the working families tax credit and have corresponded about it in the past. The debate gives me another opportunity to ask her again—I put the same question to the Financial Secretary this morning—how much fraud there is in the tax credit system.
That question will not come as a surprise to the Paymaster General, as we have debated the issue in the past. On 11 April 2001 she was good enough to write to me following the debate on the uprating order. I am sure that her memory will not need jogging, but she will remember that last year there was a special uprating order for the working families tax credit because, in addition to the inflation-linked increase in April last year—I was about to say ''miraculously''—somehow the Government also decided to increase the working families tax credit by an additional £5 above inflation in June last year. The Paymaster General will remember speculating about the timing of that increase and how it came about. She will also remember the letter that she wrote to me on 11 April 2001 in which she said:
''The Inland Revenue are carrying out a benchmarking exercise to establish the level of fraud in tax credit claims. This began in September 2000 and will run for twelve months. The results will be
used to ensure tax credits compliance work is carried out in the most effective way.''
The period of 12 months ended in September last year, so we should like to know from the Paymaster General whether, as is presumably the case, that benchmarking exercise has been completed, whether Ministers know the results and whether they plan to put the results in the public domain, so that we all know the extent of fraud in the working families tax credit system according to the Inland Revenue.
We also want to know generally what the Government's plans are for tackling fraud, a general point that we raised this morning. We want to know what their plans are for Departments to work together, given that responsibility for these areas has now been fragmented between the Department for Work and Pensions and the Inland Revenue, and also what plans the Government have to work with local government and the private sector in tackling fraud.
I also want to ask the Paymaster General a question that was not raised this morning, which I had planned to ask if there had been enough time. Is it planned that the Inland Revenue should participate in the credit industry fraud avoidance system? She may be able to write to me on that rather than answer the question now, but we should like an answer at some stage.
We also want to know whether the Government have plans to widen the scope of inquiries into tax credits, something that comes under the Paymaster General's ambit. We understand that the Inland Revenue opened inquiries into 1.5 per cent. of tax credits. How was that figure arrived at as the proportion of tax claims to be investigated? We understand from the Inland Revenue's annual report that 28 per cent. of those inquiries found instances of non-compliance. It would be interesting for the purposes of the debate if the Paymaster General could tell us how many of those cases involved fraud. As we said this morning, we believe that there are too few prosecutions for tax credit fraud. I shall not go over those points again. I am sure that the Paymaster General will be familiar with them anyway, because she has divulged the information to me in written answers.
We also want more information about the use of the civil penalty in cases of fraud. In the first two years of working families tax credit 478 penalties were imposed in respect of claims—about 240 each year. Given that penalties can be imposed for negligence as well as fraud, how many were imposed for fraud? We can reasonably expect the Government to have a record of that, and again it would be interesting to have an answer.
We seek answers to all those questions because we believe that fraud is an important subject. We do not seek to draw a connection between fraud and anything else. We believe that fraud in itself is bad and we believe that that view is shared by the majority of the public, both taxpayers and recipients of tax credit. We believe that it is in the interests of all of us to take a vigorous approach to tackling fraud. Certainly Opposition Members seek such an approach. We
intend to hold the Government to account for what they are doing.