Clause 4 - Claims: supplementary
Tax Credits Bill
12:30 pm

Photo of Mr Howard Flight

Mr Howard Flight (Arundel and South Downs, Conservative)

I beg to move amendment No. 8, in clause 4, page 3, line 10, after 'manner', insert

'before an official of the Board who is satisfied that all facts necessary to establish the claim have been made out'.

Photo of Mr Jimmy Hood

Mr Jimmy Hood (Clydesdale, Labour)

With this we may take amendment No. 13, in clause 4, page 3, line 23, at end insert

'provided that such person has appeared before an official of the Board, who is satisfied as to the identity of such person and of the claimant and that the such person acts genuinely for the claimant.'.

12:45 pm
Photo of Mr Howard Flight

Mr Howard Flight (Arundel and South Downs, Conservative)

The amendment, which would require a claimant or someone acting for him to meet an official to provide information to establish the claim, is a helpful, anti-fraud measure, as the rules and complexity even of child tax credits are considerable. It is unrealistic to believe that many people will easily be able to understand the forms, no matter how well they are devised. The Government cannot be wholly happy with the take-up even of the existing child tax credit. The amendment would help people to find out what they are entitled to claim and assist those who need it. In the context of some pretty tortuous arrangements for claims based on this year's or last year's income and whether hours worked relate to this year or last year, the amendments would also afford an opportunity upfront to iron out a lot of issues. People could be helped and advised about what they are entitled to and the Revenue would have an opportunity to ask questions. Obviously, it might discover from an interview that a claim is not justified.

I appreciate that there would be an administrative-time cost. Interviews would have to be conducted locally, which would presumably involve Revenue staff and so on. However, the interview model that the Government introduced in a number of areas has been quite successful, and the model of people going to the DWP to find out what they are entitled to is well established. Therefore, there is logic behind these two parallel amendments, which would make the system work better, help individuals and provide a mechanism to reduce fraud.

Photo of Ms Dawn Primarolo

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

Amendments Nos. 8 and 13 concern the consideration of claims by the Inland Revenue. Amendment No. 8 would introduce the requirement that a claim be made

''before an official of the Board who is satisfied that all facts necessary to establish the claim have been made out''.

Amendment No. 13 would have two effects. First, it would require any person acting for another in making a claim for a tax credit to appear in person before an official of the board. Secondly, it would require that official to satisfy himself as to the identity of that person and the claimant and to be sure that the person was acting genuinely for the claimant.

I shall deal first with the requirement for the Inland Revenue to give proper consideration to the claims that it receives and to satisfy itself that they are valid. It is unnecessary to amend the Bill in that regard. Clause 14 makes it clear that, on a claim for a tax credit, the board—in practice, a Revenue staff member—is required to take a decision about whether to make an award. It is therefore incumbent on the Revenue to consider each claim that is made. I assure the Committee that the Revenue will need to satisfy itself before paying a credit as to the identity of the claimant and any person acting on their behalf and that the relationship between the two is genuine. The

Bill does not need to be amended to ensure that that occurs.

More generally, the board's statutory responsibility for the proper administration of tax credits is covered in clause 2. Clause 4(1)(a) enables regulations to require that claims be made in a prescribed manner. I assure the Committee that the prescribed manner will be such that the facts necessary to establish a claim must be provided. If they are not, the claim will not be valid and no award will be made. Nothing more is needed in the Bill.

The amendments can be read as requiring claimants and appointees to attend personal interviews with an official of the board. I am sure that the proposal is well intentioned, but it is also, if hon. Members will forgive me for saying so, slightly misguided. Such a requirement would be completely impractical; we are talking about 6 million applications. We do not require everyone who wants to claim a tax relief to appear in person before a staff member so that they can ascertain whether they are entitled to it. Why do we need different treatments within a system that already works perfectly well? It would be completely impractical, and not just for Inland Revenue. Think of the problems involved for the people trying to make a claim. When we are supposed to be moving to e-commerce and interaction to ensure easy access, the official Opposition want everybody to trudge into a tax office in person to ascertain the right to access.

Photo of Mr Hugo Swire

Mr Hugo Swire (East Devon, Conservative)

The Minister asks why we should reorder a system that works ''perfectly well'', but does ''perfectly well'' mean the swindling of about £350 million a year from the tax credit system? Does she regard that as working well?

Photo of Ms Dawn Primarolo

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

With respect, I would need to look at the exact figures that the hon. Gentleman is quoting, as I do not recognise them. It is true that people try to swindle the tax system. It is a very interesting issue at the moment, although I will not digress. Self-assessments are being sent in at the moment, and they give an interesting perspective on people's attitudes. Unfortunately fraud is a fact of life. The amendments are to determine whether we have proper procedures in place and whether they will improve. Somehow, the official Opposition seem to take the view that if people are at the tax office in person, they are less likely to commit an offence. I do not believe that. It is not necessary for them to do that.

We have heard about the costs, and suggestions that the proposal is totally unnecessary, utterly disproportionate and far from clear. There would be a lot of sweeping requirements and we would need to employ more staff. The staff we use to track down fraud would be too busy interviewing people about their application forms.

The hon. Member for Arundel and South Downs made another point, which we can return to during the appropriate clauses, about people being aware of their rights and proper communication. He raised questions about the form and how we ensure that the take-up is at the correct level. I will not go any further down that route, because I do not want to try hon. Members'

patience, and I will be able to return to the issue anyway.

If the hon. Gentleman compares the take-up in the first year of family tax credit with the take-up in the first year of working families tax credit, he is not on thin ice: he is actually in the water and out of order in criticising the take-up of WFTC. On the question of applying all appointees—

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

In order for the Minister to sustain the proposition she has just made, perhaps she could tell us how many people are eligible for working families tax credit.

Photo of Ms Dawn Primarolo

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

Oh dear. I thought the hon. Gentleman might actually make a good point. The take-up of working families tax credit in its first year was 76 per cent. which is close to the 81 per cent. take-up of family credit in its final year and much higher than the figure for its first year, which was only around 60 per cent. We should stop flogging a dead horse and move on. Given that working families tax credit is widely celebrated and greatly appreciated by those who receive it, and it has helped endless numbers of families, perhaps we can move on.

I return to the requirement that all appointees attend an interview with a member of Inland Revenue staff. A blanket requirement of that sort would be disproportionate and ineffective. The acceptance of claims made by an appointee on behalf of other claimants is nothing new. It happens now with working families tax credit and a range of social security benefits. Our intention is to allow those arrangements to continue when the new tax credits are introduced. Clearly, they are buttressed by arrangements that are already in force. We will discuss the penalty and investigation powers later.

The most effective way of tackling fraud is not to impose indiscriminate requirements for people to attend interviews, but to use systematic risk assessment techniques to identify the cases that carry the greatest risk. We must ensure that how we pay people their entitlements is open to minimal fraud, misuse and direction to other individuals. That is covered in the Bill.

I ask the hon. Member for Arundel and South Downs to withdraw the amendment, but if he wants to vote on placing such a huge burden on the Inland Revenue, I will ask my colleagues to oppose it. I look forward to seeing his estimate of how much it would cost if Opposition Members were foolish enough to think that they could achieve what is suggested in the amendment.

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

Before my hon. Friend the Member for Arundel and South Downs responds to the Minister's comments, I will take issue with some of her points. Her response was in many ways understandable and not unexpected, but I am not sure that she did justice to the principle that lies behind the amendment. I do not accept the view, which seemed implicit in her response, that a personal interview does not do any good in tackling fraud. That is not in keeping with other Government policy,

in which they postulate the benefits of interviews. For example, the Government require applicants to have job-focused interviews, although that is in a different context and not necessarily to deal with fraud. There are benefits in seeing someone in person, and in that context, Mr. Wray—

Photo of Mr Jimmy Hood

Mr Jimmy Hood (Clydesdale, Labour)

Order. To be helpful to the hon. Gentleman, the Chairman's name is Mr. Hood.

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

I have got off to a bad start. I beg your pardon, Mr. Hood. I will need a personal interview for that.

There would be benefits in having an interview in this context. The prospect of one may deter someone who is minded to commit fraud from setting out on that course. It may result in the person who carries out the interview having the feeling that something is not right and forming a suspicion that they would not have formed from just looking at the papers.

Photo of Ms Dawn Primarolo

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

Scientific analysis.

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

We will come to that in a minute.

The other benefits would be for the honest applicant. We are putting in place a system that many people believe will be more complicated on changes of income. Applicants will be required to do a great deal, including monitoring their income and changes in circumstance, and many may find it helpful to have a personal interview.

Photo of Mr Hugo Swire

Mr Hugo Swire (East Devon, Conservative)

Does my hon. Friend remember that, according to a report in The Economist last year on the working families tax credit, only one in 10 tax inspectors could fill in the application form correctly?

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

That is an important point, and we are now moving to a system that the Institute for Fiscal Studies has said will place more requirements on the applicants. They will have to monitor their income and changes during the year, which might be a substantial burden for many people.

The Minister spoke about clause 14 and the requirement that the board must examine and be satisfied with claims. Will she tell us whether that clause makes it possible for the board to require people to come in for personal interviews? If so, how many cases will there be and under what criteria will that apply?

Photo of Ms Dawn Primarolo

Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I am not saying that personal interviews are not in order if risk assessment indicates that they are necessary for more rigorous consideration. I was rejecting the idea that we should have 5 million. We do not call in every taxpayer to claim their relief, so why should we have interviews in this context?

Photo of Mr James Clappison

Mr James Clappison (Hertsmere, Conservative)

Will the Minister, perhaps after receiving some advice, estimate in how many cases and in what circumstances such interviews will apply? There are benefits in seeing somebody in person. Our justice system operates on the basis of people having to give evidence in person rather than just making a written statement. We hope that the Minister will be careful about fraud. Although her response is not entirely unexpected, I hope that she understands that

we are concerned that every possible way of combating fraud be adopted in the Bill.

Photo of Mr Howard Flight

Mr Howard Flight (Arundel and South Downs, Conservative)

The Minister will know that the institution of interviews was introduced in the fast-track winding up of people's estates, which has been a successful experience.

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.