Clause 27 - Overpayments

Part of Tax Credits Bill – in a Public Bill Committee at 5:00 pm on 22 January 2002.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 5:00, 22 January 2002

I suppose that it has been decided that the amount will not be averaged and that there will be some notion of what ''current'' means. Until we see the regulations, we will not know what the definitions are.

I am worried about the mixed messages from the Government on how often they want people to contact the Inland Revenue. The Minister said that the Revenue does not want to hear from those on higher incomes who receive only the children's tax credit. Wild fluctuations in their incomes will not make a difference to their entitlement. However, people whose hours are fluctuating will have to be on the blower every week. The entitlement of people who do a shift one week but not the next depends on their current circumstances. Under the current circumstances eligibility rules, if those people do not want to fall foul of the overpayment provisions at the end of the year and face a possible £1,000 repayment, they must report all those changes all the time. There is tension here. In the case of income-based assessment, someone can assess their income by performing an end-year reconciliation by comparing their forecast with what happened.

Claimants have to understand that if they are in the higher income band, changes to their income do not matter, but changes to their circumstances—marital status, hours and the rest of it—do matter. If they are in the lower income band, they should immediately report all changes so that a reassessment can be undertaken. I worry about how that will work. Employers are employing people whose hours will

vary, because that is the nature of their work. The board will require those employees to pay a tax credit one week but not the next if they do not satisfy the qualifying hours.

We have come a long way from annual assessment. This is a muddle that has nothing to do with the claimant, but with the uneasy marriage of current circumstance-based assessment and annual income-based assessment. They do not fit well together and we should revisit the issue. There will be problems even when the scheme is up and running. We are worried that people will receive money that is demanded back at the end of the year, because they did not report every shift. Such people will end up being penalised, possibly substantially.

The wording of the amendment and the attempt to mirror social security legislation may not be exactly what is required, but I have grave concerns about people who run up overpayments. The Minister has not greatly reassured the Committee so far that those people will be looked after properly, given the onus that is being placed on them to understand the different reporting rules.