Clause 28 - Recovery of overpayments
Tax Credits Bill
5:30 pm
Professor Steve Webb (Northavon, Liberal Democrat)
I beg to move amendment No. 52, in page 19, line 35, at end add—
'(6) Where an amount is liable to be repaid under subsections (3) to (5), the amount repaid in any period may not exceed a specified percentage of the person's income during that period, such percentage to be set out in regulations.'.
We are back on overpayments again. Clause 28 allows overpayments to be recovered in one of three ways, as I understand it. A recovery may be made through a request for a lump sum—or an account—through the PAYE system, or through an underpayment of tax credit.
What clause 28 does not do, and what our amendment seeks to do, is to put some sort of ceiling on the rate at which overpaid tax credits can be recovered. We do not want to tie the hands of the Government in any way so our amendment merely provides regulatory powers—with due deference to the Conservative Whip, the hon. Member for Mid-Worcestershire (Mr. Luff)—to pass regulations that would prescribe the percentage rate at which recovery could be made.
Clearly, at the margin, if someone's income has gone up or down a bit and they remain below the threshold, no overpayment will be made. However, when someone's circumstances change—a relationship breakdown or other changehich—it can take several weeks before the authorities hear about it, for understandable reasons, and quite a significant overpayment can arise. A person who becomes a lone parent as result of such a relationship breakdown and who, perhaps, must give up work, could have a large overpayment and a small current income. There is nothing in the Bill that tells us how quickly the board would try to recover the money. Will the Minister tell us the Government's thinking? Would it try to recover any overpayment during the following year? Is that the maximum time during which recovery will be attempted? I would be worried by that. If a person is receiving benefit because they have a low income and a large repayment is to be recovered over a 52-week period, substantial sums could be involved that would leave the person with little to live on.
The precedent for such circumstances—I hesitate to refer to the social security system, but what the heck—are procedures such as the recovery of social fund payments. There are guidelines about the rate at which payments may be recovered. Similarly, even under the convoluted child support legislation, there are ceilings on the percentage of someone's income that may apply in maintenance assessments. Higher ceilings exist for arrears, which is an analogous system to the one that
we are discussing. The concept of ceilings on percentages of income is familiar in the system.
Will there be a ceiling in regulations? Must we force the Government's hand, or are they ahead of us? Have they drafted regulations to that effect? I mention the specific case of a childless person who goes on to jobseeker's allowance but has an overpayment of tax credit. PAYE is not relevant to that person because they do not pay tax. Underpayment of their tax credit by the Government would be irrelevant because they would not be entitled to it. A lump sum bill saying, ''You owe £1,000,'' would not help either. I understand that those are the three ways in which the Government may recover overpayments. Will the Minister address that specific case in addition to our general worry about the rate of recovery of overpayment?
What powers will the Government use to recover money from a person who no longer receives tax credits, who is not handled by the PAYE system and who cannot pay a lump sum? Our worries about maximum thresholds are germane to such a case. I hope that the Minister will reassure us that he is ahead of the game.