Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 10 November 2005.
What steps he is taking to promote a better understanding of the tax credit system.
Her Majesty's Revenue and Customs is taking steps to remind taxpayers of the importance of providing up-to-date information as their circumstances change. That includes a publicity campaign, which will run from the new year, to remind claimants of their obligations. The Department is also piloting targeted approaches, again, to help to reinforce the message and remind taxpayers of their obligations. HMRC is also discussing with the citizens advice bureau how best to work together with a view to developing arrangements for working to support claimants better, including face-to-face support for the most vulnerable groups.
I am grateful to my right hon. Friend for that response, which addresses the main problem that I have been having in Stevenage, where more than 7,500 families have benefited from tax credits, but about 150 have had serious problems with overpayments. As she says, the main cause is failure to report changes in circumstances. Will she consider producing some kind of educational leaflet—in simple, clear language—to explain this rather complex system?
I deeply regret the fact that some of my hon. Friend's constituents have experienced extreme difficulties with their claims. The House has discussed the matter on several occasions. I would not want to give the impression that this is just a question of ensuring that claimants notify HMRC because there are clear issues that the Department must address regarding the recording of information. Further steps can be taken to ensure that information is clearly given to claimants so that they are able to check that easily. That, in addition to the campaign that I have already described, the redesigned shorter and clearer award notice and the notes that will accompany that notice—I hope that they will be short and specific; perhaps two pages—will make it clear which details on the award notice need to be checked, with the notification given if they are incorrect.
If Ministers do not think that a system that was four years in preparation, that costs £475 million a year to administer and that ends up in its third year of operation wrongly paying 1.9 million families represents disarray, perhaps they will offer us a better definition of disarray. Instead of trying to rubbish the parliamentary ombudsman, why do not Ministers get a grip of this shambles and start sorting it out now?
I deeply regret the hon. Gentleman's assertion that Ministers are somehow attempting to rubbish the parliamentary ombudsman—nothing could be further from the truth. Her recommendations are being actively considered by the Department. The Department is working closely with the ombudsman, the adjudicator and the citizens advice bureau to deal with specific problems that have occurred due to errors in the Department and computer problems.
The hon. Gentleman is quite wrong to assert that the tax credit system is somehow failing the communities that it serves. It serves 6.1 million families, the majority of whom receive their tax credit. It is assisting the delivery of the Government's strategy of helping people into work, supporting them in work, helping to eradicate child poverty and, most importantly, supporting parents in balancing their work and family responsibilities. That is not a failure, but a policy going forward, albeit with issues that need to be addressed.
Does my right hon. Friend accept that tax credits are extremely popular with many working families in Hackney, South and Shoreditch and that there have been few problems? The systemic problem with tax credits arises when people's income increases very quickly in a single year, and, sadly, too few families in Hackney, South and Shoreditch experience such an increase. What can she do to help Hackney families to experience further increases in income?
As my hon. Friend will know, if the family income of people in the tax credit system rises by more than £2,500 in a year, they are supposed to notify the Department because that might have an impact on their tax credits. However, she should look at the employment rates and the number of people moving into work who are lone parents, especially, and partners in marriages. The presence of tax credits is supporting such people, and they are helping people to move into work, which must be a good thing.
In terms of a better understanding of the tax credit system, will the Paymaster General clarify what the Chief Secretary said earlier regarding no automatic recovery of overpayments? Does that mean that there will still be recovery of overpayments before the resolution of disputes?
If claimants dispute the overpayment of tax credits about which they have been notified, the Department now suspends recovery of the disputed overpayment until the matter is resolved. The Department investigates and responds to the dispute. If the case is found in a claimant's favour, the overpayment is written off. If it is demonstrated that repayment is still required, overpayment recovery commences. The system works on a manual basis at present and will move to an automated basis next year.