Tax Credits

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 1st March 2007.

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Photo of Adam Holloway Adam Holloway Conservative, Gravesham 10:30 am, 1st March 2007

What proportion of appeals against overpayment of tax credits have been refused since April 2006; and if he will make a statement.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Over the period April 2006 to the end of January 2007, there have been around 303,000 disputed overpayments. Over the same period, Her Majesty's Revenue and Customs has written off 8,600.

Photo of Adam Holloway Adam Holloway Conservative, Gravesham

I thank the Minister for that reply, but the National Audit Office report states that, during 2005:

"The recovery of overpayments has caused hardship to some families and HMRC has struggled to manage disputes about recovery."

That is causing huge distress and unmanageable levels of debt to dozens of already disadvantaged families in my constituency. It is obviously a mess. What will the Government do about it?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

As the hon. Gentleman will know, in his constituency, some 7,700 families are benefiting from tax credits, including 12,500 children. He himself has written to me in the past six months on six cases to do with overpayments. I agree that those matters need to be settled, but I ask him to keep the matter in proportion and to recognise the fact that hundreds of thousands of families across his region, and millions across the country, are benefiting. The latest figures on take-up show that the very poorest—those on £10,000 or less a year—now have a take-up rate of 97 per cent.

Photo of Keith Vaz Keith Vaz Labour, Leicester East

Of course thousands of my constituents have benefited from the scheme and I pay tribute to the work that my right hon. Friend has done on the matter, but the fact remains that, after a judgment has been made, many of my constituents are extremely anxious about having to repay immediately. What guidelines exist from her Department that will allow those in difficulties time to pay? Does she accept that there is a fundamental difference between a mistake in law and a mistake in fact?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I can confirm to my right hon. Friend that in his constituency, in the small number of cases—compared with the number of people who are benefiting—where people have to repay as a result of an overpayment, the Department offers time to pay and a graduated system of repayment, ranging from 10 per cent., 25 per cent. or 100 per cent of the sum required. In extreme circumstances of hardship, it will write off the overpayment. I am happy to send him details of that.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Revenue and Customs bases its assessments on code of practice 26. Members who refer cases to the adjudicator find the adjudicator saying that the Revenue and Customs was right because it has adhered to code of practice 26. When they then refer the adjudicator's findings to the ombudsman, the ombudsman says that the adjudicator was right because she adhered to, as Revenue and Customs adhered to, code of practice 26. That code is set down by the Treasury. It is the Treasury's own guidelines. Fundamentally, it says, "We may have made a mistake, but you should have known we made a mistake so you are wrong." When will we get some justice?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

As the hon. Gentleman knows, COP 26 uses the reasonableness test—exactly the same test that has been applied within the tax system for a considerable time. It requires that the claimants ensure that the information that they have given is correct. When it is sent back to them on their award notice, they are expected to check that information and to confirm that it is correct. Where the error is made by the Department and it is clearly demonstrated that that is the case, the reasonableness test requires the overpayment to be written off.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Here we are on St. David's day, the final month of the first financial year in which major changes were made, particularly to income variations, with increases of 1,000 per cent.—the disregard is now £25,000. Can the Paymaster General assure the House that, as far as the figures that are available show at this stage, the level of overpayments will fall by at least a third, as was indicated when the changes were introduced quite some time ago?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I can confirm to my hon. Friend that the introduction of the changes that are now operational this year will have an impact on overpayments, as will the shortening of the period for renewal of tax credits, which was completed last year; it will be shortened again this year. I am sure that he would want to welcome the fact that, because of the tax credits, a family with two children do not start paying tax until they are earning £12,800 a year, or £420 a week. That has made an enormous contribution to reducing poverty, helping people into work and reducing the tax burden on the poorest families.


Someone buy her a calculator! £12800 is not £420 per week.

Submitted by Brian Robinson Read 1 more annotation

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The Paymaster General was asked what proportion of appeals against the overpayment of tax credits had been refused and she has not managed to answer that question yet. It would be helpful to the House if she did so, so we could see how well the system is working. She talks about the numbers being less and says that most people are benefiting, but individuals who are suffering a stressful experience deserve a better service. The Government must understand the system and not make mistakes, instead of individuals policing the Government to ensure that they get the system right.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The question of overpayments is linked to a number of factors—the increase in income in the year, an over-estimation of income by the claimant and provisional payments at the beginning of the payment year. Those are being addressed. I thought that it was helpful of me to tell the House that 303,000 overpayments were disputed, 8,600 of which were written off.


An over-estimation of income by the claimant cannot result in an overpayment, only an underpayment. She doesn't know her subject very well, does she?

Submitted by Brian Robinson Read 2 more annotations

Photo of Mark Francois Mark Francois Shadow Paymaster General

The House should note that, yet again, the Chancellor declines to defend at the Dispatch Box his over-complicated tax credit system. If everything is going so well with tax credits, will the Paymaster General tell me why almost 100 Labour Back Benchers signed an early-day motion protesting at the current method of adjudicating overpayments? Is not this over-complicated clunking mess crying out for wholesale reform?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I look forward to the hon. Gentleman explaining to the 6,300 families in his constituency, including 10,700 children, why he wants to take tax credits away from them. I also look forward to hearing the hon. Gentleman explain how he will ensure that children are lifted out of poverty and people helped into work by making work pay, and how the tax burden on the lowest income will be reduced by tax credits. The hon. Gentleman wants to dodge those questions and instead try to complain about issues that are being addressed.