I made a statement to the House on Tuesday on the operation of tax credits. Her Majesty’s Revenue and Customs published on its website its estimates of error and fraud for tax credits relating to 2003-04.
I am grateful for that reply, but it is a shame that it did not come from the Chancellor, who has not answered an oral question on tax credits for 791 days. One cause of the extraordinary level of fraud and error in tax credits—now the worst in the welfare system—was payments made to people subject to immigration controls. Why were the verification procedures that would have prevented such mistakes, specifically rule 12, suspended for 18 months from April 2003? Did the Paymaster General approve that decision?
I can tell the hon. Gentleman that at no point were officials instructed to overlook irregularities where claimants had failed the UK residential rule. I also say to the hon. Gentleman that I am the Minister for the Department, I am accountable to the House and I accept responsibility for what happens in the Department.
Tax credits are the Chancellor’s flagship scheme, but the level of fraud and error reported to the House earlier this week is running at nearly £2 billion for just one year. Does that not add the Treasury to the growing list of Government Departments, such as the Department for Environment, Food and Rural Affairs and the Home Office, that are not fit for purpose? How can the Treasury hope to control the rest of Whitehall when it cannot even run its own schemes properly?
If the right hon. Gentleman looks at the figures for 2005-06, as reported to the House, he will see that the Department stopped the overwhelming number of attempts to defraud it, thus demonstrating clearly that the anti-fraud measures are working. But of course he is right, and it is true for any Department that fraud must be tackled and reduced and that claimant error must also be tackled, by ensuring that claimants have clearer information and a clear understanding of their responsibilities and that the Department responds accurately and in a timely way to those submissions.
May I ask my right hon. Friend to focus on the outcome of the tax credits system, which in my constituency is providing new chances for single parents to work and therefore look after their own families, giving new opportunities to people who did not have them before and tackling child poverty, which was an absolute scourge when the Labour party came to power?
My hon. Friend works very hard in her constituency to ensure that her constituents receive all their entitlements, including tax credits, and she will know that the take-up of tax credits in their first year of operation, particularly for lower income families, was about 93 per cent., so we now have 10 million children—6 million families—benefiting. Tax credits have made a huge contribution in helping people to return to work, in paying for child care and, most importantly, in eradicating child poverty and lifting children out of poverty. That is the situation that needs to be tackled, because child poverty doubled under the previous Government, and the difference between the Labour party and the Conservative party is that we are dedicated to eradicating child poverty; they do not even want to understand it.
Is the Paymaster General aware that, only five weeks ago, the Treasury Sub-Committee—chaired so well by the hon. Member for Sevenoaks (Mr. Fallon), who is sitting on the Opposition Benches—found that the policy of using tax credits as a method of taking people out of poverty was laudable and that the programme had considerable success? Encouraged by such all-party support, will she assure us that she will continue her efforts to help the poorest people in our communities?
My hon. Friend is right to refer to the Treasury Sub-Committee report, which I welcomed when it was presented to the House, because it made it absolutely clear that both the Sub-Committee and the overwhelming number of people who gave evidence to it said that tax credits had widespread support, that they made an important contribution to tackling child poverty, and that they should be supported.
We have learned that, in 2003-04, nearly £1 in every £10 paid in tax credits was paid either in error or because of fraud. Specifically with regard to fraud, does the Paymaster General believe that that figure will fall as a proportion of tax credits paid, and if not, why not?
If the hon. Gentleman looks at the figures for 2003-04, he will see that they are divided between claimant error and fraud, which amounts to £70 million. As I explained to the House earlier in the week, the difference between error and fraud is that the investigating officer must be certain that there was an attempt to defraud, as opposed to a genuine error. The hon. Gentleman is quite right to suggest that strategies need to be developed—they have been announced to the House—to ensure that claimant error is reduced, that the information given to the Department is correct, and that officials act on it speedily and correctly. I have already answered the question on fraud in response to the right hon. Member for Wells (Mr. Heathcoat-Amory), by pointing out that the strategies in place in the Department are ensuring that the majority of fraud attempts made against it are not succeeding.
Does the Paymaster General agree that tax credits have been absolutely central in helping to reduce the tax burden on low-to-middle income families and that Opposition Members should welcome that?
One would expect both the Opposition parties to welcome tax credits on the basis that, according to the latest figures from the Organisation for Economic Co-operation and Development, the tax paid by an average family on £21,000 a year has gone down from between 18 and 19 per cent. to 9 per cent. That has to be welcomed. In addition, the number of families paying no tax on their income has risen since 1997 from fewer than 2.5 million to more than 3 million, when tax credits and benefit reform are taken together. One would have thought that the Opposition parties would welcome this, but they do not, because they do not want to tackle poverty. That is the dividing line between us. They decry the experience of poverty but, unlike this party, they will do nothing to eradicate it.
The Paymaster General is making a spirited attempt to defend the indefensible, but the real culprit is not the Paymaster General—I will pay her that compliment—but the Chancellor. He invented the system, which is riddled with error and fraud. The Treasury itself concedes that nearly half of all payments are wrong. Week after week, the Chancellor answers questions about world poverty, which is not his responsibility, but he will not answer questions about tax credits, which are. Will he now get to his feet, come to the Dispatch Box and take responsibility for this mess, instead of using the Paymaster General as a human shield?
I fear that the hon. Gentleman has made a terrible mistake here. He has just described tax credits as “indefensible”. What is indefensible is his party’s record of doubling child poverty. When he reflects on his contribution in the Chamber today, he will deeply regret the fact that, for the first time, he has made it abundantly clear that the Conservatives are not prepared to defend tax credits. They do not support them because they are not prepared to tackle child poverty.