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Tax Credits

Volume 458: debated on Thursday 29 March 2007

9. How many people have appealed against a demand for return of overpayments of tax credits since April 2006; and if he will make a statement. (130447)

Given the unavoidable absence of the Paymaster General, one or two of us had thought that the Chancellor of the Exchequer might have answered this question himself. It is interesting to note that the policy of leading from behind still prevails.

The Minister refers to 343,000 cases of personal misery directly caused by the failure of Revenue and Customs, which is trying to blame its errors on our constituents by saying that they should have known that they have made a mistake. When, please, may we have a wholly independent tribunal system so that these cases can be dealt with fairly and properly, not by a supine adjudicator or ombudsman?

I do not agree with the hon. Gentleman’s description. I remind him that tax credits are providing support to almost 20 million people, including thousands of families in his constituency. The current position is that Revenue and Customs sends out a one-page checklist of items to check on the tax credits award notice. If all the information about the claimant—for example, how many children they have, their bank account, and the money going into their account—is as on the notice, any overpayment will not be recoverable. That is a straightforward position. A new procedure is being piloted shortly for an independent review involving the adjudicator of disputed overpayments, and that might be helpful as well.

Families that have money reclaimed can be put in serious financial difficulty, and I ask the Chief Secretary to examine the way in which money is reclaimed from some families on low incomes. Notwithstanding that, will my right hon. Friend reflect on the success of the working tax credit system in not only taking families out of poverty but removing the block to moving from benefits to employment? Many of us remember the position that we inherited when we came into government—the Conservative party created it as a matter of policy and we have ended it.

My hon. Friend is right. He knows that restrictions have been placed on the amount of overpayment that can be taken from families on low incomes. He is right that many families have been lifted out of poverty thanks to the tax credit system. That includes 600,000 children, and another 200,000 thanks to last week’s Budget. The tax credit system has also contributed to an increase of 2.6 million jobs in the economy since 1997 because so many more people find it worth their while to be in a job.

Does the Chancellor’s human shield believe that the overpayment scandal and shambles is the cause of the relatively low take-up of tax credits, which means that the abolition of the 10 per cent. rate of tax harms so many low paid people in this country?

I do not know about low take-up: 6,900 families, including 12,000 children, in the right hon. Gentleman’s constituency benefit from tax credits. For households on incomes of under £10,000 a year that are entitled to child tax credit, take-up is approximately 97 per cent. Those who benefit the most from the tax credit system receive the money that they need. They benefit greatly from it and it is now worth while for them to be in work.

Of course, I welcome the tax credit schemes. However, in some cases, fresh information is presented after the conclusion of an appeal that casts doubt on the original facts that were before the person conducting it. What is the Treasury’s approach when new facts emerge after the appeal process is over? Is the approach to a mistake of fact different from that to a mistake of law?

The approach of Her Majesty’s Revenue and Customs is that all information should be taken into account when reaching a determination. If my right hon. Friend is aware of a specific case in which he is worried about the handling of new information, I would be happy to examine it.

If the Chancellor of the Exchequer will not answer questions on his system, at least he can listen to them. Is not it clear that the return of overpayments causes untold misery to many families, that the take-up of some categories of working tax credit is only 25 per cent. and that, in several cases, the computer cannot handle the situation? Indeed, the system is bust. Is not it time that a different person reviewed the whole system?

I remind the hon. Gentleman that 6 million families today receive tax credits. Ten million children benefit and take-up is higher than for any previous form of family income support. We have done much better. The incomes of low paid people have been substantially increased and that has helped dramatically to reduce child poverty and the tax burden on families on lower incomes. I would have thought that he welcomed those achievements.

Yet another tax credit question, yet again the Chancellor takes the vow of omerta instead of responding in person. Let me ask his Chief Secretary a question in lieu of him. As the effect of last week’s Budget, especially the abolition of the 10p starting rate is to push ever more people into a highly complex tax credit system, in which more than half the payments are incorrect, has he ruled out, under any circumstances, a return to a fixed-term system of tax credits, were it to be reformed?

I do not agree with the hon. Gentleman’s characterisation of the system. The system is doing a great job—[Interruption.] Yes, it is. One of the great strengths of the present system is its flexibility. It can respond very quickly when a household’s income falls and extra help is needed. That would be lost if we were to change to a system that was based on the previous year’s incomes. We will of course keep the matter under review, but the hon. Gentleman’s solution does not look attractive to me.