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Tax Credits

Volume 475: debated on Tuesday 29 April 2008

This is an important and topical debate. We are entering difficult financial times. Many of my constituents in Shrewsbury are facing huge rises in the cost of living, the cost of food and petrol, and mortgage payments. It is important to get the tax credits system right and working properly and effectively, especially as we are entering this difficult time when the budgets of individuals who are the most vulnerable in society are being tightened up. I wrote that last part of my speech in preparation for this debate. The Prime Minister stated the same thing on GMTV today:

“We have got this credit crunch, we have got food prices rising, we have got fuel prices rising. I feel very worried about the effect of that on ordinary, hard-working families and on pensioners.”

Those were the words of the Prime Minister today.

Problems to do with the tax credit system comprise, without question, the single biggest issue facing my office today. The Minister should send my secretary, Mrs. Helen Sheppey, a box of chocolates and flowers—not just today, but every week—for the work that she does sorting out the tax credit problems. The Minister’s Department should have fixed that system a long time ago. My secretary does an enormous amount of work every day, through the Members of Parliament hotline, trying to sort out people’s tax credit problems.

This is the first time that I have spoken at any length in the House of Commons about my secretary. Helen is extremely attentive to everybody who comes to see her about tax credits. She listens to constituents and sorts things out efficiently. Many people write, but when somebody comes in off the street without making an appointment, she drops everything and prioritises somebody with a tax credit problem. I will come in a minute to why everything is dropped to sort out people’s tax credit problems and why the issue is so important.

Helen is coming under huge extra strain, as the number of cases that she has to deal with is soaring on a weekly and monthly basis. She has to deal, like many other constituency secretaries, with a great number of things: she has to manage me, which is a nightmare in itself. I sympathise greatly with her in managing my diary and my constituency engagements but, ultimately, those are the things—the main tasks of a constituency secretary—that she was hired to do. Yet we have estimated that she now spends about 30 per cent. to 40 per cent. of her time dealing with tax credits. That is astounding. I am deeply concerned about the amount of time that she is having to spend dealing with these cases. The numbers are staggering and growing.

What worries me even further is that the Government have said to us that they intend to try to clear up the mess of the 10p tax band fiasco, over which they have backed down, by using tax credits. So they are going to bring more people into tax credits. I understand that the Government are going to compensate those people who have lost out as a result of the 10p band being abolished by bringing them into the tax credit system. There will now be a huge extra strain on a system that is already not working and not operating efficiently, with even more people potentially facing chaos when trying to get their tax credits rectified and paid appropriately on time.

I come now to the most important part of my speech: not my comments as a Conservative Back-Bench MP, but the views of my secretary, Mrs. Helen Sheppey, for which I asked her in preparing for this debate because I wanted to put her words, not mine, to the Minister. In between sorting out tax credit issues, she has typed a one-page document containing some of the real problems that she faces daily in dealing with tax credits.

Helen wanted me to stress that,

“The staff on the MP Hotline are very helpful and knowledgeable”,

because she acknowledges that. I thank the Minister for the MP hotline. There is no doubt that its staff are courteous, polite, helpful and will go to the nth degree to help MPs’ secretaries try to resolve some of the problems. In fact, my secretary wanted me to put in a special plug for them, because she wants me to acknowledge just how helpful they have been to her. However, she continues:

“Constituents are very frightened when faced with a Tax Credit demand. Some constituents have told me when they receive a letter from Tax Credits they are too frightened to open it and ask a friend to come around and open it on their behalf.”

I am staggered that my constituents are receiving official communications from the Government but are too frightened to open a letter and need a friend to help them open it and give them support. What sort of a system is this that is terrorising people—I do not want to be over-melodramatic—and frightening them in this way? You will know, Mr. Pope, that these are the most vulnerable people in my constituency, and in yours, and throughout the United Kingdom.

My constituents have had to borrow money from banks to pay off the debts. Suddenly, the Government realise that they have overpaid tax credits to a certain individual and send a demand for this money. In the meantime, these vulnerable constituents have spent the money, thinking, quite rightly, that they were entitled to it and, suddenly, they have to find the money to pay the Government back. They go to relatives, friends and banks to try to borrow money. Given the credit crunch, it will be increasingly difficult for them to find the money to pay the Government back.

My secretary continues:

“Some constituents have had such a frightening experience”—

this is the most important point—

“they no longer claim Tax Credits, even though they are fully entitled.”

These are the words of my secretary, not myself as a partisan MP. What sort of system is it that leaves some of my constituents too fearful to claim something that they are entitled to, simply because of their experience?

“In the old system of Tax Codes, these problems did not exist.”

I agree with her on that point.

With regard to case problems:

“Constituents telephone the Helpline to advise them of a change of circumstances (usually an increase in income). Constituents then receive a new Award Notice which does not show the new income details. When constituents telephone the Helpline they are assured the information on the computer is correct, thus the payments they received are correct. It is only when the Award is finalised it is discovered the changes were not in fact made, and constituents have been receiving too much money. The onus is on the constituent to prove the date of their telephone call and the name of the person they spoke to.

Constituents have to return an Annual Declaration to Tax Credits at the end of the financial year to confirm the figures they have provided are correct. Constituents return the Annual Declaration and hear nothing further. Their payments later stop and they are informed the Declaration was not received.”

My secretary’s last point is that,

“If a joint claim ceases because a relationship has ended, it can be extremely difficult for the parent with care of the children. If the absent parent does not return an Annual Declaration, any overpayment is usually reclaimed from the parent with care.”

That worries me greatly.

The chaos of the system is taking a huge amount of resources out of my budget as an MP. I give the Minister three options to consider. First, I could send her an invoice. I come from business, where there was a lot of accountability in respect of finances. I can happily send her a quarterly invoice for the 30 per cent. to 40 per cent. of my secretary’s time in dealing with all these issues. Although I will not go into my secretary’s salary and remunerations, I could work it out for the Minister and send her an invoice. I genuinely believe that her Department should be sorting this matter out.

Secondly, I can collate all the inquiries from people who are frightened and frustrated, and send to them the Minister’s e-mail address and personal telephone number so that she can deal with them herself.

Thirdly, the Minister could ask the Exchequer to give MPs money for a full-time assistant to deal just with tax credits, because if the system continues as at present MPs will need one staff member—I am not being melodramatic—to deal just with tax credit problems. Those are the three options for the Minister.

I have three questions. First, why is the system not working, and why is it so chaotic? The Labour party believes that supporting the most vulnerable people in society is important, and is determined to redistribute wealth in this country, so why is its flagship and pivotal policy of helping the most vulnerable not working? Is it because of the system, or because of the computers? I do not know.

Secondly, what plans does the Minister have for reform? Does she acknowledge that there is a problem? I do not know, but I would like to hear from her, now that she has heard about the problems that we face in Shrewsbury. If she acknowledges that there is a problem, what plans does she have for reform?

Thirdly, what extra resources will the Minister secure from the Treasury to deal with the extra work involved in processing many new claims as a result of the 10p fiasco? Many more people will come into the system in the coming months and years as a result of the 10p fiasco, so what extra resources will she secure from the Exchequer to deal with the huge increase in demand when the system is buckling under the strain and is not fit for purpose?

My only party political comment—[Interruption.] My neighbour, the hon. Member for Telford (David Wright) is snorting at that. The cynical part of me believes that the Government are happy to allow this mess to continue because MPs are tied up with the problems. I have spoken a great deal about my secretary, but I also spend a great deal of time on Fridays and Saturdays dealing with people’s tax credits. If the system was working effectively, I could spend that time campaigning for extra resources for infrastructure projects in Shrewsbury, scrutinising the Government, thinking of debates, and so on, but I cannot do that at the moment because I spend hundreds of hours every month dealing with tax credits, which should be working smoothly and purring along like a Rolls-Royce engine without MPs having to involve themselves. The cynical part of me believes that the Government are happy about the matter because it allows us less time to scrutinise them.

Until this mess is sorted out, we are very happy to help constituents. Some people may ask why this MP is whingeing about having to deal with tax credits. I am not. I am more than happy to deal with any tax credit problem for any constituent. I go further and urge any constituent in Shrewsbury and Atcham who has a problem with tax credits immediately to get in touch with my office. Until the problem is sorted out, I or my secretary will be happy to help. They can get in touch with me at my office in Harlescott lane, Shrewsbury—most of my constituents know where my office is—where we are more than happy to help them. I will do everything that I can to help them. Why should they have to pull their hair out in frustration? Their MP is there to help them, and I want to get that message across, but I have a duty at the same time to raise my concerns about a system that is not working. I want to scrutinise the Minister to find out what will happen to make it work more efficiently.

At the end of the day, what angers me most is that many of my constituents are treated as numbers, unlike me. The MPs’ hotline purrs along beautifully, and when a Member of Parliament telephones the service is first class and the problem is rectified, but when a member of the public telephones, they must listen to music for hours on end, no one comes back to them, and they pull their hair out with frustration. People come to see their Member of Parliament because they are frustrated by their interaction with the system.

I do not believe that Members of Parliament should be treated differently from those whom we represent, and I want the excellent service that the Minister has provided for me through the MPs’ hotline to be universal for all my constituents so that they can sort out their tax credits on time and receive the appropriate money. I very much look forward to hearing the Minister address some of the issues that I have raised.

I see you smiling, Mr. Pope. You and I have had a number of conversations about tax credits, and this is a problem.

I congratulate the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) on securing this debate. I am grateful to him because it allows me to address the genuine problems that he is raising, and to explain some of the work that we are doing on an effective policy that is made difficult by its administration. I shall deal with one or two of the points that he raised.

I am grateful to the hon. Gentleman and to Helen Sheppey for their complimentary remarks about the MPs’ hotline. The staff will also be grateful to have them recorded publicly. I acknowledge the work that Helen is doing. She, like probably one member of staff in almost every MP’s office, has an almost personal relationship with staff of the MPs’ hotline. There is a high degree of awareness of the problems in the system, but as for sending her a box of chocolates every week—

Just once. It certainly sounds as though she deserves it. I was surprised to hear that she spends 30-40 per cent. of her time dealing with tax credit problems. I do not disagree that, although we have made great strides in improving performance, a great deal more needs to be done. Her Majesty’s Customs and Revenue and I are working hard to improve the experience of our customers, not so that MPs receive the Rolls-Royce service that the hon. Gentleman described, but, as he suggested, so that anyone contacting the tax credit offices receives a quality service.

I know from meeting staff who work in tax credits how committed they are to that high quality service, and how disappointed they are if there are problems in the system or with the computer that prevent them from delivering that service. There is a real and serious intention among staff to provide a good service, and they will be particularly pleased to hear that some aspects of their work are happily acknowledged.

I do not have the details to hand and it would not be proper to talk about individual cases, but I receive monthly operational statistics from the tax credit office. I instituted that to monitor its work, and I assure the hon. Gentleman that the level of complaints and disputes that it receives is falling, although not as quickly as I would like, but progress is being made.

I was interested and disappointed to hear Helen’s description of the impact on some constituents of receiving communications from HMRC. It would be disappointing if there was a widespread sense of fear when an HMRC letter comes through the letterbox. In the House—although often only in the few moments that we have at Question Time—I have described how we are working hard with regular customers who renew every year and every year have problems with their renewal. The renewal is part of the annual system by which we make sure the tax credit support that families get is appropriate and is exactly their entitlement. The renewal is a necessary part of the system and tax credit offices and call centres are now instituting work through which they proactively contact customers over the period of renewals, particularly those we know have got into difficulties in previous years, not only to remind them to renew, but to assist them in the process. If errors have been made because they have not understood the form, which is complicated, or if they are unaware that details of their personal incomes need to be included, staff can talk people through the difficulties. Therefore, we hope the number of customers who get into difficulties as a result of renewing will be reduced.

I was interested to hear the hon. Gentleman mention a case in which a family had renewed as requested and then did not receive anything at all. I want to go away and study everything that he has said in today’s debate. I have a number of sources of information about the subject—not only colleagues such as you, Mr. Pope, but my staff and friends of mine who are debt counsellors in Liverpool and who work with people in such circumstances. I am kept aware of where the rubbing points are, but as I have said, the overall number of complaints and disputes is falling. I was concerned about and am interested to learn the extent to which people find the process so difficult that they decline to renew and let their claim lapse. The statistics that I have seen—and I have asked for more detail on this—do not indicate that that is widespread. I appreciate that to decline to renew is an expression of frustration, but for many families, particularly those in the lower income groups, tax credits are so important that people do, nevertheless, renew. Tax credits are an integral part of a family’s income.

I totally agree with the Minister: it is extremely important to ensure that people renew. In Shrewsbury, we have had some cases in which people have felt unable to renew because of the problems that they have had. May I write to her with the names? I will not inundate her, but I would like to provide a sample. Will she look at some of the worst cases and get back to me?

Yes. I was going to suggest that the hon. Gentleman might wish to do that. I would be interested to look at those examples as case studies. Officials would be grateful to learn from the circumstances that he is describing. I do not wish in any way to diminish the pressure that he has described his secretary being under, but the information that I have, shows that during the past 12 months, he and his staff have made 34 calls to the hotline about 20 different customers. That is a large number, but it would be wrong and would distort the picture to allow people to assume that that represents the majority or a significant number of tax credit customers. In fact, 9,600 families benefit from tax credits in the hon. Gentleman’s constituency. I do not offer that figure as a way of saying that he is taking a party political position; I know that he not. However, 9,600 is a significant number of his constituents. The families of 15,900 children benefit from tax credit support. Out of those 9,600, the relative number of people who come to him are small, but I accept that those who find their way to a Member of Parliament are often a small, but determined group. That is usually indicative of a problem that we, as Members of Parliament, need to take account of and be aware of. I, as a Minister, ought to be listening to such problems.

On that point, I appreciate that, as an efficient Minister, the right hon. Lady obviously has the details of the cases with which we have been officially involved and that we have raised through the MP’s hotline. I am sure that she will appreciate that because of the experience that my secretary is getting in dealing with these matters, much work is done on other cases, about which we do not necessarily phone the MP’s hotline. Some of the problems are in certain cases very small and we do not need to approach the MP’s hotline because, after three years, my secretary has experience of the issue. Although the figures that the Minister quotes are correct, they are just the tip of the iceberg of the other issues that my secretary is involved with.

The hon. Gentleman makes a fair point and I take on board what he says. As I have said, I accept that there have been serious difficulties and that in the early days, they were very serious indeed. I hope he accepts that matters have improved since then. Her Majesty’s Revenue and Customs now provides a much better, if not good, service—although I am the first to recognise that there is always room for improvement. The improved performance of the tax credit system has meant that fewer overpayments are caused by IT or administrative errors. Again, that is demonstrated by improvements to the accuracy in processing and calculating awards, which increased from 78.6 per cent. in 2003-04—during the opening days when the systems were being set up—to around 97 per cent. in 2006-07.

There have been a number of significant changes in the past year, and I would like to mention briefly two important developments. One development that the hon. Gentleman might know of was the reform of code of practice 26, which is the policy that defines how HMRC should respond to disputes and complaints about recovery of overpayments. Previously, an overpayment was written off if there was an official error but it was reasonable to expect the customer to believe that their award was correct. That allowed for a huge area of disagreement between HMRC and the staff. I know that the reasonable belief test caused concern because people’s perception of what is reasonable can vary greatly. Before I was the relevant Minister, I saw many tax credit cases involving my constituents, but when answering letters to Members of Parliament as a Minister, I bear in mind, as I always do, that what I see is the smallest wedge of complaints, and I ask myself, “Does HMRC’s response feel reasonable to me?” Out of that discussion, work that was already under way with HMRC to review the reasonable belief test and code of practice led to a more straightforward set of questions and responsibilities, some of which HMRC also took on board. From the end of January this year, we replaced the reasonable belief test with a clearer test that sets out the responsibilities of HMRC and the customer for checking factual information.

Although we may not all be very good at doing it, if we are paid through pay-as-you-earn, we accept without question the responsibility that we have as taxpayers to ensure our pay slip is correct and to check our end of year tax statements and codes. We have a responsibility in relation to that and that is carried through into tax credits. The tax credits transformation programme, which started in 2006, aims to improve the service that families receive. Often, when I get the opportunity at Question Time, I mention the changes that are being introduced as a result of the work of this excellent group of HMRC officers. As I said, one change that has been made regards contacting customers at some of the most difficult times in their lives. When a family breaks down, we now have a system that is spread throughout the administration of tax credits. In the past, if a customer contacted the office to tell someone that their relationship had broken down, their joint claim would have been cancelled, a new form would have to be sent out, and it would have taken about six weeks to renew and get the person back into receipt of valuable tax credits at a time when the family needed it most. Now, we make the change during the phone call, so that the customer should not see a break in their receipt of payments. That is important to maintaining the confidence of our customers in the service.

I hope that the hon. Gentleman agrees that the service is getting better and that he welcomes our plans to improve the service further. I would be grateful to receive some of the detail of what he has mentioned if it is available, and I thank him again for securing the debate.