Question
Asked By
To ask Her Majesty’s Government what is the total value of unpaid debts to the Government in the form of benefit overpayments and unrecovered tax; and what action they will take to recover those debts.
My Lords, the value of unpaid tax debts is shown on page 96 of HMRC’s trust statement. On 31 March 2009, the figure stood at £27.7 billion.
The value of benefit overpayments to be recovered, as on 31 March 2009, is £1.8 billion, which the noble Lord could have found on page 108 of the DWP’s resource accounts. If people owe a debt to the Exchequer, it should be paid. HMRC and the DWP can, do and will continue vigorously to pursue those who can pay but will not.
My Lords, I thank the Minister for that response. He will agree that that is a very high proportion indeed of the national debt and, as he rightly says, if it is not paid the burden will continue to fall on the responsible taxpayers who do continue to discharge their debts. Is he aware of the Government’s guidelines on government agencies’ debt recovery, particularly the section on the legal services framework, and will he say whether he considers those guidelines still to be an adequate response to the need for collection activity in an incisive manner?
I am not intimately familiar with the document to which the noble Lord refers, but I shall put a copy alongside my bed tonight. What is more reassuring is that HMRC collects all but 1 per cent of tax due. Of the 1 per cent that is not collected, 90 per cent is due to business insolvency. That is an extraordinarily good record of debt recovery, which most businesses would find hard to match.
Does my noble friend agree that the figures sought by the noble Lord, Lord James, were about known tax debt? Does he further agree that the real problems that need to be addressed—I am sure they are receiving attention—are some of the corporate fiddles for evading taxation, such as transfer pricing, so that profits can be put into the most favourable tax domain even when they are earned in this country?
The Government and HMRC are committed to pursuing tax avoidance wherever they see evidence of that happening. We have been particularly vigilant in our dealings with the banking sector in this respect because some of the most invidious forms of tax avoidance are those associated with, and perpetrated or facilitated by, major banks. We are also extremely alert to areas in which tax codes and rules can be improved in order to reduce the risk of unintended consequences.
My Lords, does the Minister not agree that the noble Lord, Lord Tomlinson, in trying to put all the blame on the corporate sector, is being quite unfair? An awful lot of people operating privately are avoiding and evading tax.
I agree that we all have a commitment to meet our tax obligations and it is a great tribute to the vast majority of citizens and companies that they pay their tax at the time when it is due without being pursued or putting additional burdens on the system. That is to be welcomed. However, a small number do not and they should be pursued appropriately.
My Lords, no doubt the Minister is aware that CPAG recently won a case in the Court of Appeal to the effect that the Department for Work and Pensions could not recover overpayments of social security benefits through the courts where the claimant was not at fault. Some 65,000 claimants received letters saying that they would have to repay major overpayments. Can the Government give those people an assurance that they will now be written to again to tell them formally that they no longer have to pay back benefits that they were overpaid through no fault of their own?
If the judgment stands, there is no further appeal and that is the outcome, the DWP will of course recognise that and, I am sure, it would be the department’s intention so to communicate.
My Lords, is not our 99 per cent collection rate one of the highest, if not the highest, in western Europe?
I thank my noble friend for his question. I believe that the figure is very high, and as I said, it is high in comparison with my experience of the private sector. HMRC also works to understand the procedures used by tax authorities elsewhere and is constantly enhancing its methods, including in particular in terms of communication and phased payment. It is a good record and one on which HMRC deserves to be congratulated.
My Lords, what is HMRC’s latest estimate of the size of the black economy, and how accurate does the Minister think that estimate may be?
I do not have a figure to provide for the noble Lord, Lord Lawson, but I will endeavour to find out from HMRC its current estimate and communicate with him in writing. There is an economy which acts outside the formal economy with clear tax evasions as a consequence. We are much focused on ensuring that we raise the appropriate rate of taxation from all taxable activities.
My Lords, is my noble friend willing to comment on the fundamental issue here, which is that the benefit system is so complicated that you have to be a genius in order to be able to fill in the forms, and increasingly the tax system is so complicated that you worry enormously about making mistakes because you are never clear about the right answers? Have we not spent years talking about simplification? The problem is that while we all say that it is a good thing, we never do anything about it.
My noble friend Lord Peston makes a point with which I have much sympathy. The tax system and the benefit system are both complicated, but that is the consequence of targeted policies that try to ensure that we raise taxes in a fair and proportionate way and that we focus benefits on the most needy. The need to get good value for money and to preserve focus needs to be counterbalanced with the fact that there are some consequences in terms of complexity. I am not sure that any government will ever get it perfectly right, but the message of my noble friend is one with which I have much sympathy.
My Lords, in May the Public Accounts Committee criticised Her Majesty’s Revenue and Customs for failing to explore new payment methods for taxpayers to settle their liabilities and called on HMRC to look at letting people settle their debts through schemes such as Paypoint and Pay Zone. What progress has been made in this area?
As I said, HMRC is looking at new ways of settling tax through electronic money, adjustments to PAYE coding and adjustments to benefits received. Again, we are drawing on the experience both of the private sector in its management of debt recovery as well as that of tax agencies elsewhere. I have found HMRC to be an innovative and customer-focused organisation that is constantly seeking to improve its performance.