Sir George speaks out on Working Tax Credits
7 Jun 2005
In his first speech in the new Parliament, Sir George attacked the Government's incompetence in managing tax credits.

"Everybody wants to see people on low incomes encouraged back into work, but the Government's shambolic administration of the tax credit scheme is proving counterproductive."

This is the text of Sir George's speech:

Sir George Young (North-West Hampshire) (Con): I commend the hon. Member for Nottingham, North (Mr. Allen) for his choice of subject for the first Westminster Hall debate of the new Parliament. He may know that the penultimate Westminster Hall debate in the previous Parliament was on tax credits, and there are some survivors from that debate in the Chamber this morning.
The fact that Back-Bench Members of Parliament are applying for, and securing, debates on tax credits at such regular intervals indicates the problems that confront our constituents and that arise from a complex and rather dysfunctional benefits system. When I was last called to speak, I was asked to compress my remarks into five minutes. I shall try to exercise the same self-discipline this morning.
It is as if one is trying to run a large number of appliances from one small three-pin socket. The plugs are overheating and the fuses are blowing all over the place. In the previous debate, I presumed to give advice as to how we might resolve the problems. I said that in the next Parliament—in other words, this one—we would need to stand back and examine the financial interface between citizen and state to see whether there was a better way to achieve the principle to which we all subscribe.
Can the interface be reduced by raising the tax thresholds? Can we do more on the universal benefit front? Would a universal taxable child benefit do the trick? Can the system be simplified in some way? I suggested that we should, in the next Parliament, stand back and examine what I described as a top-heavy, complex system, and asked this basic question: is there a better way to achieve the goals that we all want to achieve?
Had the Conservative party done better in the election, I am sure that the review that I wanted would now be under way and that my hon. Friend the Member for West Suffolk (Mr. Spring) would be about to tell us all about it. We have, however, the human face of the Treasury to reply to the debate, and I hope that she can go a little beyond the brief that was read out in the previous debate. That brief was apologetic about the mistakes but basically unrepentant about the system.

Dawn Primarolo : I apologise to the right hon. Gentleman in that I could not respond to that debate and the then Economic Secretary to the Treasury, now the Financial Secretary to the Treasury, had to step in. That was because unfortunately I was admitted to hospital that day and, as friendly as I may be, it is not possible to address the House from a hospital bed after an operation.

Sir George Young : We all understand why the right hon. Lady was not there, and we are delighted that she has recovered from the indisposition and can reply to the debate this morning.

To demonstrate the continuing need for reform, I shall briefly mention two cases that have cropped up since the previous debate. What is disturbing is that in each case that has come to my attention a different thing has gone wrong. It is not as if one component in the system is malfunctioning. I believe that the problems are more systemic.
Miss S of Andover has a seven-year-old disabled son and receives £160 a week in working tax credit. She pre-notified the Inland Revenue of a change of circumstances: she was going to move in with her partner. She told the Revenue that her partner had a temporary national insurance number, and she was assured that that did not matter. It did matter; the number was not recognised, the working family tax credit was stopped, and she was told that it would be two weeks before an interview could be held and a new national insurance number issued. She was also told that it would be five weeks before that number was recognised at Preston. Being £160 short for five weeks is a lot of money for a low-income household. Some £1,300 was put into her account on Friday. She told me yesterday that the whole saga had been an absolute nightmare, and that she had been given different advice each time she rang. Once, she was told to contact her MP as that was the only system that really worked. She was also told to go to the Inland Revenue office to ask for cash to tide her over, although the Revenue does not provide that facility. Miss S eventually obtained the money, but what she will say to her friends who are thinking of moving on to working tax credit will not be very helpful.
The second case involves Miss S of Whitchurch, who wrote in an e-mail:
For the past 5 weeks we have had no Working family tax credit. To get any sort of idea what has been happening we have had to travel to Basingstoke every Monday to get some answers or to try and get some payment out of them even they don't know what is going on we have not been able to pay our rent, pay our phone bill or even sort the tax out on our car. When we have phoned the Inland Tax Office they have said to us that the arrears and the next payment are sat waiting to go from their computer but are waiting for a date to be inputted onto the computer so that it gets to our bank."
When I eventually took up the case, I received an answer from the Inland Revenue:
Unfortunately Mrs S's 2005/6 tax credit award has been affected by a technical fault which is preventing our computer system from issuing payments into her bank account. This problem has been brought to the attention of our technical experts who are currently working hard to resolve this fault."
As the whole purpose of the working tax credit system is precisely to make payments into people's bank accounts, the failure of the computer system to do so seems to me slightly more than a technical fault.
I was told:
A member of my team has therefore arranged for Mrs S to receive four weekly manual payments from May 27th until the system problems are resolved."
Before 9 May, the system had been broken for five weeks—that was how long it took to sort the matter out. Those are only two families whose lives have been turned upside-down by the tax credit system. My experience is no different from that of other colleagues.

The debate coincides with renewed media interest. Headlines last week stated that Chancellor Gordon Brown has been urged to reform the tax credits system and that he is under increasing pressure to revamp the Government's flagship tax credits. Figures released yesterday show that nearly half of all awards were overpaid in 2003–04, and, according to HM Revenue and Customs, some 45 per cent. of the awards proved to be wrong in the first year of operation.
The day before yesterday, the money section of The Sunday Times contained an article with the headline, Victims of tax credit fiasco face hardship".
A Child Poverty Action Group leaflet that arrived on all our desks last week says:
Non-take up of tax credits and benefits and the often unreasonable recovery of overpaid tax credits have actually created rather than prevented hardship. Government must get the administration of tax credits right to achieve its anti-poverty targets."
I was struck by another paragraph in the leaflet, which stated:
Child benefit, a near universal benefit, provides a well-functioning mechanism that does not suffer the administrative or technical difficulties of tax credit."
That may well be a key to the solution.
There are two schools of thought: one more heave", to which I believe the Government subscribe, or back to square one", the philosophy to which I adhere. The whole structure is unstable, incomprehensible and unworkable, and I ask the Government to initiate a fundamental review of the system. I also ask that the Select Committee on Work and Pensions, when it is set up, carries out a parallel inquiry. Our constituents deserve better than what they are getting today.
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