Mike Hancock News
Portsmouth Lib Dems back amnesty for tax credit casualties
The taxman should stop chasing the longest-suffering victims of the tax credit system, say Portsmouth's Lib Dem MP and the man who wants to join him in Parliament at the next election.
Mike Hancock and Lib Dem Parliamentary hopeful for Portsmouth North Darren Sanders want Alistair Darling to stop chasing those people who were overpaid tax credits through no fault of their own between 2003 and 2005.
Mike is also demanding Alistair Darling to bring in a system less prone to the foul-ups that are continuing to cause so much distress to hard-working families.
Mike and Darren join groups such as the Child Poverty Action Group, Royal College of Nursing, Low Incomes Tax Reform Group and Unison in calling for an amnesty.
In 2005, the Parliamentary Ombudsman issued a report arguing for a major overhaul of the tax credit system. But as a party, Lib Dems think the Government has not done enough to implement that report of four years ago as last year saw a rise in the number of overpayments.
Darren, last year presented a petition to 10 Downing Street calling for justice for casualties of the tax credit system.
He called on Treasury Minister and Portsmouth North MP Sarah McCarthy-Fry to act, saying: "Sarah knows the pain this system is inflicting on law-abiding people. After all, one of her constituents is a leading light in the campaign for justice for them. People who have done nothing wrong suddenly find they are treated much like criminals - it is they who suffer. This has to stop."
Mike said: "I am getting constituents telling me they will not take up their tax credit entitlement - money that should be rightfully theirs - because they are fearful of an overpayment. While the extra help from tax credits is welcome, the administration of them is clearly a complete mess. That is why I have demanded that the Chancellor fully implements the Ombudsman's report of 2005 and that the Ombudsman herself also applies more pressure on the Government to do just that."
Mike and Darren have drawn up a three point plan, based on the Ombudsman's report to improve the administration of tax credits:
- An amnesty for people with non-fraudulent tax credit overpayments between 2003 and 2005.
- Change the leaflets and letters so people know they might be entitled to additional tax credits to help with overpayments.
- Reform the administration of the tax credits system so that overpayments are significantly reduced and claimants get a better service.
Notes: The letters Mike has written to the Chancellor and the Parliamentary Ombudsman are enclosed below.
The Tax Credit Causalities website is at http://www.taxcc.org/
The Parliamentary Ombudsman's 2005 report is at http://www.ombudsman.org.uk/pdfs/tax_credits.pdf
Rt Hon Alistair Darling, MP
Chancellor of the Exchequer
HM Treasury
1, Horseguards Road
LONDON SW1A 2HQ
OUR REF: MA/TAXCREDITS/ADMINISTRATION
16 September 2009
Dear Chancellor
I am writing to you about Tax Credits and continued problems with their administration and in particular overpayments. As you may be aware there is a considerable body of opinion that there should be amnesty for those that have been overpaid Tax Credits. I particularly bring to your attention the report by the Parliamentary Ombudsman in 2005 and the following recommendations that she made: "10. Consideration should be given to writing off all excess and overpayments caused by official error which occurred during 2003-04 and 2004-05. (Paragraph 5.61). 11. Consideration should be given to the adoption of a statutory test for recovery of excess payments and overpayments of tax credits, consistent with the test that is currently applied to social security benefits..." In addition, the Ombudsman made three recommendations about additional tax credits.
I am sure like me, you have many of your constituents coming to you still with problems over tax credits. I also gather that the percentage of overpayments increased in the most recent year for which figures are available 2006/07 from 19.77% to 19.82%. While this is down from the figure of 2005/06, it is felt that this was mainly due to a change in a technical change between 05/07 and 06/07 of increasing the "income disregard" from 2005/06 to £25,000. That approximately 1 in 5 of tax credits result in an overpayment is still a very high level. There is also a feeling that the availability of the possibility of additional tax credits for people who experience hardship when their entitlement falls is not widely enough to people.
As I said the Ombudsman in 2005 report made three recommendations about additional tax credits: Those were: "5. Steps should be taken to ensure that all Revenue staff who have contact with tax credit customers are alert to the circumstances when Additional Tax Credits (ATCs) might be appropriate, so that they can invite an immediate claim. (Paragraph 5.30). 6. Where in-year recovery of excess tax credits is justified, the Revenue should take steps to pay ATCs automatically to families in receipt of Income Support and income-based Jobseeker's Allowance. (Paragraph 5.30). 7. Details of the availability of ATCs should be printed prominently on the 'payments' page of an award notice (where details of in-year recovery also appear); and the issue of financial hardship (and how the Revenue can help) be given greater prominence in the guidance notes which accompany an award notice. (Paragraph 5.30.)."
I have to say that I don't think that the points about Additional Tax Credits have been taken on board by HMRC and certainly in my work helping constituents, I have found they haven't. I, for example, have a notice to a constituent, saying that they owed money dated the 22nd June 2009 - and this seems to be fairly standard of the letters that are being sent out which makes no mention of the possibility of additional tax credits. The standard leaflet COP26 "What happens if we've paid you too much tax credit?" makes no mention of the possibility of additional tax credits either.
I note that it is estimated that £4.24 billion is not claimed each year. In contrast the overpayments are estimated at under a quarter of this - £940 million. There is of course an issue of people being getting too much when others are not getting the money that they are entitled to. I also welcome additional help given to people in need but also working. However it is clear from these facts that the administration of tax credits is still going seriously wrong As has been pointed out, benefits such as Housing Benefit and jobseekers and unemployment benefits seem to work much better with fewer problems with overpayment. I hope that you will take a better and more lenient attitude to overpayments. I also hope that you will take greater steps to implement the changes recommended by the Parliamentary Ombudsman - including making it more widely known that people may be able to get additional payments. And finally take greater steps to increase the take-up of tax credits.
Finally the Parliamentary Ombudsman said in her report: "12. The Revenue should reconsider the way it organises delivery of tax credits in order to deliver a better, more complete service to the customers it now serves. A different model is needed in complex cases and where something has gone wrong. More sustained and informed
communication with customers about their case is essential, as is a 'whole case' approach to investigation to ensure a tax credits award is correct. (Paragraph 7.14)."
I have to say that I don't think that the Government has taken on board those recommendations either yet - that the administration of tax credits needs to be radically overhauled and improved. With one in five tax credit claimants still receiving overpayments and many receiving under-payments or not receiving a payment which they are entitled to at all, it is clear that urgent and concerted action needs to be taken by the Treasury.
I look forward as to my constituent and millions of people up and down the country to receiving your reply that you will now do that.
Best wishes
Yours sincerely
MIKE HANCOCK CBE MP
Ann Abraham
Parliamentary and Health Service Ombudsman
Millbank Tower
Millbank
London SW1P 4QP
OUR REF: MA/TAXCREDITS/ADMINISTRATION
16 September 2009
Dear Ombudsman
I am writing to you about tax credits and their administration. This follows your report in 2005 as it seems to me from my work as a constituency MP that there is still a very significant problem over their administration as it would seem from my experience there has been very little progress on improving it. In addition, actually quite a large proportion of your recommendations remain unimplemented by the Government. This is despite the fact that the report was issued in 2005, some four years ago. So it would seem to me that the Government has had a long time to implement the recommendations.
I appreciate that you make your reports to Parliament and it is up to Government to decide what action if any to take on this but I hope that you will consider what further action you can take to improve the situaiton. I am sure that you will be aware that the number of overpayments increased last year and remain at approximately 1 in 5 of claims. While I appreciate this is less than the 2005/06 level, there is a feeling that a technical change of increasing the "income disregard" to £25,000 is responsible to large degree for the decrease in claims compared to 2005/06.
I also believe that this is a serious issue because I still have a large number of constituents coming to me as an MP distressed by suddenly having a demand from HMRC for a very large amount of money and we are talking, by definition, of some of the least well-off people in the country. In addition, confidence and trust in the system has been so shredded that many people are also telling me that the just do not want to claim tax credits for fear of having these demands. I note that an estimated £4.24 billion in tax credits is not claimed each year (compared to £940 million in overpayments).
As I say, it seems to me that a number of your recommendations have not been implemented. In particular:
Recommendations 5-9 deal with possibility that those who have received overpayments and in hardship might receive Additional Tax Credits (ATCs). As far as I can see, having checked a recent overpayment notice no mention is made of these by HMRC in letters or correspondence and I am really only aware of them having read your report.
Recommendation 10: Suggests that an "amnesty" should be given for overpayments between 2003 and 2005. I am not aware that the Government has done this.
Recommendation 12 says: "The Revenue should reconsider the way it organises delivery of tax credits in order to deliver a better, more complete service to the
customers it now serves. A different model is needed in complex cases..." As I say the number of overpayments seems to have stayed roughly the same so it is clear that it is not succeeding at this.
As I say this is a very serious problem as this is money that Parliament has decided people should have through the tax system but many people are not claiming it and I believe that this is significantly because of a breakdown in trust and confidence in the system. In addition many of those that do claim are having the difficulty, distress and shock of having overpayments.
I would be grateful therefore if you could tell me what you will be doing to continue to pursue this and whether you will issue another report or hold discussions with the Government so that the system can be improved for the people of this country.
I look forward to receiving your reply.
Best wishes
Yours sincerely
MIKE HANCOCK CBE MP
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