Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 220 - 239)



  220. Do you mean later or now? This is all for 2003. Or do you mean, we will do this first and then tack on these other bits later?
  (Ms Pattison) Understanding what we want to do and then thinking about the timetable. As much as we could do, which made sense at its launch, we would want to do, although some things may be easier to do than others. For example, the disabled premium would be a relatively straightforward thing to bring in because it exists in the main benefits supports that we are looking at. But something like Disability Living Allowance (DLA) to be paid for children, which is not means-tested and has a certain conditionality about it, may not fit well with the tax credit system. So what we are doing is looking at the impact on the DSS benefit system.

  221. But you do not yet know—and if you do not know that is fine—exactly how some of these important side issues are yet going to be finally disposed of?
  (Ms Pattison) Not yet, no.

Mr Thomas

  222. I would like to ask a few questions about preparations for ICC. Perhaps it would be appropriate to start with Nick Macpherson, although I would be obviously interested to hear what the good people from the DSS have to say. Do you think the target date of 2003 continues to be a realistic target date?
  (Mr Macpherson) Yes, I do. Clearly we are not complacent about this. We think that 2003 is do-able. We would not have set it as a date for introduction if we had not thought it was achievable. In my view, we are on target, at the present time, to deliver by then, obviously subject to things like legislation. You can envisage circumstances where you have funny dates for the General Election and legislative programmes might be lost, but my colleagues at the Inland Revenue can probably say a bit more.

  223. What do you need in terms of legislation? First of all, do you need legislation?
  (Mr Macpherson) Yes, we do need legislation. It would be primary legislation. Obviously I do not think we can say, at this stage, precisely what the size and scope of that legislation would be, but when we introduced the Working Families Tax Credits (WFTC) there was a Tax Credits Bill; so it seems reasonable to conclude that one might do the same on this occasion which, after all, represents probably a rather bigger reform.

  224. So you need the legislation—I will come back to that in a moment, if you do not mind—you need proper consultation, do you not, and presumably you need to sort out the whole delivery issue, particularly bearing in mind the upheavals in the DSS and the creation of the new Working Age Agency? Perhaps your answers could embrace all those various issues.
  (Mr Macpherson) Yes, we do need to take all of those things into account. As I say, the timetable is demanding but we think it is achievable. It is fair to say that we have been having pretty much continual consultation on this issue since the Chancellor originally announced it in the Budget in 1999. We are having a continuing dialogue with a lot of pressure groups. In fact, only on Monday of this week, I had a very productive meeting with the Low Pay Unit which, I believe, has just submitted a paper to your Committee.[1] We are also having consultation with employers. Tony has a special consultation group for the WFTC at the Inland Revenue. Since April 1999, with each successive Pre-Budget Report and Budget, we have been seeking to expose more detail and indeed to encourage public debate on this issue. To that end, we very much welcome the Committee's interest in this subject and the evidence it has taken. So clearly, as the proposals begin to firm up, we will consult more. I would envisage that in the new year those details will begin to crystallise, and the Government will clearly want to consult with those interested in that detail before legislation is introduced.

  225. Although there would have to be consultation on the details of a proposed regime, would there not?
  (Mr Macpherson) Certainly one wants to expose the details of that regime and talk to those who are interested in it.

  226. What we have had so far, as far as the published material is concerned, is the announcement in the Budget of 1999. As we understand it, the only published material is the Treasury document of March 2000,[2] and I am sure you are aware of that. It may interest you to know that the Institute of Fiscal Studies has given us evidence recently. They were very clear in their view that 2003 was rather ambitious as a target date.
  (Ms Ghosh) Shall I pick up from there because you have also raised two points at the DSS end. From the point of view of DSS delivery, we see this programme in two contexts. First of all, the way it fits and has synergy with our major modernisation programme. We were lucky enough to be given £2 billion by the Treasury last summer to update, on a rolling programme, various elements of our outdated Legacy systems.

  227. Could I interrupt you there. The Legacy system must be IT.
  (Ms Ghosh) Yes.

  228. The one used for Child Benefit. That is 21 years old.
  (Ms Ghosh) Indeed, it is. That is a Legacy system and it is probably our oldest Legacy system.

  229. "Legacy" seems the right word to describe it.
  (Ms Ghosh) I think it is a generic word, is it not? Prehistoric. There is a Child Benefit system, which indeed is 21 years old, but there are other very antiquated systems. I do not know whether any Member has been into a local Benefits Agency office to see the computer systems people have on their desk. No Windows. No Windows in the Microsoft sense. Black and green screens.

  230. No windows in the offices either.
  (Ms Ghosh) No. Piles of paper. All that kind of thing. So clearly we are looking for a good fit there with our on-going programme, which we are structuring very much around the recommendations in the McCartney Review:[3] good planning up-front, incremental approach.

  231. Your record has not been terribly good, has it, frankly?
  (Ms Ghosh) If you look across Government and the private sector, very large IT systems are not without problems, but we do feel that McCartney has given us very clear guidelines on which to run. I know the tax credits end is working within that framework as well, so we are hoping that our performance will be significantly improved. The other angle is the Working Age Agency. As I said at the beginning, for Income Support and Jobseeker's Allowance customers, who are probably about 1.5 million of the caseload on ICC, the gateway for them will be the Working Age organisation. We are working with colleagues in Employment Services, in particular, and DfEE, on precisely how that will go.

  232. There has been slippage, as far as the Working Age Agency is concerned, has there not? There is a fairly major upheaval going on in the DSS, at the moment, is there not?
  (Ms Ghosh) Yes. However, most of the reorganisation in DSS is actually pretty well in place. From 20 November we were assigned to our new categories, into our client facing groups. That, in a sense, has made work easier, in that the relationship between our Working Age client group and colleagues in the DfEE and Employment Services is a much clearer one now. They have been working continuously on that process of setting up the Working Age Agency. I do not think DSS reorganisation is an issue, but obviously there are very big organisational issues in bringing about this Working Age Agency.

  233. Why do you say it is not an issue? Of course, it must be an issue if there is complete upheaval in the DSS. How on earth are you going to stay on target for this major target for 2003?
  (Ms Ghosh) The management team and the DSS, in terms of our internal organisation, took the decision in February of this year that they would manage this change swiftly—and they have managed it swiftly in terms of running preference exercises, restructuring ourselves, and so on. As I say, between February and November of this year, they have done it. So we are now in our new organisation and it is not an obstacle to creation of the Working Age Agency. Just to go back to the IT issues, I think from a DSS end that it is, in a sense, a less complex issue for us from an IT point of view than the building of a whole new tax credits system. I do not know if you would like to know a bit more about its various elements. Mary?
  (Ms Pattison) It might be helpful if I describe what we need to do within DSS, so that you can get a sense of that. We need to do a number of things but for us it is not about designing new systems for tax credits. It is about making changes to existing systems, and those systems that are in development around the modernisation programme. What we need to be able to do is to take children out from the Income Support and Jobseeker's Allowance systems, and manage a smooth migration of the cases across, including advice. We need to ensure that leaflets and forms and so on are modified and staff are trained. We need to provide effective links with the Revenue so that data can be transmitted. We need to use the modernisation programmes that have been put in place within DSS, to include things like electronic information gathering and better work flow management, to ensure that they are supporting tax credits as they come on-stream. It is about what we are doing within DSS. One of my jobs is to make sure that we have the right skills marshalled within the Department, and that we are also interacting within the other programmes, so that we are clearly a part of their activity and clearly signalled. Therefore, that we are meshing together. That is something that has been organised at a fairly senior level within the Department to ensure that it does happen.

  234. Can I come back to you on this question of legislation? You will be aware that there is such a thing as a Tax Law Rewrite Project, which many people will commend if it creates greater clarity. Do you envisage that the legislative basis of ICC will require a complete rewrite of the legislation; or will you prefer, as you have done in the past, perhaps tagging on these impenetrable and extraordinarily complex amendments (I speak as a lawyer) to existing legislation? This is because the whole system is completely inaccessible to most people apart from experts in tax law.
  (Mr Macpherson) Tony is our resident expert on the personal taxation system so he will probably be able to answer that.
  (Mr Orhnial) If we have start with the Tax Credits Bill, which was brought in for the Working Families Tax Credit, we see that certain things had to be done in the context of existing social security legislation. Now for the ICC, new tax credits generally, we will clearly need to look at all the component parts of the existing system, and consider where they will need to be unwound in some way and where it is a matter of changing them slightly. It all depends what rules we arrive at, as to the way the new tax credits will operate. But we do envisage a separate bill which will contain a certain framework of rules, and a certain balance of primary and secondary legislation. It is difficult to be precise at this point until decisions have been taken on the policy details. Whether or not we will have the legislation drafted on Tax Law Rewrite lines is an issue we will need to look at closer to the time, but what I will say is that the basic principles of the Tax Law Rewrite enterprise are ones that are beginning to permeate a lot of the work we do, particularly when we are beginning from first principles. I would not, for a moment, like to suggest that they are permeating every page of the Finance Bill, but I think on new bits of legislation we see those principles coming through.

  235. If you do not mind me saying, Mr Orhnial, I did think, with respect, that the way you answered the question was a somewhat impenetrable answer. If you could answer the question simply. Are you going to create a brand new piece of legislation from scratch, which is self-contained and does not require people combing through the whole of the tax legislation in order to find out what the position is, or are you going to build on the accretion of regulations?
  (Mr Orhnial) What we would envisage is to have, as much as possible, a separate and clear system. The extent to which it will rely on other bits of legislation really depends very much on the extent to which we are essentially reproducing existing bits. With the new credits we are looking at a new enterprise and a new system, so we would not envisage that happening to a great degree. I am sorry if my answer was impenetrable. It is as far as I can get with the knowledge I currently have.

  236. It is not your decision ultimately anyway, is it?
  (Mr Orhnial) It is not, no.

  Mr Thomas: Thank you very much.

Ms Buck

  237. May I go back to policy-oriented questions in respect of child poverty: obviously ICC, but some wider issues on how you tackle child poverty. The targets, as you have again confirmed this morning, are targets about poverty within the definition of inequality, in effect. I think that is an important component of it because we know that failure to be able to take part in society, as it currently is, is part of the definition of poverty. But there are two major problems related to that. I would like to ask you what your current thinking is in responding to those problems. The first is that the definition tends, therefore, to be one of dealing with issues of breadth, not depth. It can steer policy towards lifting those in shallow poverty above the cut-off point. So I would like to know what your views are and your responses. The second issue is: how can you be sure that the ICC and the other policies, which are being developed, actually meet the real needs of children?
  (Ms Ghosh) You are absolutely right. The headline measure for child poverty is almost always the relative income measure. The Public Service Agreement target that Nick mentioned earlier is to reduce the number of children living on less than 60 per cent of the median income by 2004. The Government has always recognised—and this has been very much highlighted by the second, the more recent of the two Opportunity for All reports—that simply looking at that relative income measure is not the answer. In a funny sort of way, it would be simpler to focus just on that because you could keep pumping money through the tax and benefit systems, and you could keep taking out that group just below the level, and you could trumpet your successes; but actually it would not, in the long term, solve the problem of child poverty at all. In the first Opportunity for All report,[4] just over a year ago, we had something like 15 indicators of what success in abolishing child poverty means. I personally could not remember what all those 15 were. This year, Ministers made the conscious decision that we need to start focussing down and indeed encouraging a debate on how we measure child poverty, to pick up wider issues. As Nick says, clearly a key issue, given the Government's approach to work being the best way out of poverty, is the worklessness type of measure. This is clearly going to be one of the small packages of measures of how you deal with child poverty and so that is in there. We also included in the five headline indicators we chose to focus on, something about the quality of children's lives. This is because that is obviously another issue, which I know several of the people who have appeared or have given evidence to this Committee, have been very much concerned about. It is not just a matter of income. It is also the question of the experience of people's lives. So we have included one on housing and we will be, (although we have not got firm figures against it yet), including a measure on child health. Again, those two are very closely related. I see that the Barnardo's report, which is discussed in the paper today,[5] emphasises the importance of that in the quality of living. So there is income; quality of children's experience of life; and the third thing Ministers want very much to focus on is the life chance issue. That is really where you get into the issue of education. Our fourth measure is about basic literacy and numeracy, which very much chimes with DfEE policies. So we are beginning to focus down on a basket of indicators, which is more than just income, because for the most disadvantaged the education, housing, health kinds of issues really impact on the quality not only of their lives but on their children's lives and their children's children's lives. Clearly this is going to be an on-going debate. It is one in which we are, all the time, engaging academic commentators. Ministers are very well informed about the deprivation-type work, the basket of goods approach, that some commentators—indeed, some of the evidence to this Committee—has produced. For example, we organised a seminar in the summer with various academics. We had Brian Nolan over from Ireland, who is a respected academic, talking about the Irish experience. So this is going to develop. Ministers are very conscious of this. One group you did not mention, for example, was disabled children. Disabled children are disproportionately represented. We have been putting money through the various child premia and so on. Again, that is the kind of issue on which when you have dealt with the "easy" cases, you will need to start looking at those sorts of groups and seeing how you can do particular things to help those groups.

  238. I thoroughly approve of the multi-faceted approach to poverty, but it still leaves us with a problem of income, which is what we are really discussing. We know that when we were discussing the issue of pensioner poverty, the fact that there ended up between Government and Age Concern who did the work, a broadly accepted baseline definition of a modest but adequate income, was critical in moving on the debate. Sue Middleton, to whom you were referring, who has given evidence to this Committee,[6] has done a lot of very valuable work on it. Why do you not do that? Why do you not come up with a working definition of a modest but adequate income for children, which then allows you, as another one of your basket of indicators, to say how many children and by what degree they are falling below what is acceptable?
  (Ms Ghosh) Clearly, in setting the levels of Income Support in the present system, what Ministers are doing all the time is effectively making a judgment between what is an adequate safety net, but one that is affordable in public expenditure terms and one that maintains the work incentive issues. This is the point the Chairman raised in his introductory remarks. Therefore, that is the kind of judgment that Ministers are making about a particular income. Again, I am talking to academic commentators. There are all sorts of issues. Obviously you know this from the evidence you have had about your basket of goods—if you go back to the basket of goods approach—what you would put into the account, made up from the budget base approach, as an adequate income. There are all sorts of people with different views. Sue Middleton is one, Joseph Rowntree Foundation is another.

  239. It was done for pensioners, with a degree of acceptance by different Government agencies. I understand the point you are making but the point is that the Income Support definition started somewhere. We all know where it started. It is not as if people are not adopting the approach of a basket of goods. We are just adopting a basket approach which was devised in 1901.
  (Ms Ghosh) And one which we have since updated in various ways.

1  Making Tax Credit Work-the next generation of tax credits in the UK. Available from the Low Pay Unit. Back
2  The Modernisation of Britain's Tax and Benefit System, Number six. Tackling Poverty and Making Work Pay-Tax Credits for the 21st Century. HM Treasury March 2000. Back
3  Report from the Central IT Unit of the Cabinet Office. Review of Government IT Projects-Successful IT Modernising Government in Action. April 2000. Back
4  The Changing Welfare State. Opportunity for all. One year on: making a difference. DSS Second Annual Report 2000. Cm 4865 Back
5  the Guardian, 13 December, 2000. Back
6  See Ev. 29 November, 2001 (HC 951-iii). Back

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