Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 40-59)


MONDAY 20 MAY 2002

  40. Are you making any further efforts to make sure that these people receive their money?
  (Sir Nicholas Montagu) No.

  41. So there are 900,000 people out there who are owed £13.5 million and at present do not know it.
  (Sir Nicholas Montagu) No. Again, I emphasise that it looks as though 85 per cent of the people we contacted and who contacted us back had paid the right amount of tax. Take in that case, if you will, your 1.04 million, let us call it one million because your head for figures is better than mine, in that case what we are talking about is 850,000 people who paid the right amount of tax. If you are saying that among the remainder it looks as though there are still overpayments, yes, we have contacted them, we have made every reasonable effort to contact them; relatively few—160,000—have responded. As I think I said at a previous hearing, we have to judge the point at which there are diminishing returns and at which our people and our money are better employed getting on with day-to-day customer service.

Geraint Davies

  42. Would you accept that in constructing a tax system there is a need to balance simplicity and fairness and what in essence the Chancellor is doing through a system of working families' tax credits and other tax credits is trying to introduce a reasonably complex system to deliver social justice? That is very straightforward. That is true, is it not?
  (Sir Nicholas Montagu) That certainly is the way in which the Chancellor presents his policies.

  43. Well said.
  (Sir Nicholas Montagu) When you are as old as I am, you get cautious.

  44. I notice that you are not in fact that old and you should be with us in four years' time unless you retire at the early age of around 60.
  (Sir Nicholas Montagu) I am afraid the Civil Service has these repressive policies. It has not heard of the third age.

  45. Well, we hope to see your portal again. Given that this is a complex system and it is evolving quite quickly into new consolidated tax credit systems, child tax credit, working tax credit, etcetera, against that your statement this afternoon to Mr Rendel that the computer system is pretty inflexible, is that not something for us to worry about? Does not inflexibility at a time when we are having continuous change imply problems both for take-up, accuracy and fairness.
  (Sir Nicholas Montagu) No, we are talking two different worlds, quite honestly. Self-assessment came in five years ago. You know better than I just what advances have been made in technology since then, and you mentioned the portal a moment ago. It is certainly true that the computerised environment for self-assessment is inflexible. What we are aiming to do is to design the massive computer system which we will require for new tax credits to be as flexible and as user-friendly to every one operating it as possible. Dave, here, is the programme sponsor at board level for tax credits and if you would like more detail, I know he can supply that for you.

  46. What I am really getting at is that you know this Committee has had a number of reports on the national insurance system and the difficulties of implementing new computer systems. What we are talking about this afternoon is the problem of transferring information to an income tax system and national insurance system at a time that the Chancellor is quickly changing the tax law for understandable reasons.
  (Sir Nicholas Montagu) If I may say so, I do not think that is wholly right. What we are talking about in the context of the so-called open cases is a hangover from a specific problem in one specific year, 1997-98, in the transmission of data from the national insurance recording system to the system—

  47. That is all sorted out now, is it?
  (Sir Nicholas Montagu) That is completely sorted. We are talking about a completely distinct system for new tax credits.

  48. Just because there was a problem in the past it is obviously logic that there is no particular reason why there should be one in the future.
  (Sir Nicholas Montagu) Exactly; yes.

  49. I notice you are a philosopher. Excellent. In terms of the confidence we have in the system, obviously there has been some dialogue with the C&AG about access to employers and you have made the point that the Government are interested in not putting any more burdens on small business. Would it not be the case that if the NAO in fact went in with your compliance people, it would be possible to do it with one check without a massive over-burden? Would there not be a practical way of doing this without having a significant impact and indeed, presumably that would be done with a sample of employers, you would not want to do it with everyone? You would just want to get a taste of the real accuracies you were achieving.
  (Sir Nicholas Montagu) I have to say, with the greatest respect to the National Audit Office, our people are experts in a way which by definition, with their wider remit, Sir John's people cannot be. We can get in there, get at things pretty quickly, pretty expeditiously and get out.

  50. Like the SAS.
  (Sir Nicholas Montagu) I hope equally effectively, yes.

  51. My suggestion is that they go in with you. They are the normal squaddies next to the SAS and they just look at a particular area.
  (Sir Nicholas Montagu) If you asked the SAS whether they would like to have a few squaddies with them on their next expedition, you might get the same answer I am respectfully giving Sir John.

  Chairman: I think it is le"se majeste« to accuse Sir John of being a squaddy.
  (Sir Nicholas Montagu) Sir John is a Field Marshal, but he has the odd squaddy working for him.

  52. I withdraw that analogy: active partner. You mentioned a moment ago that when you do compliance tests, the tax credit issue is one of 74 possible errors by employers. That illustrates that there is a lot of stress and strain on employers, but also, if you are saying this is just one area, this is quite a large area because there is a variety of different tax credits available and it is quite a significant area from the point of view of an employer. What I am talking about is the NAO accompanying one of your compliance people looking at 74 possible error areas and focusing in on the tax credit issue as particularly significant. Why can they not do that? It seems quite reasonable in a certain number of cases?
  (Sir Nicholas Montagu) I am very happy to talk with Sir John about the best way of giving the National Audit Office the assurance which they are seeking. My worry is that with the best will in the world, an extra party in on the act would increase what employers see as a burden.

  53. I know that, but there is a cost and benefit. What we want is the assurance that these systems are in fact working. We are not looking to have access to all employers, but to do a certain amount of sampling alongside your people.
  (Sir Nicholas Montagu) I am happy to talk to Sir John.

  54. At the moment you do not know that you are delivering the outputs you are suggesting you are.
  (Sir Nicholas Montagu) Essentially what Sir John's people would be doing would be giving an assurance that we are doing the work properly.

  55. No, not you, that the employers are.
  (Sir Nicholas Montagu) I am sorry, we need to get one or two things absolutely straight. First you said that there are a whole lot of tax credits. There are not. There is the disabled person's tax credit and there is working families' tax credit. End of story. Those are the only credits paid via the employer.

  56. There is the children's tax credit.
  (Sir Nicholas Montagu) Yes, there is the children's tax credit, which operates slightly differently.

  57. There is the housing credit as well. I shall tell you about that later.
  (Sir Nicholas Montagu) Housing credit?

  58. I do not think this will be the end of all tax credits.
  (Sir Nicholas Montagu) The Chancellor has not told me to the contrary yet.

  59. There are complexities here as regards an employer filling in these things. The issue is whether the NAO can simply come along and check this out. Yes, they are checking that your people are doing it correctly as well as checking employers.
  (Sir Nicholas Montagu) No, I am sorry, I think this is a genuinely important point. They are not checking up on whether the employer is doing it right. What Sir John's people are doing is quality assuring the efforts of my people in ensuring that employers have got it right.

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