Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 1-19)




  1. Minister, welcome back. Could you identify yourself and your officials, please?

  (Dawn Primarolo) Good afternoon, Chairman. It crossed my mind that it must be Wednesday and it must be time to visit the Treasury Select Sub-committee again! I would like to say it is delightful to be here. Can I introduce Dave Hartnett, who is the Head of Revenue Policy and a board member, and Stephen Banyard, who is Director of Local Services.

  2. As you know, we are basing this session on the report that has just been presented to us which is entitled "The Government's Expenditure Plans". This is the main departmental report, as I understand it?
  (Dawn Primarolo) The main report is the Revenue report which is published in the autumn. The last one was for the year ending 31 March 2001, and this covers specifically additional information about the PSA targets as a wider departmental report as well.

  3. I am a little confused because, when the main Committee took evidence from the Treasury on the review of departmental reports, we were told the new format of departmental reports would apply to the spring 2002 departmental reports, and the aim was to publish these in April, so this has come out a bit later but it is still called "Expenditure Plans"?
  (Dawn Primarolo) Yes. It is late because the Budget was late this year as well. Normally it would follow straight after the Budget which we would expect to be in March/April. The Budget was exceptional this year.

  4. But this is the departmental report?
  (Dawn Primarolo) It is the PSA targets.
  (Mr Hartnett) It lays out the Inland Revenue expenditure plans and our performance for the previous year, whereas the report published in the autumn is the report of the Commissioners for the Inland Revenue and measures our performance for the year against our unpublished internal targets as well as the external targets.

  5. I understand that and I see what it does. It is just the title itself that might reflect on future years. Just calling it "Expenditure Plans" does not do justice to it.
  (Mr Hartnett) Maybe we were remiss. I am sorry if we were.

  6. In the introduction the Chairman of the Revenue says that the report shows real progress. In what areas do you think the Revenue has made "real progress"? You have had responsibility for some time now. In what areas have they made real progress?
  (Dawn Primarolo) If we look at specifically the targets that were set, the individuals who set accurate terms, the percentage of inquiry, satisfactory standards and the risk base in the context of the rapidly changing structure of the Inland Revenue and the extra workload that we have taken on, for instance, the growth in employment has meant that with no growth in our staff the workload is much greater, my view is as the Minister is that I am satisfied with the results in one target—these are mainly new targets being reached—one just being missed and the second equalising our performance in the year before but, naturally, I asked Revenue to look specifically at the targets in reaching those targets and what we needed to do to improve and continue to improve. So perhaps if I could say, on the target which we narrowly missed, the risk selected for cases for inquiry, the Inland Revenue have now introduced a new and more consistent and I hope systematic approach to using risk and research teams, and what we are looking for here is that, with a better approach and learning why we did not reach our target, we will improve in subsequent years. In the target that we missed which is to do with the quality of working cases, although these equalled last year's performance, naturally we want to see a year-on-year improvement. Now, resources were stretched because of the increased workload, but on quality what the Inland Revenue have now done is introduce a new improved system from April of this year which includes greater management involvement in helping staff improve; also introducing a broader set of targets to support better quality, which I hope we will see feed through in 2003-04. On the risk-based inquiries, the risk and research teams are obviously gaining experience and continuing to be trained and also learning and comparing practice by selecting cases and, where we can, looking at practice in other countries. For targets that we maintain all the time, I looked slightly wider as well to make sure that performance was being maintained. For instance, if we looked at the PAYE quality for more complex cases, we can see that there is a steady improvement from 1997-98 through to 2001-02. The target was 89 per cent and we are at 90 per cent achievement, and for proposed monitoring not only have we shortened the number of working days that we are to complete this post monitoring from 28 days to 15 but we have also continued to exceed our targets. So what I have done is, in looking very carefully where I can as a Minister, and obviously in a vast organisation I need to focus where I can, ensure that the quality of the service to the customer in a changing environment is improving and will continue to improve and what we can learn from not having reached our targets in some areas this year.

  7. We are going to come to some specific targets in a moment but one thing that leapt out of your report on page 13 for 2002-03 was you said, "The successful introduction of the new Child Tax Credit and Working Tax Credit is the Department's top priority for 2002-03. As part of the preparations, we will be taking the opportunity to clear up our computer databases . . .". What does that mean?
  (Dawn Primarolo) Some of the systems that the Inland Revenue operate, if we look at, for instance, the records we have on temporary National Insurance numbers, the duplication of National Insurance numbers and sometimes the National Insurance numbers are just wrong, and some of the information is out of date—for instance, the address that is recorded against the National Insurance number. Obviously with something like new tax credits which require to be cross-referenced with the National Insurance number what happens is that it causes either delays or incorrect information to decisions being made so we need to continue to clear that database. It is really a question of the database now being expected to do more than was originally intended and, therefore, needing to be improved. If we take the PAYE database, which is also crucial, the IT system for this was delivered in the mid-1980s and was built on a regional basis, and we needed at that point in time a national database but it was not possible—technology did not enable the Revenue to develop that. The problem is now, because we have the regional structure, it is increasing the problem where, for instance, people move, so we need to develop the technologies and to clear up the database to help us overcome the effect, for instance, of not having a national database and moving towards that whilst keeping all the information we have on the regional database as well. This means that we will be able to match our records and improve the elimination of duplication of material. For instance, where somebody has multiple employment, which is something we are seeing a lot now, and they work in a number of places, the way we collect the information on the old system of regional databases does not always lend itself easily to making sure we have a complete picture of that individual but we need that for the new tax credits assessment, so we are moving not only to a new database for the tax credits but, as we say, clearing up the database. Another example would be self assessment returns where we have an address for that person but in the meantime they have moved and they have not told us, and when their self assessment return comes in it is a different address and it is not always cleared down through the system so we have a correct address. I am sure you are aware there have been problems where people perhaps have not been sent reminders when they should or they have been sent penalties to an odd address that has eventually caught up with them even though they have made their return. So it is the interaction of National Insurance and PAYE with our central database and making sure we can clear through the whole system accurate pictures of people's employment. It is historic in the sense that each time the Revenue have developed databases that were the best that could be done at that time and, as we move on in terms of the demands from our customers, they do not always provide the information our customers want—or, indeed, that we might want to give our customers the best service.

Mr Beard

  8. In the PSA target which was to deliver year-on-year improvements and the number of individuals in businesses who comply with their obligations and receive their entitlement, the tables on pages 9 and 10 show that the two areas where the Inland Revenue have failed to meet targets are on inquiry work where the target was 91 per cent fully satisfactory standard, and the outcome is 88 per cent, but then quite a number on processing and tax credits, working families' tax credit, disabled persons' tax credit, where there is a substantial fall in the actual achievement compared with the targets. Why is this so?
  (Dawn Primarolo) Are we talking about the applications processed within five working days, where there was a target of 95 per cent and 87.5 per cent was, and then the target now is 90 per cent?

  9. Yes, that is right, and also for the working families' tax credit applications calculated correctly the target was 93 per cent and the achievement was 87 per cent?
  (Dawn Primarolo) Yes. As the working families' tax credit and disabled persons' tax credit was developed out of the information we had on family credit, I was involved as a Minister in setting very high targets and I thought it was important that we improved on the service that had been offered in family credit. What happened, and this is not the first year that we have missed this target, was that in the first year the Revenue were required to reassess how they processed the claims: to look at relocating and putting more staff in, and trying to push an improvement to reach the target of the five working days and the correctly calculated and, given that in a sense our staff are constant but the demand is growing, in the second year we missed the target again and the figures are here. The advice from Revenue to me for working families' tax credit is that we had no more ability in the system to re-direct staff without some other area of our service declining and that there was a real danger in terms of staff morale. If you set a target that the staff can never achieve that was recognised, then to keep that target there we were in danger of even their achievement target reducing so, after very careful consideration and considering the moving to new tax credits, we thought we would set targets again as high, bearing in mind if you want staff to hit a target you have to give them a reasonable chance of them doing that without it affecting morale. Despite the fact I realised it would not look very good to reduce the targets, I took the decision to agree that those three targets should be marginally reduced and we would want to see improvement closer to those targets, naturally monitoring as closely as possible how well we are doing in that area, and it requiring quite a substantial change in relocating staff if the problem were greater than we had anticipated, and I would then need to take decisions about other targets if we were moving staff around. In summary, therefore, it is a balance between keeping the pressure on to deliver the highest of services where staff are committed to that recognising the constraints and really having to take the decision where I was endangering even what we might achieve in terms of morale if I maintained a target that I did not honestly believe we could achieve at this stage. So I decided to make a clean break of it and rebalance, if you like, our targets. I think that is regrettable but realistic and I hope through that we will be able to steadily improve and return and build on our original targets.

  10. So what has actually been done to ensure the new target will be achieved?
  (Dawn Primarolo) Clearly staff training and monitoring the volume of the work that is coming in, ensuring that the material is dealt with very quickly and adequately, and our staff also are dealing with the range of tax credit inquiries, and we need to make sure they have that balance across the piste. It is very difficult in fairness to the staff to ensure that they are given the tools to make sure they can do the job properly and then the targets are set realistically within that and they are supported and encouraged and training provided within that. So there is a continuing monitoring of that and I am regularly briefed by the divisional directors in terms of what is happening in that area. Everybody agrees, and though staff understand this very clearly, it is very important to get these decisions out as quickly as possible because it is payment of money to people.

  11. I understand what the answer is but, given that you are reducing the target and it has proved difficult without a substantive change-around of staff, is the present PSA target still relevant? It talks about delivering year-on-year improvements with a number of individuals and businesses who comply with their obligations and receive their entitlement, so in this range that has not been achieved, and it looks as though it is going to be very difficult.
  (Dawn Primarolo) It is going to be very difficult to achieve but the staff were improving their performance to reach that target; there is improvement within that. As I have said, I had to take the decision that, if I have set the target too high initially, I would not see the year-in-year real improvement and that is obviously very important—that the 87.5 could slip back. I hope that the staff will see that there is an appreciation that they have been doing their best, and that the new management team will assist them and work with them to continue to improve that, but I don't really think its fair to set targets that people cannot achieve. If there is any criticism I suppose the criticism perhaps is of me, the Minister, in being rather too optimistic about what could have been delivered in the first place. Obviously I need to account for that to Parliament and to yourselves in terms of why I have taken the decision to lower it. I hope they will reach those targets soon and when we move into some new tax credits we will be back to a level that is reasonable, but there is year-on-year improvement.

  12. What was the year-on-year improvement? We do not seem to have that figure.
  (Dawn Primarolo) Forgive me, we have not got the figures here but perhaps I could let you see the performance against those three targets[1]. I would want to say that the staff are working very hard and this is not a criticism of them in delivering a new system, but I would be happy to let you see that. It seems to me that is crucial—to keep pushing forward even though it was not a year-on-year improvement on the PSA target.


Mr Plaskitt

  13. Roughly how many WFTC applications were there in 2001-02?
  (Dawn Primarolo) We are running at 1.3 million now. I think there was something like a 17 per cent order of increase between August 2000—I can send you the figures.

  14. An approximation will do for the purposes of this question. So the table which shows 87 per cent calculated correctly suggested about 150,000 were wrong?
  (Dawn Primarolo) I am sorry?

  15. The table shows 87 per cent calculated correctly, and you had about 1.3 million applications, so if my maths is right about 150,000 or so were wrong?
  (Dawn Primarolo) Yes, initially, but that could be for a whole range of reasons. It could be that—

  16. Are they serious errors? How bad is that statistic?
  (Dawn Primarolo) They would range from not very much to being on the border between how much the credit was set at to perhaps people being refused credit when really they should have received it, and that could be for a combination of reasons. It could be that, for instance, all the information was not there and more should have been asked for rather than a refusal.

  17. In order to get up to the 93 per cent target on that presumably you need to do a fairly good analysis of the errors to find out of what nature they were, therefore what you need to get back to target and that work is in hand, is it?
  (Dawn Primarolo) It is because that is partly linked to whether or not the advertising and the information that is being provided to the claimants, for instance, is as easily understandable as it should be, so we are sampling on I think it is a quarterly basis to look at exactly what is happening there, and that will feedback through the management structure. It may be our communication strategies: it may be the forms are not clear enough and we need to improve there: it could be just straight error by the tax credit office itself, and this was an area that was covered by a recent NAO report in terms of looking at what were the errors and where they should be picked up, where it was our error for one reason or another and what type of error. So yes, we will do an analysis of why this is occurring to see where the improvements could be made, and that is why I made the point about improved training, what the management team are doing in terms of analysing this work and, therefore, whether there are some policy implications as well, or advertising or for applications—whatever.

  18. So there are around 1.5 million working family tax credits to be handled. What is the disabled persons' tax credit? 100,000 or something?
  (Dawn Primarolo) Something in the region of that.

  19. Therefore when the pensioner tax credit comes in next April, which the Revenue handle—?
  (Dawn Primarolo) No. We do not do the pensioner tax credit. The new tax credit that supercedes the disabled persons' tax credit and the working families' tax credit goes on to a new system, and clearly what we have been able to do there is learn from all our experience, both on family credit and working families' tax credit—the fact we have moved to an annual assessment and we collect the information we need now rather than what the computer system that we inherited allowed us to, and it should be far more accurate in terms of its returns. Also, with the new tax credits we rely on information—and that really goes back to the point about needing the clean data—that is already in the tax system, so it is people who ask for their P60s, for instance, and how we determine how much they have earned and what their obligations are. But the pensioners' tax credit is not us.


1   See Ev 11. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 31 July 2002