Select Committee on Treasury Minutes of Evidence



Examination of Witnesses (Questions 20-39)

DAWN PRIMAROLO MP, MR DAVE HARTNETT AND MR STEPHEN BANYARD

WEDNESDAY 19 JUNE 2002

  20. Who handles that?
  (Dawn Primarolo) DWP. It is a pensional credit: it is not a tax credit.

  21. Yes. I know it is called that but five million of those are going to have to be administered eventually, so are you in communication with that Department to pass on any lessons learned in your experience of handling credits?
  (Dawn Primarolo) Yes. We would have worked very closely in terms of sharing experience on the development of the system and, as far as I am aware, DWP has been very closely involved with the Inland Revenue in learning from our experience with the working families' tax credit and, for instance, the children's tax credit, and how we run our systems and the IT information we collect and the targets we use.

Mr Cousins

  22. Why are there not any targets for the take-up of the tax credits in the report?
  (Dawn Primarolo) The issue is the information that we draw on to determine the potential take-up so we are drawing from a number of surveys that do not necessarily have the information that we particularly need—for instance, we draw on the family resources survey, the family expenditure survey, the labour force survey and the families and children survey. Firstly because of the time lag and, secondly, because they had not asked—not unreasonably because it did not exist—"Were you claiming working families' tax credit? Do you think you are entitled to?", in order to see very specifically how many potentially could, because we only have a rough idea and therefore we could measure take-up, we have been working with the controllers of these surveys to develop questions that households would also answer which would give us much more accurate information so we could move to a position, particularly with the new tax credits, of what the potential population would claim and then we could measure how many had claimed and, therefore, where we needed perhaps to do more work. At the moment we have to rely on rather cruder data supplemented by our own research and there is no one place that all this information is held. When we move to the new tax credits, we already have—because we have the working families' tax credit and the disabled persons' tax credit—the information that DWP would have that would be relevant, a more accurate idea of the potential population which is 5.25 million households. So there was really the problem of finding data that we could properly measure it against. Looking at the question of that take-up, this had not been done before, and again there is a time lag between us commissioning the work to inform that; it is trying to get a much more accurate picture of the breakdown regionally, geographically and between different communities if we can to see whether there is a shortfall therefore we need to refine and develop better communication strategies for the take-up.

  23. So what is your rough idea of the take-up rate of working families' tax credit?
  (Dawn Primarolo) We think it is round about 1.3 million out of a possible 1.5, so is that 70 odd per cent.

  24. Would you care to share with the Committee, obviously not verbally now, how those figures have been arrived at? The 1.5 figure?
  (Dawn Primarolo) Yes. It is a best estimate but there would be no problem about that.

  25. Some estimates show a take-up rate for working families' tax credit of only about 60 per cent.
  (Dawn Primarolo) Some of the figures quoted are out of date and the figure you are quoting was looking at the first year of operation, whereas the 76 per cent I am using, the estimate of 1.5 million, is where we were at the last quarter because these figures are published every quarter. We follow the sequence we inherited from DWP but we can certainly do you a note on that[2]. What we can say is that in the first year of operation of working families' tax credit the take-up was higher than the first year of operation of family credit, and we are running considerably in advance of family credit now. But we can put a paper together for you on that, no problem.

  26. But, Minister, those of us who have been around a long time—and I include myself in that category; I do not extend it to you—will recollect that the family credit was one of the great take-up disasters of British public administration, so the fact you have done rather better than that is almost unavoidable, is it not?
  (Dawn Primarolo) I think that the question of take-up, if I can focus on that, of working families' tax credit is something that we are paying a lot of attention to and we need to have much more understanding of. We do know, for instance, though it is very sketchy, that the take-up is very high amongst those groups who would benefit the most and would get the largest payment. We are not sure why people who are entitled to claim it do not; where they are; how big that group is; and what we need to do is to refine our communication particularly to get to those people.

  27. When we are looking at the future of general employment tax credit that is to come in next year, that is the 5 million plus target group, will it not be essential to have a strong sense of take-up and a strong commitment to targets for that?
  (Dawn Primarolo) Yes, I absolutely agree, but the difference also is that we know the people who are claiming the child tax credit which is the tax relief, and that accounts for a very substantial percentage of the possible population for claiming new tax credits. We already know those who are claiming the working families' tax credit and the disabled persons' tax credit so we can move them straight away, and that accounts for a very large percentage of the just over 5 million people. We know from our take-up rates for the self-employed, where of course there is a year's time lapse because of self-assessment, the potential number there so what we have done is we have commissioned research to try and measure where everybody else is if they are not known in the tax system and how we get to them. So we are working on trying to deliver exactly the point that you are making: what is the potential and what is the take-up.

  28. This month the child premium in working families' tax credit went up by 2.50 a child. Did you write to all the people receiving working families' tax credit to explain that the premiums had gone up and that people would be getting more money, or will it just come as an inplexcable surprise to people when the money comes through?
  (Dawn Primarolo) When they reapply they will be informed. Tax credit follows the family credit level, is set for six months and is non-interrupted, so the increase goes to those people who are applying at that time. It takes time to work through the system. Those currently in the system—

  29. I accept that but one way of increasing take-up is to create a warm feeling about it amongst the people who are receiving it. This month an extra 2.50 was paid to everyone on working families' tax credit for each child but, if you have not communicated with the people receiving it that that is the case, you are missing an opportunity to build a sense of commitment to it?
  (Dawn Primarolo) Yes. We have survey data which shows the attitude of those who are claiming working families' tax credit to it and the warm glow is already there, but the point about writing to people is they would get that written explanation when that money arrived when the claim was made, and that would be explained to them. We do that.

Mr Beard

  30. Several representatives of the business community have grumbled about the efforts they are having to put into administering the working families' tax credit and the CBI have been grumbling as well. If you are looking into this, what do you say is the justification for it and what could be done about it?
  (Dawn Primarolo) We have consultative committees working with business all the time on the functioning of the working families' tax credit, particularly, for instance, because we can put the business in funds if there were to be a shortfall traded off against their National Insurance and PAYE. Again, the surveys which I do not have here but I am happy to send them to the Committee[3], when we looked at for instance how satisfied businesses were with the service they were receiving and the support and advice from the Inland Revenue on working families' tax credit and disabled persons' tax credit, they are very satisfied. What they are dissatisfied with is that some businesses do not want to do it in the first place, so it is a slightly different question. Given that they do deliver through the pay roll, however, the working families' tax credit, all the information and the survey data that we have is that they are very satisfied with the speed, the quality and the support that they receive from the Inland Revenue, if there is a problem for them or they have a query or they need to be put in funds. We had a target for how quickly we should put them in funds once they had requested it, and all those are being delivered. I am afraid I did not read that information in connection with today's hearing but I have seen it over the last few weeks and, again, I would be happy to share that with the Committee in writing. We must not be complacent about this. I could make justifications, which are numerous, about the benefits to employers, how people are telling us they have been able to stay in paid employment, how they have returned earlier to paid employment or been able to return to employment, but nonetheless we constantly look across the taxes—not just the working families' tax credit—at what we require of employers and whether we are doing it in the most efficient way with the lowest possible requirements from business to make the system work, and the new tax credits we worked very closely with and were able to take out a number of things that we no longer require them to do, streamline the forms and reduce the number of forms considerably for employers.

 

  Chairman: That takes us neatly back to customer service, I think.

Mr Cousins

  31. I did take your earlier point that staff must not be demoralised by being set targets that are unachievable, but equally I think Parliament is owed a bit of an explanation if the targets are not being achieved and you change the satisfaction index to one that is—?
  (Dawn Primarolo) Can I say that is a very fair point and one that I have asked as Minister. It is all very well to measure but if you measure something that is slightly different, how can you have a proper picture of whether there is improvement? I think this goes back to something I said earlier on about looking at some of the underlying quality—the internal targets that we also operate, how quickly firms are answered, whether people are given the correct advice, for instance whether our new tax advice centres are well used, whether people appreciate the service, whether we are available when people need us to be available—and that has been the development in looking at that and saying that the Revenue firstly is doing new things. It does the National Insurance, it has the tax credits, there are more people working, people are asking for more information, the nature of their lives is changing, and so there is the development of the call centres in saying whether people can contact us by phone, whether they can do things on-line, the hours we are open—all of this information as well as our PSA targets we are concentrating on because it is about the quality of the service we are delivering to customers as well as the turnover, the quantity tests. I am quite keen that we can deliver quantity as long as we do not lose the quality side of it, and are improving on the quality as well.

  32. What are the measures, then, that are consistent that can be used to test this?
  (Dawn Primarolo) We measure by customer survey and tests which are looking at the ease with which people completed the process, contacting us, whether they found it useful, whether they got the information that they wanted. We then had to look at the new business we are taking on like National Insurance and a different set of requirements and measurements about whether people were getting the information they wanted and whether our targets reflected that. We also did survey work by phone. What we are trying to do is get a much higher response rate to our queries. This is about quality, accuracy, how people felt about the way they were treated by the Inland Revenue and whether our staff were helpful. We are also looking at questions that focus on the process relevant to particular groups because the service is not exactly the same to every single taxpayer in what they require from the system. So whilst maintaining the examples of the quality, more complex PAYE targets and looking at our post monitoring which is bread and butter and underlying targets, we are monitoring those at the same time as we are saying "How can we take on and measure the new business?" It is an absolutely valid point and one I am certainly making: when will I get to a point where I am at a constant and have all the new systems in place, where we are measuring basically more or less the same thing every year to show that improvement—and that has been a bit difficult of late.

  33. But within these new measures of customer satisfaction, and I can see why you as a Minister and we as Parliamentarians would want broader and better measures, will it be possible to have consistent information on the old measures that enable us to see change over time?
  (Dawn Primarolo) Yes. If you look at the key customer service targets which have been measured throughout, they would be response times on post, telephone, personal visits—for example, post turnaround and whether that has improved, the nature of the telephone service and whether that is improving—and those are constants—

  34. Is that something you would feel able to share with the Committee?
  (Dawn Primarolo) Yes. This goes back to the point the Chairman made at the beginning which is how can the Committee know if it has to look across two reports? These are our headline PSA targets; these are our internal what we are monitoring, over and above the sort of strategic targets that Government is aiming for. We will extract the ones that are relevant and send them to you[4].

  35. There is in the book that we are working to on page 12 a specific reference to reviewing the way you deal with pensioners and students. I have a constituency that seems to be largely made up of pensioners and students, and the pensioners are terrified by contacts with the Revenue and the students who have spasmodic income, usually low and usually taxed at the emergency code, are extremely angry with the Revenue. What can be done about this?
  (Dawn Primarolo) Both of those issues we are working on. Starting firstly with pensioners, it is true that there is a general reluctance sometimes for taxpayers of their own volition to contact the Revenue for fear that there may be something they do not know and they come out of the telephone conversation worse than they perceived they went into it, and it is a matter of trust and getting across to them that we are there to help. On the pension issue, we are working very closely at the moment with Age Concern, with the low income tax reform group and a number of other organisations who have made very strong representations to us about pensioners' contact with the Revenue, and we are working through with them changes and improvements that we should make. For instance, we do home visits now if a pensioner would prefer that for us to help them fill out a form or if they cannot get into our nearest tax inquiry office, and we have looked at how we can get pensioners out of the self-assessment system and whether the numbers are too large there. A lot of pensioners need to be reassured that they do not need to have contact with us, but we get a lot of inquiries from pensioners saying they have not had a self-assessment form, and there is absolutely no reason they should have had one, but they are worried. So we are experimenting with things like video links from libraries which people can go in and use; we did one I think in Alfreton in Derbyshire, and one in Wick to see whether accessibility could be improved by video links into the inquiry offices and maintain confidentiality. On the question of students, I could not agree with you more. Students are the taxpayers of the future and to make them cross seems rather short-sighted, in terms of making their first contact with the Revenue not a good experience and possibly shaping their attitudes to the Revenue in the future. Again, therefore, working with the low income tax reform group we have set about trying to improve, for instance, the guidance and the forms for students. We have set up a student website; we have looked at and produced information packs for student welfare advisers; we are looking to forge better links between our local inquiry centres and the advisers; we plan to introduce an on-line student tax calculator; and we are working very closely with a number of organisations to see what other things we could do to improve in this area, and we have a lot of work to do. That is a reasonably recent development in terms of the detailed work. Again, either now or later, if the Committee would like more details, then we are happy to make sure that is provided to see how we are developing that sort of particular set of circumstances.

  Chairman: Thank you. We need to move on to the take-up of electronic services.

Mr Beard

  36. This is rather a grand target, Minister: "Ensure by 2005 that one hundred per cent of services are offered electronically, wherever possible through a common Government portal, and a take-up rate for these services of at least 50 per cent", and yet, reading the press, the service has virtually collapsed. What is the problem and what is being done about it?
  (Dawn Primarolo) What would you like me to deal with first? The fact that self-assessment is off-line and the issues around that? Because what we offer on-line is wider than just the self-assessment, as crucial as that is, and the rest of the stuff is on-line. It is about contacting us, not necessarily whether all transactions can be completed, and we are currently at about 40 per cent in terms of the information and access that we can offer on-line. I could give you those areas but perhaps I should turn first to the question of the self-assessment and the fact that it is not on-line and has not been for over two weeks now. I can explain to the Committee as much as I know but inquiries are still continuing and I am sure this will be a matter you will want to come back to. Would you like me to explain what has happened?

  37. Yes.
  (Dawn Primarolo) On the weekend of 25 and 26 May four customers contacted the Inland Revenue's electronic business unit help line to report seeing information on another person's return whilst using our on-line self-assessment service. The customers could also add or otherwise overwrite information on that person's return, and we then received notification that one of the customers had contacted the media simultaneously. The Inland Revenue withdrew the on-line service because clearly confidentiality is paramount—it is the whole foundation of the tax system. We then received a further nine contacts from customers, so we have a total of 13 in all. Clearly, not just for the taxpayer but for the whole credibility of the system, confidentiality and the maintaining of it is crucial, and we needed to know exactly what had happened and why before we restored the service, otherwise there would be clearly a question of confidence for the taxpayer on that service. What has happened is the Inland Revenue is working with its strategic IT partner which is EDS and with the e-envoy's office, and we have brought in an independent specialist internet security company because we needed to know exactly what was going on. The first thing we needed to establish was whether or not the system had been hacked into—which it had not. I am told by the Revenue that the weakness in the system, and this is a software issue, allowed an internet service provider or a company supporting to store the unique identifier for some taxpayers in a way that was unintentional, and this was what enabled the access. This information never should have been stored: it was not a malicious act: it was not designed: it was something to do with the software: and obviously, as I have said and I cannot stress it enough, this is very serious. The Revenue, therefore, have taken a two-pronged approach: firstly to fix the problem, which is a software issue and, secondly, to improve the system, if you like fitting alarms to the system, so that if one taxpayer did or should ever be in the position of viewing another person's tax data then the system would immediately deal with that. Also I think it is right that we should do a thorough audit now of the on-line service, and I should be satisfied as well as the Revenue that the system is now completely secure before we return it on-line. I will not, and I know that Revenue will not ask me to, return the service until that can be delivered. Sir Nichlas Montagu, who is also the accounting officer, because the PAC will have an interest in this, will be writing to the Chairman of the PAC, and I wondered Mr Chairman whether you would think it appropriate that we can return to this when we have a full report? I understand you will be visiting Inland Revenue to look at the on-line services so you will have a proper and thorough briefing then as well about where we are. To say that I am erring on the side of caution would be an understatement; this is not unique unfortunately—it has happened to other on-line providers—but it is something we absolutely have to settle and make sure of so we can take the work on SA on-line forward. It is a great disappointment because we have vastly improved the service and usage was already higher than it was at the same time last year, but it needs to be sorted and I cannot add any more than that.

  38. Is it only individual self-assessment?
  (Dawn Primarolo) Yes.

  39. The other parts, corporation tax and everything, are working all right?
  (Dawn Primarolo) Absolutely. They are perfectly secure and have been checked. It is just this and it is to do with the software. To be honest, I could not myself explain it to you; it is quite a technical issue but we could not have foreseen it.

 


2   See Ev 11. Back

3   See Ev 11. Back

4   See Ev 11. Back

 
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