Tax Credits (Scotland) (Hansard, 10 April 2003)

§ Ann McKechin (Glasgow, Maryhill)

This month marks one of the biggest-ever reforms of the Inland Revenue and the Benefits Agency, with the introduction of a new tax credits system for low-paid workers and people with families. It represents a comprehensive sea change in the way in which people are taxed on their income by recognising that everyone who is in work or bringing up children contributes to building a stronger economy and a stronger society, and that we should assist those who, at different times of their lives, are in need of additional support.

Since being elected in 1997, the Labour Government have worked progressively to reform taxation policies to support workers and families. In particular, they have introduced measures to help people into work and to make work pay, and at the same time they have given more help to families when they are bringing up their children. Such measures are, of course, integral to the Government's agenda of halving child poverty by 2010 and setting ourselves the ambitious target of eradicating child poverty within a generation. In a modern society, extending opportunity for all children and ensuring that people's life chances are no longer unfairly determined by their childhood circumstances is not only morally right but essential to a strong economy and society.

In their first Parliament, the Labour Government introduced the working families tax credit, the disabled persons tax credit and the children's tax credit. Those measures have already made a substantial difference for many low-paid workers throughout Scotland, together with other fiscal measures such as the introduction of the 10p rate of tax, increases in child benefit and the reduction in the standard rate of income tax. Since 1997, families with children are, on average, £1,200 per year better off as a result of those measures. As a result of the targeting of our reforms, households in the poorest fifth of the population are, on average, £2,400 per year better off in real terms.

I am pleased that the Government are now able to offer a much more sophisticated and targeted system of assistance, and I know how much effort my right hon. Friend the Paymaster General has expended in the past few years to bring those plans into effect. She and her staff are to be congratulated on that real achievement in fiscal reform.

The new tax credits introduced this month are an attempt to build on the successes of the original system in order to offer a better system of support for families and people in work. I welcome particularly the move to pay the new child tax credit to the main carer, normally the mother, rather than to the principal household wage earner. I am also delighted that, for the first time, eligibility for the new tax credits is being extended to thousands of people who were previously excluded, such as student nurses and low-paid workers without children. In fact, I understand that the Government have estimated that more than 5 million families will benefit from the new child tax credit alone, compared with 2.5 million under the old scheme. As I represent 500 part of a city in which the largest income bracket is £10,000 to £14,000, I know that that will make a real difference to thousands of our citizens.

Recently, I held a roving surgery in my own constituency to promote the new system, and I met a disabled woman who was working part-time and had no children who will be approximately £3,500 a year better off with the new tax credits. Another constituent whom I met, however, who was in a low-paid job and had a two-year-old daughter, will be better off by approximately £2,500 a year due to a combination of both the working tax credit and the child tax credit. I was genuinely surprised and delighted at the generous support that the scheme provides, and I know that my constituents were just as pleased.

As my right hon. Friend will be aware from recent press reports, however, it is currently estimated that only 3 million of the 5 million families in the UK entitled to the new tax credit have completed and returned their forms. I am concerned to ensure that, in Scotland, we are able to maximise the take-up rate. Only this week, the Child Poverty Action Group, while welcoming the launch of the scheme, expressed concern about the relatively low take-up and asked the Government to continue their present campaign. From speaking to my constituents, I know that many are still unaware that they may be eligible for benefits offered by the new reforms. Although I appreciate that those who were under the old working families tax credit scheme have received application forms automatically, my right hon. Friend will know that the new system widens substantially the net of beneficiaries. As employers are no longer involved in processing the administration of tax credits, little or no information is being disseminated at places of employment among the small and medium-sized enterprise employers. That, however, is where a large percentage of potential applicants such as women and the low-paid work. Is there any way in which information can be distributed through the place of employment, perhaps based on the Inland Revenue's records, which will show potentially low or lower-paid work forces.

I appreciate the sophistication and extent of the television and press advertising in recent months, including the targeting of women's magazines, and that is certainly a big help in encouraging a positive level of claims. Clearly, however, more work in this direction is required, and possibly for a much longer, sustained period so that the message gets through to all parts of our communities. Has the Minister considered further advertising in the local and free press, together with advertising on local radio stations, particularly as evidence suggests that that is where most women or low-paid workers obtain access to news and information? Has the Minister or her staff made any contact with local authorities in Scotland about how they can use their networks, particularly in schools and nurseries, to promote the scheme?

I have also met a considerable number of people who claim that they have received the forms but have still to complete them, and in their words, "haven't quite got round to it". Most seem unaware of the time limits: for example, that they needed to return the forms by the end of January to guarantee that their money would be paid in time for this month., or that they would lose money if they did not apply within the first three months.

501 That suggests a few problems. First, although I am sure that my right hon. Friend and staff at the Inland Revenue have made every effort to condense the application form to 12 pages, many people, particularly those with literacy problems, still find completing such a form, which is in fairly small print with a good number of boxes and a substantial amount of supplementary notes, a daunting prospect. Their first instinct is to gaze at it with perplexity, put it down and forget about it. My right hon. Friend will no doubt reply that, in most cases, applicants will be able to skip a good number of the questions, depending on their circumstances, but that is not necessarily as clear to every applicant when they look at the form.

Secondly, many people will start looking for last year's P60 and may realise that they have lost it or that their employer has failed to provide it. That starts the tortuous search for the duplicate and, again, frustration and a degree of confusion can result. Will staff issue reminder letters to those who have received application forms but who have still to return them, and will people be encouraged to make more use of the helpline assistance?

I was alarmed that a number of constituents have contacted my office in the past week to say that they are having substantial difficulty reaching the helpline number. My staff have phoned the number over the past couple of days and have repeatedly received a BT message that the call cannot be connected owing to the volume of calls. A number of other Members of Parliament have indicated that their constituents are experiencing similar problems in other parts of the country. Will the Minister comment specifically on what steps are being taken to tackle that problem, given that we are implementing the scheme this year?

Last week, I attended the annual conference of One Plus—a voluntary organisation based in the west of Scotland that does a huge amount of valuable work in assisting and providing training for sole parent families. Concern was expressed about take-up and, although people are aware that a tax credit scheme is in operation, their knowledge of its scale and detail is, probably understandably, fairly vague. Some of the rules of eligibility are quite complex.

For example, at the conference I met a woman whose 18-year-old daughter, currently a student, has just had a baby, and they both reside with her. She has been advised that she may be able to claim for tax credits as she is supporting her daughter and grandchild. A number of other women also spoke about the lack of any response so far from the tax office about their applications to confirm that their payments will be made. That highlights the need for a very high level of efficiency and support in the Revenue to ensure that the take-up of benefits is as high as possible and that payments are received on time.

Targeted benefits are always more difficult to administer, but I fully understand and support the Government's priorities. I have been impressed recently by the work of the new pension agency, which is checking its record base, identifying pensioners on low incomes and contacting them with information about their possible eligibility to enhanced benefits, such as the 502 minimum income guarantee. In fact, my mother was one of those who received such a letter last year. Is it possible for the Inland Revenue to conduct a similar exercise for those who may now benefit from the working tax credit, which is specifically intended to benefit low-paid workers?

Will my right hon. Friend comment on the feedback that her officials have received about the current media campaign? Does she see merit in continuing the level of the current campaign to ensure wider take-up? In particular, has her Department considered any further measures to increase participation and to chase up those who, to date, have failed to return their forms to the Inland Revenue? Does she agree that more needs to be done to emphasise the three-month period to make sure that families and low-paid workers do not lose out on that important reform?

The new system is vital to our aims to ensure that all families and workers have a decent income and that we successfully combat poverty in Scotland and in society generally. Like my right hon. Friend, I am very keen to ensure that all those who are eligible to benefit in Scotland know how to claim and submit their applications to the Inland Revenue. The Government have made an enormous effort to get the scheme into operation. There are bound to be teething problems, as my right hon. Friend said earlier this evening, but I urge her and her colleagues to continue to work to allocate the necessary resources to ensure that the scheme is a real success.

§ The Paymaster General (Dawn Primarolo)

I congratulate my hon. Friend the Member for Glasgow, Maryhill (Ann McKechin) on securing this Adjournment debate in what has been a busy week. It is very timely given the introduction of the new tax credits, and I hope to deal with each of the points that she has made. In particular, I thank her not only for the support that she has given personally in the House in participating in the legislation's progress through Parliament, but for being actively involved in her constituency in assisting us to get the message across about eligibility for the new tax credits.

My hon. Friend well knows that, as a result of the reforms that we have introduced—the working families tax credit and the disabled persons tax credit, linked to the national minimum wage and huge increases in child benefit—the Government have made significant progress in tackling poverty and low pay not only in Scotland, but throughout the United Kingdom and Northern Ireland.

As a result of the improvements that we have made and the reforms that we have introduced, families with children in the poorest fifth of the population will be £2,500 a year better off in real terms from April 2003 compared with 1997. Our new child tax credit will be complemented by the new working tax credit, which builds on the work-based elements from the old provisions.

On my hon. Friend's comments about publicising tax credits through the workplace, I confirm that we have done all that we humanly could to encourage all employers, including local authorities, to make available information about the tax credits, particularly 503 the working tax credit, which will still be paid through the wage packet. On future activity on publicity, training and information for potential tax credit claimants, I reassure her that the Inland Revenue will continue its activities next year, but not at the same level, to encourage people to apply.

On take-up and the numbers who have applied for the new tax credits, I should like to take this opportunity—my hon. Friend did not do so—to put straight the record with regard to others' comments about take-up of the new tax credits. We anticipate that about 5.75 million families in the United Kingdom will benefit from the child tax credit. Of those families, about 1.3 million are in receipt of income support and jobseeker's allowance. Those families do not need to claim tax credits this year. Instead, we have increased the child premium in those benefits to ensure that they receive the same amount as they would have received had they been on the tax credits, although we plan to transfer them on to the system next year.

I agree with my hon. Friend that it is important that families who are entitled to make a claim do so as soon as possible. That is why the Inland Revenue has spent £12 million on bringing the new tax credits to public attention. It wrote to everyone who was receiving the previous tax credits inviting them to claim. Indeed, it sent reminders and included messages in items such as child benefit books and bounty packs. It then attempted to ring as many potential claimants as possible to remind them to claim if they had not done so. Some members of the public became a little irritated at being contacted so many times by the Inland Revenue encouraging them to apply for credits when they had either simply not got around to doing so or had already done so. We can be absolutely sure that the message has got across. We believe that we are well on our way to achieving an excellent target. To date, we have received more than 3.9 million claims from families. As I told my hon. Friend, that does not include the 1.3 million who are on income support or JSA, who will receive the benefit automatically.

Of course, it is vital to encourage people to apply by the end of January. We started advertising last August so that we could process forms in time for claimants to receive payment by the beginning of April. As my hon. Friend said, some people unfortunately did not fill in the forms at the time and may have completed them recently. That led to huge pressure on the telephone helplines and the Members' helpline. At the beginning of the week, the number of calls to the tax credit helpline was astronomical. No contact centre in the country could have handled it—indeed, all the centres put together would have struggled. We already have 1,900 people answering calls. They are handling approximately 500,000 calls a week and, on some days, the calls exceed that number.

To deal with the extra demand this week, 150 staff were added today, 250 will be added tomorrow and 300 on Monday. A further 700 staff will be in place by early next week. Tomorrow, we shall double the capacity of calls that can be taken by the Members' helpline; we shall treble it by early next week. I understand that people are anxious, especially those who have left it late to apply, or have not received confirmation from the Inland Revenue that payments will start. The Department is doing everything that it can to provide that service to communities in the United Kingdom.

504 I should like to pay tribute to Inland Revenue staff. In the past three months, they have moved heaven and earth to try to ensure that all the applications for tax credit were speedily tackled. It is a huge achievement on their part that millions of people are receiving tax credits, and that will apply to millions more as we move through the month. Once we are finally in a position to give the exact information about what happened in the first month of implementation, I am confident that that splendid work will be demonstrated to all. The staff have not flinched from being asked to do increasing amounts. Thousands of Inland Revenue staff who are totally committed to introducing new tax credits have been involved.

My hon. Friend asked about future publicity and methods of ensuring take-up. She is right that it is important in the next few months to stress to people that if they do not submit their application before the beginning of July, they will lose payment for the early part of the year. So long as they submit it in time, it will be backdated. That must be our next focus. We shall redouble our efforts to issue the information through the many routes that we have used, for example, the citizens advice bureaux, which have been splendid, and the Child Poverty Action Group, which has helped through updating its advice book and undertaking the training of its staff on our behalf.

The claim forms are 12 pages long—half the length of the forms for working families tax credit, but none the less, 12 pages—because we need to get the information about the families and their structures on to our systems for the first time. Future renewals will be much easier, but we do not yet have the information and it is important to secure it. Of course, the process will continue because any new claimant will be faced with the form. As always, the Inland Revenue looks critically at the information that it sends out and the application forms that it designs, and it constantly tries to make them simpler.

I understand that some people have been caused anxiety by the question of their previous year's income because they have wondered whether to submit a P60. We do not ask for a P60; we ask for the claimant's previous year's earnings. If anyone is in doubt about what to do, they should ring the call centre, and try to do so outside peak hours. I understand that a good time to ring is while certain soaps are on the television, because most people are watching them. Alternatively, if members of the public need assistance to complete their forms but cannot get through to our call centres, they can visit or ring an Inland Revenue inquiry centre.

In conclusion, I thank my hon. Friend for her unstinting encouragement and support for the introduction of the new tax credits. I agree that we still face large challenges. We must get the information out to, and the claims in from, those who have not yet applied. We must deliver either weekly or four-weekly payments on time to families who are in desperate need of the money. The Inland Revenue is working flat out to process claims, including recent claims, to get award notices out, to deal with inquiries and to get payments in place.

505 I hope that my hon. Friend agrees that we have made an impressive start on a major reform. I assure her that we, too, want to ensure that the implementation of the system in Scotland and the rest of the United Kingdom goes smoothly and as well as possible to deliver the 506 important revenue to families when they need it most. The money has their name on it, and it is up to us to ensure that we get it to them.