LITRG submits evidence to MPs on spending review

Published on 2 November 2010

LITRG has submitted written evidence to the Treasury Committee of the House of Commons for its inquiry on the spending review.

Our submission concentrates on two aspects of the spending review proposals: the joint DWP and HMRC fraud and error strategy, and the tax credits changes. It also discusses the move to Real Time Information in the context of its intended use for tax credits and benefits.

To get an accurate picture of the loss to the Exchequer generated by fraud and error, fraud must be analysed separately from error and tackled differently. Conflating the two is misleading. Also, Government must recognise the extent of official error in the system. The causes of customer error are many, and range from system complexity to mistaken advice being given to callers to contact centres or misleading statements in official publications. Moreover, HMRC estimates official error in HMRC-run benefits and credits at nil, whereas to our certain knowledge HMRC have written off millions of pounds due to official error in tax credits.

Our comments on the tax credits changes concentrate on the risks that freezing or reducing elements of working tax credit will present to work incentives, and particularly to disabled workers.

Whatever the benefits of moving to Real Time Information may have for PAYE, there must be alignment between the units of assessment and measurements of income in tax, tax credits and benefits for the system to work properly for purposes of tax credits and, in time, the universal credit. 

To view the LITRG evidence please use the link.

(15-02-2011)

Contact: Robin Williamson (please use form at http://www.litrg.org.uk/ContactUs)