Committee of Public Accounts Press Notice: Treasury Minutes

September 2008

Committee of Public Accounts recommendations on public services accepted by Government

Recent reports by the Committee of Public Accounts (PAC) have led the Government to make a number of significant improvements to public service delivery.

Edward Leigh, Chairman of the Committee, today said:

"At long last HMRC has followed our advice and set itself a target for reducing the enormously high levels of error and fraud in tax credits. It should not have taken five years to do this. The Department needs to determine the resources required to meet this target and closely monitor how much progress it is making.

"The Government can now be held to account for keeping the cost to the public of the London 2012 Olympic and Paralympic Games within the March 2007 revised budget of £9.3 billion. The Department for Culture, Media and Sport has fully accepted that it should be held to account against the revised figure; assured us that none of the approximately £2 billion of unallocated contingency will be spent unless all other options for making savings elsewhere have been explored; and agreed to publish regular updates showing costs incurred and any changes to cost forecasts.

"I am pleased that the Pensions Regulator is now pushing forward with its regulation of money purchase schemes - which had previously taken second place to final salary schemes - and obtaining complete data on work based pensions."

The Government was responding to the following reports by the Committee of Public Accounts:

Tax credits and PAYE (8th report)

HMRC has paid £65 billion to tax credit claimants since the scheme was introduced in 2003. Awards are made on an annual basis and payments are initially made on provisional data; a final assessment is made once the claimant's actual circumstances are known after the end of the year, which can change the final value of the award. The Department overpaid £6 billion in the first three years of the scheme. By the end of March 2007 it had collected £2 billion of this debt and written off £0.7 billion. £3.3 billion of these overpayments remain to be collected. It is unlikely to recover £1.6 billion of the debts.

This was the Committee's fifth report on the current tax credits system. Although the administrative cost has increased from £406 million in 2003-04 to £587 million in 2006-07, there is little evidence the Department has the scheme under control. Many claimants continue to struggle to understand tax credits and why they are overpaid. There have been many complaints about the process for recovering overpayments. Tax credits continue to suffer from the highest rates of error and fraud in central government. The Department still has no targets for reducing error and fraud.

The Department has agreed that the level of error and fraud needs to be reduced significantly. The Department has accelerated the random enquiry programme to help facilitate both the setting of the target and the management of fraud and error. By summer 2008, the time required to produce reliable annual data will have been reduced by a full year from that required in previous years. Drawing on this data series, the Department will set an error and fraud target to sit alongside all the other performance indicators for the Department's business as part of its Departmental Strategic Objectives.

The budget for the London 2012 Olympic and Paralympic Games (14th report)

In response to the Committee's conclusions and recommendations about the £9,325 billion public sector budget for the London 2012 Games - an increase of £5.9 billion in public funding since the time of the bid - the Department for Culture, Media and Sport has assured us that contingency funds will be used only where all alternative options for making savings elsewhere have been explored, and agreed to publish regular updates showing costs incurred and any changes to cost forecasts. The Department has fully accepted that it should be held to account against the revised budget figure.

The Pensions Regulator: Progress in establishing its new regulatory arrangements (15th report)

The Pensions Regulator (TPR) was established in April 2005 to regulate work-based pensions. It replaced the Occupational Pensions Regulatory Authority (Opra), on which our predecessors reported in 2003. Since its establishment, TPR has acted to put the regulation of pension schemes on a firmer footing. It now takes greater account of risk in deciding where best to focus its regulatory work and has stronger powers to obtain information and intervene to protect members' benefits. There are signs of improvement in the adequacy of the funding of final salary pension schemes.

However, TPR had made a slower start in the regulation of money purchase schemes, and much remains to be done in improving standards of scheme governance and communications with members. Further work is also needed to improve the information held by TPR about schemes and to use this information to target regulatory effort at individual schemes. It must also use its new powers, and clearly explain the reasons for their use, in order that the pensions community understand its expectations. In a field such as pensions, with long term liabilities subject to short term volatility, TPR will need to be alert to the scope for new problems and risks to emerge

Notes to Editors

1. This information is contained in Treasury Minutes presented to Parliament in June 2008 by the Financial Secretary to the Treasury on the following three reports: 8th report Tax credits and PAYE; 14th report The budget for the London 2012 Olympic and Paralympic Games; 15th report The Pensions Regulator: progress in establishing its new regulatory arrangements.

2. For a list of all the recommendations and responses, go to http://www.official-documents.gov.uk/document/cm73/7365/7365.asp