05 August 2005
The government has rejected the parliamentary ombudsman's main recommendations for resolving the continuing problems with the tax credits system.
Paymaster general Dawn Primarolo has formally responded to Ann Abraham's recommendations and made clear that, in most cases, the Treasury will not take them up.
In particular, the minister has ruled out the ombudsman's call to write off all tax credit overpayments, resulting from mistakes by staff at Revenue & Customs, during 2003/04 and 2004/05. Currently, an overpayment is written off only if it is judged that the claimant could not have been expected to notice it.
'HMRC has to balance their duty of care to all their customers with regard to the public purse,' Primarolo said.
'The government believes that this “reasonableness” test… strikes the right balance between being fair to those claimants who have been paid the incorrect amount and being fair to the taxpayer in general.'
Instead, Primarolo said attempts to recover overpayments would be suspended only in cases where claimants disputed that payments were incorrect, a commitment she first gave last month.
The minister's tough stance was in response to a report published by Abraham last month, which warned that attempts to claw back £1.9bn in overpayments on tax credits to almost 2 million low-income households were causing 'considerable distress'.
Her findings were an embarrassment for the government, which has placed the tax credit regime at the heart of attempts to get people off benefits and into work.
The Liberal Democrats' work and pensions spokesman, David Laws, criticised Primarolo's response to Abraham's findings. 'Rather than providing solutions, the government seems determined to sweep the problems under the carpet,' he said.
PFaug2005
