28 April 2006
The government has said that reform of the tax credits system will reduce overpayments after the Commons Public Accounts Committee revealed that £1.1bn in mistaken payouts might never be recovered.
The PAC, in a report this week, slated the operation of the system since its launch in April 2003 as 'deplorable'.
PAC chair Edward Leigh said: 'An element of overpayment to claimants was an inherent part of the design. What came out of the blue for the government was that overpayment would routinely occur on such a gigantic scale.
'This is a deplorable situation for the hundreds of thousands of vulnerable families who have to find money for repayments.'
Revenue & Customs, which runs the scheme, admitted that it had overpaid £2.2bn to 1.9 million families in the year from April 2003, representing one-third of those claiming tax credits.
A similar amount might have been overpaid in the 2004/05 tax year, when £15.8bn was distributed to 5 million families.
R&C said that new measures making it obligatory for claimants to inform the department if their circumstances change, and a tenfold increase in the threshold at which they have to inform the tax office of a rise in income, from £2,500 to £25,000, could cut overpayments by a third.
'As a result there is greater certainty for families who experience changes in their income,' a spokesman said.
PFapr2006
