By David Williams
The tax credits system is vulnerable to error and fraud, and is failing to reach many who need it, an MPs’ inquiry has found.
The Commons Public Accounts Committee described overpayments by Revenue and Customs as ‘breathtaking’, and pointed out that the department had failed to support many who are entitled to tax credits.
In HM Revenue and Customs: tax credits and income tax, the PAC said the department had paid £85bn in tax credits since the scheme began in 2003, but up to 2007 had overpaid £7.3bn. By March 2008, £1bn in overpayments had been written off and the department expected it would be unable to recover a further £1.8bn.
The PAC said underpayments totalled £2bn up to 2007 and had affected 800,000 families that year.
In 2006/07, claimant error and fraud led to incorrect payments of up to £1.54bn. There were also problems with take-up, the MPs found, with 39% of those entitled to Working Tax Credits not claiming.
The PAC acknowledged that overpayments had dropped from £1.9bn to £1bn annually over the past three years.
Committee chair Edward Leigh said: ‘It is the scale of that overpayment that has continually caused dismay. It is distressing that many of the families that have to make repayments to the department, on average £770 for a single year, are highly vulnerable.’
Leigh also recommended that R&C become more sensitive about the recovery of overpayments.
An R&C spokeswoman said: ‘The support provided by tax credits is vital for family budgets, especially in these difficult times. That’s why we are working hard to continue to reduce overpayments and to give people fair repayment periods when these do occur.’
