£2bn overpaid in tax credits
Nearly £2 billion has been overpaid in working tax and child tax credits, according to new figures from HM Revenue and Customs.
Of £13.5 billion paid out last year, £1.9 billion was overpaid, according to the official figures.
The payment errors ranged widely, so that 40,000 of those who were overpaid got £5,000 or more whilst 714,000 were underpaid.
The errors have been attributed to computer problems two years ago, and to families failing to report a rise in income.
HM Revenue said that the “key challenge now is to encourage the reporting of such rises to Revenue & Customs more quickly, in order to minimise people’s overpayments in the future”.
And it stressed that the figures also showed “unprecedented take-up success” with 80 per cent of eligible families claiming in the first year, compared with just 57 per cent of the family credit on its first year.
But those that have been overpaid face the prospect of being asked to pay back any additional money they received.
Shadow Chancellor George Osborne said that the figures were a scandal, and indicative of widespread incompetence.
Mr Osborne said: “This is Government incompetence on a grand scale. It is scandalous that a system meant to help people is causing so many problems.
“Many families will find it extremely hard to repay money sent to them in error. Once again, Gordon Brown’s obsessions with fiddling and complexity have backfired.”
David Laws, who speaks for the Liberal Democrats, said he was concerned about families being forced to make repayments.
Mr Laws said: “These figures are unprecedented and reflect serious problems not only with the computer system, but within the tax credit system itself.
“Millions of families are having their budgets thrown into chaos, causing serious problems and hardship, especially for those on low incomes.”
He also pointed out that it is not clear how many of the overpayments are the result of official errors or will be written off, saying: ” Last week’s statement by the Paymaster General about changing the way overpayments are clawed back was an implicit admission that the Inland Revenue have not been acting responsibly in the past.
“The policy of reassessing income at the end of the award is flawed. A return to a system of fixed awards would end this bureaucratic nightmare.”
