Lib Dems warn of tax credit ‘nightmare’
The Liberal Democrats have called for a major reform of the government’s tax credits system following the publication of figures detailing a “bureaucratic nightmare”.
Data released in a parliamentary answer to work and pensions spokesman David Laws reveal that staff at the Inland Revenue are struggling to cope with the number of overpayments and disputed tax credit cases.
About 400 members of staff are dealing with about 300 unresolved cases each, while disputes are beginning to come in at 28,000 a month, Mr Laws said.
The publication of the figures comes ahead of tomorrow’s parliamentary debate on tax credits and just weeks after the parliamentary ombudsman detailed the scale of the overpayments problem in the tax credits system.
It recommended that overpayments caused by official error more than two years ago be written off to prevent causing further distress to families who have found themselves in debt trying to repay the money.
Today’s figures suggest less than two per cent of overpayments have been written off so far, with the vast majority of these 36,000 – worth more than £1,000 each on average – occurring a month before the full overpayment figures were published.
“Gordon Brown’s flagship tax credits scheme seems to have turned into a bureaucratic nightmare, with only a few lucky families getting their cases resolved,” Mr Laws said.
He added: “The Treasury needs to admit that the current tax credits system just isn’t working. What we now have is a system which is complex and bureaucratic to administer, and in which overpayments are endemic – driving people on low incomes into debt and despair.
“Gordon Brown should stop using the paymaster general as a human shield and should admit that the system needs major reform. The chancellor should consider bringing back a system of fixed half-yearly awards, as were used with family credit and working family tax credit.”
