MPs slam tax credits ‘nightmare’
The introduction and operation of the government’s new tax credits system has been a “nightmare”, an influential committee of MPs said today.
The committee of public accounts censured HM Revenue and Customs for failing to stem the “flood of public money” being wasted under the previous system and for “seriously mistreating” hundreds of thousands of claimants.
It says the system “routinely overpays large numbers of claimants – some 1.8 million in respect of 2003-04” and warns there is “no kindness” when it comes to getting these people, many of them in desperate financial circumstances, to pay the money back.
The child tax and working tax credits were introduced in April 2003 to replace the old working families and disabled person’s tax credits. They were intended to be simpler to use than the old system, and ministers said it would lead to half the number of errors.
However, today’s committee report finds “no evidence that this reduction has been achieved”, and committee chairman Edward Leigh says that far from being more efficient, the new system is “frustratingly arcane”.
The system, which affected about 5.7 million at a cost of £16 billion last year, has been plagued with problems, and last April the same committee warned of “severe problems”.
Today it expressed similar concerns, with Mr Leigh now raising questions about the Revenue’s ability to get the tax credits system operating properly at all.
A computing error means some taxpayers will not have received the payment they were due as far back as 1997, the report says, while the efforts to deal with the tax credits problem have created a build-up of work elsewhere that threatens to hold up the entire process.
“There is a general lesson here: that an ambitious scheme might be fatally undermined by its intrinsic complexity,” Mr Leigh concluded.
Tony Blair has already apologised for the problems in the system, and chancellor Gordon Brown has promised to reform it.
But shadow chancellor George Osborne said this further condemnation of the tax credit “fiasco” meant urgent reform was needed to make the system simpler and fairer.
“It is scandalous that a system designed to alleviate poverty is causing so much distress to thousands of Britain’s poorest families,” he said.
“We will now see whether Gordon Brown has the courage to come out and apologise for the mess he has created, instead of sending a junior minister to do the job for him.”
Liberal Democrat work and pensions spokesman David Laws described the report as “a damning attack”, and called on the government to consider writing off some overpayments and stop recovering money without giving people a chance to appeal.
“The government must undertake a fundamental review of tax credits to consider returning to a system of fixed awards to end this bureaucratic nightmare and create greater financial stability for families on low incomes,” he said.
