Tax credits system under fire after Treasury admits to overpaying £1.8 billion

Tax credits system under fire after Treasury admits to overpaying £1.8 billion

	Published : Thu, 01 Jun 2006 11:00 By : Richard Owen Print this Story

LONDON - Calls for sacking the government minister responsible for the tax credits system grew louder today after the Treasury admitted that nearly £2 billion have been overpaid for the second consecutive year. Official figures show that £1.8 billion of tax credits was overpaid in 2004/05 forcing poor families to face large repayment bills for the second year running.

It has emerged that more than 1.9 million claims were overpaid last year, around 120,000 more than the previous year. In 2003/04 £2.2 billion was overpaid and this forced the HM Revenue and Customs (HMRC) to write off a debt of £1 billion. The government announced that people would not be forced to make repayments if the system is at fault. The chief secretary to the Treasury, Stephen Timms defended the system and said that overpayments had dropped by more than a fifth since the system came into being.

"The tax credit system has delivered three vital improvements: it has increased incentives to work, reduced the tax burden on low-to-middle-income families and helped to sharply reduce child poverty," he said. "Take-up of tax credits is at unprecedented levels with first year take-up of around 80% and 93% among the poorest. They have played a vital role in reducing child poverty, with 700,000 children lifted out of relative poverty since 1997."

However the Liberal Democrats feel that paymaster general, Dawn Primarolo has to be sacked and the whole system needs to be overhauled. "It is surely now time to replace the paymaster general, who through oversight, incompetence, or complacency has presided over a broken system rife with incorrect payments and fraud," said Lib Dem spokesman David Laws. He added that urgent reforms were needed.

The shadow paymaster general, Mark Francois also expressed his displeasure over the flaws in the tax credits system. "This government is in meltdown and they have Gordon Brown to blame for it," he said. "Gordon Brown needs to acknowledge whether the ongoing problems are a result of his obsession with fiddling and complexity or gross failure of his ministers and department to administer the payments effectively."