Another £1.4bn is likely to be written off in overpaid tax
credits, according to a report from a committee of MPs.
The Public Accounts Committee said this would bring losses
from overpayments to £1.9bn. A revamp to the system meant it would pay £500m
more a year, it added.
“Billions of pounds, far more than those who thought up the system ever
envisaged, are still routinely overpaid to claimants,” said Edward Leigh
MP, chairman of the committee. “Very large amounts have to be written off.
And the attempts to recover overpayments from genuine claimants have caused
significant suffering to many vulnerable families.”
“And HMRC seems incapable of mounting a credible and effective response
to the flood of money being wasted in this way,” he added.
The new tax credit system started in 2003, but it has been
plagued by complexity, overpayments and fraud. So far £500m of the tax credit
overpayments from the first three years has been written off.
At the end of March 2006 another £3.6bn in overpayments was outstanding, but
the MPs think that £1.4bn of this will also have to be written off as
To remedy the administrative problem caused by the need to notify rising
incomes, the government has introduced a new rule from the start of this tax
year. This means that the threshold for notifying HMRC of any increase during
the financial year has risen to £25,000.
“Once these measures are fully implemented they are expected to reduce
overpayments by a further third,” the HMRC said.
Sounds like more
creative accounting to me, but its only taxpayers money, so that’s all right.
No doubt we will see performance related bonuses next!!
NuLab – Destroying Britain
from the inside out.