News

22/06/2005
REPORTS ADD TO CASE TO WRITE OFF TAX CREDIT OVERPAYMENTS - CARMICHAEL

Orkney and Shetland MP Alistair Carmichael called on the Government to admit they had made mistakes with the administration of family tax credits. The government's tax credit system is subject to "completely unacceptable" errors, Citizens Advice (CAB) has said. A third of recipient families have been overpaid - and many forced into poverty when HM Revenue & Customs (HMRC) takes back overpayments, the charity said. In another report, the Parliamentary Ombudsman accused Paymaster General Dawn Primarolo of failing to give a clear picture of the problem to MPs. Both reports call for such overpayments to be written off.

Alistair Carmichael said:
“1,400 local families have been overpaid and are being forced to repay on average £1,071. That represents a combined overpayment of £1.5m which is being clawed back from local families.

“The report by the Parliamentary Ombudsman concludes that the Paymaster General, Dawn Primarolo, ‘did not give a complete picture’ to MPs. Rather than admitting that mistakes have been made - and trying to ensure that families do not suffer unduly - the Government has sought to spin their way out of this problem. Nationally nearly £2bn of overpayments has been made. In 78% of cases investigated by the Ombudsman tax credit complaints have been upheld.

“The current tax credit system is failing many families. The policy of reassessing income at the end of the award is flawed. The Government must return to a system of fixed awards as a matter of urgency.

“Labour has created an over-complex system based on means-testing. It is simply unacceptable that families in this country are being left with a meagre income because of mistakes made by the system. Urgent action must be taken to sort this mess out.”

ENDS

Notes to Editors

- 31% of all awards were overpaid and nearly 1,400 families in Orkney and Shetland are being forced to repay on average £1,071 each. This represents a combined overpayment of £1.5million to local families. Statistics on tax credit overpayments for 2003/04 are available at: http://www.hmrc.gov.uk/stats/personal-tax-credits/cwtc-pyts_geog0304.pdf

– There is no point of comparison with previous years. Child and Working Tax Credits were introduced in 2003 replacing Working Families Tax Credit where awards were fixed and not reassessed at the end of the tax year.

– Overpayments arise for a variety of reasons such as a delay in reporting changes of circumstances; or when the 2003-04 income was more than £2,500 higher than the 2001-02 income but no estimate was reported before the end of 2003-04 (or not soon enough to prevent an overpayment). They can also arise through official error.