Blair apologies for tax credit 'distress'

Prime Minister Tony Blair has admitted that the tax credits scheme has caused “hardship and distress” to many families.

However, Mr Blair said that, overall, the scheme had helped millions of families. His remarks follow the publication of two reports which heavily criticised the scheme.

Citizens Advice (CAB) criticised the scheme in their report, claiming that it was “backfiring” for large numbers of families. Another report by the Parliamentary Ombudsman, Ann Abraham, also warned that “teething problems” with the system, which was introduced in 2003, had not been completely overcome.

The Parliamentary Ombudsman’s report stated that a third of all tax credits (almost 1.9 million) had been overpaid in the first year of the scheme alone.

Both reports have called for the overpayments to be written because the recovery of the overpaid credits was leaving many families with mounting debts and substantially reduced incomes.

Paymaster General Dawn Primarolo said that the government was already beginning to write overpayments due to official errors.

Citizens Advice said that the recovery of tax credits had left some families being threatened with repossession of eviction. Other families had been forced to give up work because they were no longer able to pay for childcare, while CAB had to arrange Salvation Army food parcels for families left without enough money to eat.

CAB also claimed that tax credit staff had told some families that they should take out high-cost loans to repay overpayments.

Both CAB and the Parliamentary Ombudsman blamed the failure of the credits system for the problem. CAB said that the system was “complex to understand and administer” and that awards notices were “incomprehensible and contradictory”, leaving many people unable to understand their entitlement or spot errors in their awards.

CAB Chief Executive David Harker described the system as “completely unacceptable.”

He said: “There needs to be urgent improvement in tax credit administration if the scheme is to achieve its anti-poverty objectives and not frustrate them. The challenge now is to make the changes necessary to restore public confidence in tax credits and make the system work properly for those who really need it.”

The Parliamentary Ombudsman’s report also blamed the IT system used for the tax credits system, saying that it did not take account of the needs of customers.

The Parliamentary Ombudsman made a series of recommendations to improve the system, which included improvements to the way the Inland Revenue deals with overpayments and communicates with customers, as well as to the measures taken to reduce the risk of families suffering financial hardship.

Ms Abraham said: “While it has benefited many millions of people, the tax credits system is currently operated in a way that can have unintended harsh and unfair consequences for vulnerable groups of people who will often have particular needs.”

Liberal Democrats work and pensions spokesperson David Laws said: “The report’s findings are a damning indictment of Gordon Brown’s tax credit system. The message is clear – his attempt to micromanage the budgets of nine out of ten families has caused harsh and unfair consequences for millions of people.”

(KMcA/SP)