Tax credits' £1.6bn 'black hole'
£1.6 billion of overpaid tax credits unlikely to be recovered, MPs claim
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Tuesday, 05, Feb 2008 08:41
More than £1.6 billion of tax credits overpaid by the government is unlikely to ever be recovered, MPs said today.
The black hole of credits is in addition to £3.3 billion still to be collected from overpayments worth £6 billion in the scheme's first three years since its 2003 inception.
According to the influential public accounts committee (PAC), there is "little evidence" HM Revenue and Customs (HMRC) has the tax credits system under control.
Its members criticise the department for presiding over a scheme with the "highest rates of error and fraud in central government".
"The tax credits situation is as serious as ever," said PAC chairman Edward Leigh. "HMRC's attempts to bring the system under any measure of control have so far not been crowned with conspicuous success.
"The amount of tax credit being lost to fraud and error is still running at some £1 billion each year."
Responding to the report, an HMRC spokesperson said the data it relied upon was "captured only up to 2006".
"This report relies on data captured only up to 2006. As a result of a series of improvements, overpayments have fallen by a fifth and accuracy in processing payments has reached 97 per cent," the representative insisted.
"HMRC's security measures stopped the vast majority of fraudulent claims before any money was paid out.
"What's more, the major changes to the tax credit system announced in 2005 have increased flexibility and certainty for families, and are expected to reduce overpayments by a further third once they are fully implemented."
More than £65 billion has been paid to tax credits claimants since 2003. PAC estimates that up to ten million families have been placed in debt to the government in the ensuing years.