[UK] Anti-poverty groups sceptical of Brown's tax credit reforms

From The Guardian

Phillip Inman

The government's tax credits system came under attack yesterday from anti-poverty groups who said thousands of claimants faced a further year of misery despite reforms promised by Gordon Brown in his pre-budget statement.

The groups said design flaws and problems with the computer systems that control tax credit payments meant there were doubts as to whether planned reforms would reap long term benefits and ministers might be forced to switch to a simpler system of delivering benefits.

Citizens Advice said moves by HM Revenue & Customs, which operates the tax credit system, to recover overpaid tax credits was "scandalous" when it could plunge families on low incomes into poverty. Child Poverty Action Group said the tax credit system "had been designed to suit Revenue & Customs and its computer system, and not claimants".
The groups, along with the charity One Parent Families and the Low Incomes Tax Reform Group, were giving evidence to the Treasury select committee, which began a review of the tax credit system yesterday. MPs are keen to discover whether reforms of tax credit administrative procedures and computer systems will overcome persistent disputes and errors that have dogged the system since it was introduced in 2003.

The chancellor put forward a series of reforms to the tax credit system last month after sustained criticism from opposition MPs and groups representing low-income families. A report by the National Audit Office highlighted problems that resulted in 1.9 million claimants receiving overpayments worth more than £2bn in each of the first two years of the scheme. Of these, between 150,000 and 200,000 families on low incomes were estimated to be affected by demands to repay tax credits, plunging many into poverty.

Mr Brown said the scheme for repayments would become less draconian. He added that new rules would force the Revenue to reclaim benefit payments in stages or delay reimbursement until the following tax year. Currently Revenue staff can demand the immediate return of tax credit overpayments. He conceded that some changes would be delayed until November to allow time for Revenue staff to upgrade computer software.

Katie Lane, Citizens Advice policy adviser, said the delay until November would result in Revenue & Customs continuing to reclaim overpayments which often totalled £4,000-£6,000. "It is scandalous that the Revenue can reclaim money without explaining why." She said thousands of claimants were forced to repay tax credits, often when it was a result of computer error. "In many cases it is not possible for a claimant to know if they have been overpaid."