Tax credits launch 'disastrous'

Claimants have experienced delays

The Inland Revenue has been severely criticised by government spending watchdogs over its handling of tax credits.

The Public Accounts Committee chairman said the launch of the new-style tax credits in April was "disastrous".

The launch was also criticised in a report by the National Audit Office.

The NAO report also took a dim view of the previous system - it said £700m (10-14%) of the old-style credits may have been wrongly given out.

If the same level of fraud or errors had existed over three years, £2bn may have been given out in overpayments.

In other sobering news to taxpayers, the report said the Revenue's tax credit system would not be fully back on track until 2005.

Computer problems

The Child Tax Credit and Working Tax Credit were introduced in April 2003.

They replaced the old-style Working Families' Tax Credit and the Disabled Person's Tax Credit.

Although many people are now successfully claiming the new credits, the launch was marred by a series of delays and computer problems.

Public accounts committee chairman Edward Leigh said the launch had caused "unnecessary suffering to a large number of genuine claimants, many of them vulnerable people in extremely difficult circumstances".

He also said the delays had caused inconvenience to employers and businesses around the country.

The National Audit Office's report identified a series of system failures at the Revenue.

For example, delays were caused by the system closing down and because staff had to wait too long to access records.

Overpayments

The National Audit's second main conclusion in its report centred on problems with overpayments of the old-style tax credits.

It found that between 10% and 14% - £510m and £710m - may have been paid in error or as a result of fraudulent claims, such as failing to declare a partner's income.

Sir John Bourn, the NAO boss, described the overpayments as a "serious concern".

In response, an Inland Revenue spokesperson told BBC News Online that the introduction of the tax credit had been a success.

"New tax credits are already reaching 5.9 million families - 98% of those expected to receive them in the whole of the first year. That is a massive achievement. As the report recognises the improved controls we have put in place for new tax credits should help to reduce overpayments"