Tax credit overpayments cost £1bn

The government says overpayments have been cut

Tax credit overpayments cost £1bn in 2006-7 having fallen by £700m from the previous year, figures from HM Revenue and Customs show.

Some 1.3 million families were given too much money during the year to April 2007, although nearly six million families were receiving the funds.

The Treasury said overpayments had been "significantly cut" from £2.2bn in 2003-4 by improving the system.

But one charity has called for clearer information for claimants.

'Increased flexibility'

"The improvements we have made to the administration of the tax credits system have significantly reduced overpayments, increased the flexibility of the system and provided certainty to families," said the Financial Secretary to the Treasury, Jane Kennedy.

CAB continue to see people who really need the money but are put off claiming because of the problems there have been with overpayments Katie Lane, Citizen's Advice Bureau

She also outlined proposals to make the system easier for people to claim, receive and renew tax credits, as well as more support for people when their income falls.

But charities and opposition groups have called for improvements to the five-year-old system.

"While the number of families with overpayments went down last year, there has been little progress in helping claimants understand why they've been overpaid," said Katie Lane, policy officer at Citizens Advice.

"CAB continue to see people who really need the money but are put off claiming because of the problems there have been with overpayments.

"More immediate changes in the quality of information, advice and support for claimants are essential in rebuilding confidence in the system as well as a longer term review of the policy."

The Liberal Democrats said families were on a "financial roller-coaster" owing to the complexity of the system, while the Conservatives said overpayments were still at "stratospheric levels".

Efforts to retrieve the money often leads to problems as families have often already spent the cash.