Form filling mayhem

Being caught between the hell of a 47 page tax form and a jammed Inland Revenue phone 'help' line could easily be a form of torture.

Millions of people who wanted to apply for the new family and working tax credits have found themselves in that very situation. Two million in fact gave up waiting and hung up the phone line.

So Gordon Brown's leap towards a tax and benefits nirvana has proven a bumpy road. There are still 90,000 families in bureaucratic limbo, waiting for their money. The Minister responsible had to apologise to parliament about it.

Our Economics Correspondent, Stephanie Flanders, looked at what went wrong.

STEPHANIE FLANDERS
Welcome to Oldborough in East Anglia, home of Karen Banford and vanguard of Gordon Brown's tax credit revolution. When the new child tax credit was introduced in April he called it the biggest financial boost for mothers in more than 30 years. In front of the kids, Karen calls it a massive pain in the neck.

KAREN BANFORD
The whole fiasco with the child tax credit was a nightmare from start to finish. When you finally get the forms, if you need help to fill them in you can't get through to the helpline. When you do finally work out how they're supposed to be filled in, you send them off, you phone the helpline to find out how your claim is going - you can't get through.

FLANDERS
Her MP is on the Treasury Select Committee which produced a fairly scathing report last month on the handling of the new credit. But he didn't need to sit on a committee to find out that people like Karen were having problems.

NORMAN LAMB MP
I've just seen it through my constituency mailbag. We've had an enormous number of people complaining. Even if it's a small percentage, you're still talking about hundreds of thousands of people who had one sort of problem or another. Often delayed payments or the wrong payment coming through. I think there was general support for this new system. No party opposed the bill in 2002 when it went through. I think it's the implementation of it and some of the detailed rules.

FLANDERS
No-one thought it would be easy dealing with a new tax credit that nine out of ten families, or 6.3 million, could qualify for.

As of the 2nd July, there have been 4.5 million applications of which 220,000 were still not resolved, and 400,000, like Karen's, were awarded late. By the end of the month, the Inland Revenue had mopped up quite a lot of the problem, but 90,000 claims were still unresolved, several thousand of them more than six months old.

Like all great benefit screw-ups, this one was born of the very best intentions. The Treasury wanted to do something that a lot of people have wanted to do for a while - bring the tax and benefit system closer together so they're not operating in separate realms. The trouble is, collecting tax is actually a lot simpler than giving people benefits, as anyone who's tried to apply for one of these new tax credits has discovered. The claim form is 12 pages long. The explanatory pamphlet is 47 pages long.

ROBERT CHOTE
Essentially the Inland Revenue has seen a big revolution in its role. This is an institution which has been used to taking money in for the Government. Now it's adjusting to a role which also involves paying money out. That inevitably involves big structural changes and problems, and that's part of what we've seen.

FLANDERS
No-one has a problem with trying to get more money to poorer families. The question is whether creating yet another new tax credit is really the best way to go about it. In Havant, the Tory MP, who thinks more about such things than most, thinks the answer is no.

DAVID WILLETS MP
One of the problems of the past few years is that Gordon Brown has a genuine commitment to try and tackle child poverty but has ended up perpetually changing the system rather than just delivering competently, instruments that already existed. And if only he could have got the money to families who were entitled to the old benefits it would have been so much better, when instead, what we reckon is, that he's changed the tax credits for families on average, in the past four years, every nine months. That's an absurdity.

ROBERT CHOTE
You could have done pretty much everything that the Chancellor has wanted to do in terms of redistributing income with the old system of family credit that he inherited. The interesting question is whether politically that would have been possible. It may be that by paying money through the pay packet, the Chancellor's been able to get political acceptability behind the idea of transferring more money than would have been possible had he kept with the inherited system.

FLANDERS
There is a political calculation at the heart of all this, and it's not just about the child tax credit. Gordon Brown wants to give as much money as possible to the poor and target it efficiently to making work pay and reducing poverty. It makes absolute sense as a political theory, but the practical consequence is you end up with vast proportions of the population subject to some forms of means test and potentially with a gripe with the Government about the way their form's been handled or how long it is or how bureaucratic it is, even if they're getting more money now than they were under the old system.

The same problem could crop up again in two months when there's another benefits revolution in the form of the new pension credit. From 6th October nearly half of UK pensioners, 4.9 million people, are going to be eligible for extra benefits, about £7.50 a week. But to get the cash, as with the child tax credit, hundreds of thousands of pensioners, especially older ones, are going to be struggling with forms. The IFS estimates that 74% of over-75-year-olds will be subject to some form of means test when the new credit comes in.

NORMAN LAMB MP
We're dealing here with an even more vulnerable group of people. If you're dealing with someone elderly, perhaps on their own, unable to find out what's happened to their claim, if there are helpline problems, there could be real anxieties. There are very great concerns about what will happen in the autumn.

FLANDERS
In fact, the Department of Work and Pensions is working overtime to get this one right.

ROBERT CHOTE
It's certainly the case that there are plenty of people in Government who are very nervous about what the outcome is going to be and they don't want to raise expectations. They'd like to see people applying for it over a longer period rather than this big rush to start off with, which has been part of the problem about the introduction of the other tax credits.

FLANDERS
In explaining Karen's hours hanging on the phone, the Government has not so subtly pointed the finger at EDS, the American electronics giant that designed the IT system for the child tax credit, and has been linked with a lot of other policy fiascos. But some say that's just a little convenient.

DAVID WILLETS MP
I sometimes think that EDS's final service to the Government is to be the fall guy who takes responsibility when things go wrong. My view is that the problems of tax credits are design problems. They go back to an over ambitious attempt to combine very different systems.

FLANDERS
It does rather beg the question of why they should be using EDS again for the new pension credit.

KAREN BANFORD
If I thought that the company that did the child tax credit and the working tax credit was going to do anything for the pensioners' tax credit, it would horrify me. We are lucky to a point because at least our partners had wages coming in, we had something, but these pensioners have got absolutely nothing other than their pensions. They can't go through what we went through.

FLANDERS
The Government had better hope that pensioners have a seamless transition to the new pension credit or it could blow up in their faces right in the middle of party conference season in October. The rest of us can hope that the Chancellor has finally quenched his desire to fine-tune.

Some hope.

This transcript was produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.