Tax credit system still failing families

6.00.00pm UTC (GMT +0000) Fri 31st Mar 2006

Responding to new figures on tax credit payments released today by the Treasury, Liberal Democrat Shadow Work and Pensions Secretary, David Laws MP described the administration of tax credits as "a system in crisis, still failing hundreds of thousands of families" and called for the minister responsible, Paymaster General Dawn Primarolo, to be sacked.

Commenting Mr Laws said: "This failing tax credit system has made overpayments totalling nearly £4 billion in the last two years, around half of which is likely to be written off at the taxpayers' expense. Overpayments have meant nearly 2 million families were plunged further into poverty and debt, through having to pay back often thousands of pounds to the Government. Last May, the Paymaster General claimed that the system was working well for the vast majority of families. But today's figures show that the Minister is clearly in denial - in actual fact 44%, over 2.8 million people, received incorrect tax credit payments.

The Minister has known of the systemic failures in the tax credit system for years and today's figures are yet more evidence that too little has been done to rectify them. Recent modifications to the system are too little too late. Meanwhile Dawn Primarolo continues to bury her head in the sand and blocks parliamentary scrutiny of this crucial issue. New ministerial leadership is now needed to introduce a radical overhaul of the way tax credits are administered."

The Liberal Democrats are calling for a five point action plan to tackle tax credit chaos. An abbreviated version of the five points is:-

1. A return to stable, 6 month fixed, awards

2. Much simpler, clearer award notices.

3. Action against organised criminal gangs.

4. An immediate end to what the Ombudsman has called "systemic maladministration"

5. Improve the tax credits IT system.

In order to ensure that all these reforms take place, the Liberal Democrats believe that it is necessary to have a change in leadership in the department, so that the system is run by a minister who is prepared to acknowledge the failings of the current system and willing to drive radical change through the department to tackle the ongoing problems.