Government failing to understand the root of the tax credit problem - Laws

4.05.05pm BST (GMT +0100) Wed 3rd Aug 2005

Responding to the Paymaster General's formal reply to the recommendations contained in the Parliamentary Ombudsman's report Tax Credits: Putting Things Right, Liberal Democrat Shadow Work and Pensions Secretary, David Laws MP said:

"The Tax Credit system is in a continuing state of chaos and is fundamentally flawed, yet the Paymaster General simply talks of 'options' and 'a review'.

"Rather than providing solutions, the Government seems determined to sweep the problems under the carpet. Those affected by the clawing back of overpayments want to see action now, not at 'the earliest opportunity'. The Government has still refused to stop recovering overpayments without even bothering to check if this is justified under their own rules.

"The further refusal to follow the Ombudsman's advice to write off all overpayments caused by official error shows that the Treasury is unwilling to admit that the tax credit system is illogical, complicated and a huge mistake. The 'reasonableness' test seems decidedly unreasonable to those suffering under the burden of overpayments.

"The Paymaster General has failed to realise the root of the issue - that reassessing income at the end of the award is flawed and a return to a system of fixed awards would end the rollercoaster nature of wildly fluctuating payments for many families."