New figures show tax credits worsening

7.35.42pm BST (GMT +0100) Mon 10th Oct 2005

New figures released in the National Audit Office's report on the accounts for 2004/05 of the Inland Revenue, show that:

• The level of overpayments in 2003/04 has increased from £1.9 billion reported in June 2005 to £2.2 billion

• The Revenue estimate that overpayments for 2004-05 awards are likely to be similar to those for 2003-04 (i.e. nearly 2 million families with an average overpayment of £1,000 each)

• The Revenue has made provision for £961 million of tax credit overpayments it does not expect to recover - more than twice as much as the amount of income tax considered unrecoverable, and seven times as much as unrecoverable corporation tax

• The Revenue expects the amounts needing to be recovered to grow over the next few years, as a result of overpayments for further cycles. Recovery of overpayments from 2003/04 is already expected to extend over at least the next 5 years

David Laws MP, Liberal Democrat Shadow Work and Pensions Secretary, said:

"These new figures show that the chaos in the tax credit system is worsening.

"The previous level of overpayments for 2003/04 was huge, but now we find out that the final figure is even higher. The admission that overpayments for 2004/05 could be at a similar level to 2003/04 is particularly shocking when we were told that it was expected to be considerably lower.

"The Paymaster General must make an urgent statement on these figures. I am extremely concerned that the Treasury is in a state of denial over the bureaucratic chaos they have created - if they do not sort this out within the next few months the Paymaster General's position will become untenable and the Chancellor will also pay a high political price for this crisis."