Blair admits tax credit problems

Tony Blair has admitted there are "serious issues to be addressed" in the tax credit system following the publication of two damning reports.

17:12 22 June 2005

Tony Blair has admitted there are "serious issues to be addressed" in the tax credit system following the publication of two damning reports.

The prime minister apologised to the families who had had their tax credits unexpectedly stopped after they had been overpaid through no fault of their own.

His comments came after the parliamentary ombudsman said low-income families were being exposed to "considerable distress and hardship" because of the system's failings.

Ann Abraham recommended that all overpayments over two years should be cleared, a sentiment backed by a separate report from Citizens Advice (CAB).

This study, based on 150,000 tax credit problems handled by the charity, said attempts to recover overpayments had left families in "severe hardship".

It also criticised the tax credits system for being too complex, for having award notices that are "incomprehensible and contradictory" and for having a helpline that was unable to resolve problems.

Questioned on the issue in the Commons this lunchtime, Mr Blair accepted the criticism but called for a "sense of balance" in the debate.

He said 300,000 families underwent substantial changes in their incomes, explaining that it was in these circumstances that errors could arise.

However, he admitted there are "serious issues to be addressed and we are addressing them", adding that it was "correct at the moment it is failing some people".

Mr Blair refused to commit to an amnesty on repayments, saying that while errors made by the Inland Revenue would be written off, a balance had to be struck between the interests of individual families and the wider taxpayers.

Earlier, Paymaster General Dawn Primarolo was forced to respond to criticism she had failed to provide accurate information to MPs on the overpayment of tax credits.

She told the Commons that the ombudsman had failed to take account of her acknowledgment of the system's problems in adjournment debates over the past months.

The focus was inappropriately on one written answer, which the ombudsman said painted an "incomplete picture" of tax credits, Ms Primarolo claimed.

She said would be writing to the ombudsman and CAB and offering to meet and discuss the detail of reforms being introduced.

But she dismissed any possibility of returning to an "unfair" fixed system, which, she claimed would fail to take families' changing circumstances into account.