Family tax credit payments cut
MINISTERS faced a fresh row over tax credits today as it emerged that thousands of families have had payments cut without warning.
The cuts have been introduced because of overpayments made during the past nine months, with 'computer errors' being blamed.
To claw the money back, the Inland Revenue is reducing payouts by up to a third in many cases - while some families have had all their credits removed.
In many cases, the Revenue is seeking to reclaim between £800 and £1,000 from families, according to advice centres.
The confusion has hit payments of new-style child or working tax credits which benefit about six million households and were introduced in a move to 'simplify' the system.
Ministers have claimed the new method has been working well. But families are now receiving letters from the Inland Revenue stating that they have been 'reassessed' - and are entitled to only lower payments, or none at all in some cases.
The National Association of Citizens' Advice Bureaux (Nacab) has written to the Government to protest and to demand swift action to protect poor families.
The affair threatens to develop into a major new headache for hancellor Gordon Brown and Paymaster-General Dawn Primarolo, who is responsible for the Revenue.
Poorer families will be entitled to special 'hardship' payments to help them cope - but Nacab says many have not been told they need to apply for these payments.
The child tax and working tax credits were introduced in April, replacing the working families' and disabled person's credits.
But the launch was marred by a series of delays and computer glitches which forced Primarolo to make a public apology. Last month the chairman of the House of Commons public accounts committee, Tory Edward Leigh, hit out at the 'disastrous' launch.
He said it had caused 'unnecessary suffering to a large number of genuine claimants, many of them vulnerable people in extremely difficult circumstances'.
The new credits were introduced in an attempt to reduce overpayments. The last three years of the previous system may have seen £2bn - between 10% and 14% - of the old style credits given out in overpayments, either in error or as a result of fraudulent claims, according to a National Audit Office report.
Last month an Inland Revenue spokeswoman said: 'The improved controls we have put in place for new tax credits should help to reduce overpayments.'
Shadow work and pensions secretary David Willetts said the chaos gripping the system was 'not just teething problems' and claimed some families were now suffering cuts of about £40 a week.
He said they were paying the price of a failed 'experiment' by Brown and added: 'So far the evidence is that it is not working and that it is causing a lot of distress.'
An Inland Revenue spokesman said: 'Some families' circumstances are bound to change: for example, a pay rise or children leaving home. This is why the tax credits system was designed to be as flexible and responsive as possible - so overpayment occurs, which is then recoverable once the Revenue has been informed of the change. People should tell us as soon as possible to prevent overpayments building up.'
