The Public Accounts Committee on Tax Credits revealed that of 47bn paid out in tax credits in the first three years of the system, 5.8bn was overpaid to claimants, often causing hardship to the low paid who were asked to repay money they had spent in good faith. The report criticised the system, saying there had not been an adequate response to the 'unacceptable levels of error and fraud'.
Kate Green, chief executive of Child Poverty Action Group, said, 'The great success of tax credits has been the role they have played in lifting 600,000 children out of poverty. But errors and overpayment recoveries have caused hardship to thousands of families. The Government should put in place a "pause" before recovery of overpayments as soon as possible.
'The Government must also apply more investment through the simple and stable route of child benefit and through targeted benefits that support families affected by disability.'
Some changes have been made to the scheme in an attempt to reduce overpayments, including raising the threshold for notifying HMRC of any increases in income to 25,000.
The report is available at www.publications.parliament.uk.