Tense meeting sees MPs grill Revenue over tax credit fiasco

Tense meeting sees MPs grill Revenue over tax credit fiasco

The cost of reforms to the government's much-criticised tax credit system will reach £300m by 2010, MPs heard last night. The reforms will also increase entitlement to tax credits by £500m this year, tax officials told the powerful all-party Public Accounts committee.

The figures are likely to embarrass the government, which brought in sweeping reforms of the tax credit system last year after protests that design flaws brought misery to hundreds of thousands of poor families. The Public Accounts committee has written a series of critical reports of the Revenue's handling of the tax credit system. Paul Gray, acting chairman of the Revenue & Customs, said his department had been hampered in its efforts to combat errors by lack of information.

He told the committee of MPs that figures at his disposal only related to 2003-04, the first year of tax credit operations. Revenue, which operates tax credit payments to 6 million families, has struggled to stay within its £14bn budget set by the Treasury. In July it was revealed that fraud and error in payments was twice as high as previously estimated and cost £1.17bn in the first year. The National Audit Office said the "unacceptably high" level of mistakes and criminal activity in the system forced it to qualify the Revenue's account.

The MPs heard the Revenue will publish figures for the second year of operation next spring, which will allow officials to consider in more detail.....continued below

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ways to limit error and fraud. Mr Gray said the number of compliance officers was being increased from 1,200 to 1,400.

In an often tense meeting, in which several MPs criticised the conduct of the Revenue's staff, Mr Gray said he regretted those cases where families were caused hardship.

Edward Leigh, the committee chairman, said the administration of tax credits by the Revenue was a disgrace. "Surely it is a matter of shame that [Revenue & Customs] is reporting to the chancellor, its master, with the worst levels of fraud and error and more than any department in Whitehall," he said.

The Tory MP Richard Bacon asked how many staff had been convicted of fraud related to tax credit payments. He was told 11 cases had either been prosecuted or were going through the courts.

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