THE pattern of overpayments of tax credits to poor families followed by clawing back money by cutting their income could take years to resolve, a committee of MPs predicted.

The Commons Public Ad- ministration Committee expressed concern at the handling of the tax credits system, introduced by Gordon Brown to tackle poverty. Its members said that the system, which led to overpayments of £2 billion last year, is designed so that maladministration is “systemic”.

When the Chancellor merged parts of the tax and benefits system to introduce tax credits in 2003, MPs said that officials at the Inland Revenue made no assessment of the needs of the vulnerable people to whom they were paid.

By relying on an automated computer system it had no adequate capacity for case- handling in the event of complaints and no customer support for tax credit recipients, people offering advisory services or MPs raising complaints.

The committee backed the view of Ann Abraham, the Parliamentary Ombudsman, that “resolving these problems will be a long haul” and that some of the changes since announced by ministers would take effect only over 18 months. Its report, Tax Credits: Putting Things Right, said that in setting up the scheme, Revenue & Customs failed to recognise that many families receiving benefits have no savings to tide them over if their payments are suddenly reduced or removed.

For these people, “regular payment is not a budgeting convenience but a real necessity”, the MPs said. The computer system at the heart of the scheme was both “the cause of major problems” and an obstacle to resolving them, the report found.

Ms Abraham called on the Revenue last year not to claw back overpayments until claimants had been given a chance to challenge them, and suggested that some of the £2 billion overpaid be written off to avoid causing hardship.

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