CONFIDENTIAL tapes and internal documents have exposed bullying and bungling in Gordon Brown’s flagship tax-credit scheme that will cost the taxpayer up to £2.8 billion.

More than 1.5m people have been told that they were overpaid tax credits and should now give back the money. Tax officials told them it was their own fault and informed some victims they had no right of appeal.

However, many victims have turned the tables on the tax-man, using evidence from their own case files, obtained under data protection laws, to prove officials’ errors were to blame.

This has revealed government offices in disarray, random errors inserted by computer into claimants’ files, and officials misleading claimants about the right of appeal.

HM Revenue & Customs (HMRC) is now preparing to write off £2.8 billion, a similar sum to that which Alistair Darling, the chancellor, has already been forced to hand over to recompense taxpayers hit by the 10p tax row.

The evidence uncovered by the tax-credit victims reveals: The computer routinely wiped out claimants’ salaries, thus triggering overpayments. One claimant landed with tax-credit debts was told: “The computer zeroed your wife’s salary. It’s a common fault.” Duplicate rogue files caused errors and sent out multiple awards. One claimant was sent 10 letters in one day – but was still assured there were no payment mistakes. He was subsequently threatened with court action over the overpayments. Victims were sent letters claiming they had “no right of appeal” when they were pursued for overpayments caused by official error. A woman with two children said she had taken out a £7,500 loan to repay the tax credits after receiving one of the letters.

Richard Bacon, a Conservative member of the Commons public accounts committee, said: “This is unbelievable. It shows no matter how many times claimants gave accurate information, officials still managed to screw it up.”

The tax-credit system – at the heart of Brown’s programme to lift people out of poverty – was launched in April 2003.

About £8 billion of tax credits have been overpaid to claimants to date, of which only £2.7 billion has been clawed back; £1 billion has already been written off and HMRC’s latest accounts show a provision to write off a further £1.8 billion if necessary.

Alison Myers-Ward, of Tax Credit Casualties, which has been helping victims with data protection requests, said: “Officials have been completely ruthless in pursuing people for this money and it has destroyed lives.”

HMRC said its tax-credit system had been “working well” over the past two years.

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