WHITEHALL

HM Revenue & Customs has failed to get the tax credit system under control - more than £1 billion is still lost in error and fraud every year - the public spending watchdog says. In a highly critical report the Public Accounts Committee says although HMRC has increased its administration budget from £406 million to £587 million, the situation is “as serious as ever”.

The beleaguered department, still reeling from the loss of child benefit discs, failed to react to countless critical reports and complaints from thousands of claimants. High levels of error and harsh procedures for clawing back overpayments left some tax credit recipients “regretting they ever got involved in the scheme”, Edward Leigh, PAC chairman, said.

In the first three years £6 billion was overpaid, of which only £2 billion had been recovered by last March. About £700 million has been written off. Two million claimants were in debt because of overpayments.

“Certainly the vulnerable ones face a future of trying to repay the money they owe, with all the hardship that involves,” said Mr Leigh.

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