I suppose it is inevitable that sometimes mistakes will be made with something like tax credits – it is the contention of some MPs though that the Tax Credit system is inherently flawed in that it tends toward overpayment.
How much do you think that overpayment might be? Well, it turns out that it is currently running at £1 billion per year – which is £3.15 for every single tax payer.
The real issue here is that the Treasury will claim the money back when it realises it has made a mistake (although it has effectively written off £3 billion of the £7.3 billion overpaid so far – that’s £22.99 per taxpayer) which is a real problem for the families who really need the tax credits who have budgeted for the wrong amount – they face not only a cut in income, but having to repay the rest.
This situation is not acceptable – it is not acceptable that the system is so flawed, nor that those that most need it’s help are likely to be the ones who suffer, nor that this in-built inefficiency has cost each and every tax payer £9.45 in written off overpayments since 2003.
It would be interesting to hear Kevin Barron’s view on this