The Commons Public Accounts Committee believes that the HMRC paid around £2.2 billion too much during the 2004 to 2005 period, the same amount as during the scheme’s first year in the previous tax year.
“An element of overpayment to claimants was an inherent part of the design of the tax credits system,” the committee’s chairman Edward Leigh, commented.
“What came out of the blue for the government was that overpayment would routinely occur on such a gigantic scale – an estimated £2.2 billion for 2003-04 and probably again for 2004-05.”
Many families have suffered when the Inland Revenue have asked them to make up the overpayments, as in the case of Isle of Wight parent Serena Furniss and her six children, reported by the Times.
Mrs Furniss explained that she was forced to remortgage her house after the Revenue cut her child tax credit by 70 per cent.
“Now we will be paying for the Revenue’s mistakes for the next 20 years,” she told the newspaper.
The committee predicts that around £1 billion in tax credits will never be recovered.