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AMNESTY
FOR TAX
CREDIT OVERPAYMENTS
Early
Day Motion 325
"I accept
public confidence has been severely dented. I very much regret
the fact that people who should have been paid on time were not
and the launch of the scheme has gone spectacularly wrong."
Sir Nicholas Montague, head of the Inland Revenue
Why
CPAG is supporting an Early Day Motion calling for an amnesty on
overpayments of tax credits
CPAG
supports the government's aim of tackling child poverty through
a system of tax credits. However, there is a serious danger that
the scheme's effectiveness in achieving this aim will be undermined
by the well-publicised problems with its implementation, and a consequent
loss of public confidence in the system. CPAG is backing calls for
tax credits overpayments for 2003-2004 to be written off to protect
children from poverty caused by mistakes made in the first year
of the tax credits scheme.
Following the
initial problems with the introduction of tax credits earlier this
year, resulting in interim payments being made to 375,000 people
whose claims were not assessed in time, CPAG has received numerous
reports of cases in which claimants have been overpaid tax credits,
often as a result of errors on the part of the Inland Revenue in
wrongly assessing their claims, or in failing to act on information
given by the claimant. Many claimants did not know they were being
paid too much money.
Regardless
of claimants' circumstances, the Inland Revenue has been recovering
overpayments from ongoing payments of tax credits at punitively
high rates, in many cases reducing payments to nil. Because of the
way the benefit rules work, claimants who are not in work cannot
top up their incomes with additional income support for their children.
As a result, many are reduced well below the income support subsistence
level, and in many cases have been left without enough money to
support themselves and their children. Those claimants who are in
work also have their incomes severely reduced with resulting hardship.
Many of those worst affected are lone parents. This is directly
contrary to the aim of the scheme to reduce child poverty, and is
likely to undermine the government's efforts to encourage lone parents
into work.
The Inland Revenue
delayed in producing guidance on the circumstances in which overpayments
would be recovered, and its code was not finalised until 11th November.
Many claimants' awards were unfairly adjusted to recover overpayments
well before this. The code remains deeply flawed.
It is clear
from reports in the media and in the Public Accounts Committee that
these problems are widespread. The Inland Revenue has now accepted
that the scheme was introduced a year too early, blaming problems
with its computer system for the resulting problems.
The Inland Revenue
has introduced a scheme of "top up" payments for cases
of official error and hardship. However, they have decided not to
publicise the scheme so many claimants will not know about it. They
have also made it clear these payments will add to an overpayment
at the end of the year, and could be recovered from future awards,
potentially leaving families facing debt and hardship in future
years.
Why
an amnesty?
We
are proposing an amnesty in recognition of the difficulties which
have emerged in the first year of a new scheme which is fundamentally
different from previous forms of social security. An amnesty offers
an opportunity to wipe the slate clean, ensure public confidence
in tax credits and put the scheme on a more secure footing for the
future. Inland Revenue staff resources can be freed from overpayment
recovery and instead applied to ensuring the smooth running of the
scheme in future years.
Early
Day Motion 325
That this
House welcomes the government's pledge to end child poverty by
2019; but is concerned that the problems in the administration
of the tax credits system may undermine the aim of the scheme
to reduce child poverty; is concerned that these problems have
resulted in unnecessary overpayments, which have led to difficulties
and hardships for families with children when these overpayments
are recovered automatically from future tax credits entitlements;
and calls on the Inland Revenue to introduce an amnesty in respect
of all overpayments of tax credits made in the tax year 2003/4
unless the overpayment was caused by fraud on the part of the
claimant.
Ask
your MP to sign the EDM
Please
support CPAG and ask your MP to sign this EDM today. They are contactable
at the House of Commons, Westminster, London SW1A OAA or you can
telephone 020 7219 3000 at any time and ask to speak to your MP.
Find
out how many and which MPs have signed the EDM
You
can find out whether or not your MP has signed the EDM by visiting
this web page http://edm.ais.co.uk/weblink/html/search.html
and searching for EDM 325.
Find
out who is your MP
If you need to find out who your MP is, then visit www.locata.co.uk/commons/
and search by postcode, name or constituency.
If you
want to find out more on this issue please contact:
Sarah Clarke
on 020 7812 5219
sclarke@cpag.org.uk
or
Paula
Twigg on 020 7812 5237
ptwigg@cpag.org.uk
or visit:
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