Leading charities call for next generation of tax credits to ‘build on progress’

Following the publication of new figures showing that tax credit overpayments have reduced by £700 million, four leading charities have called on the Government to build on this improvement to introduce the ‘next generation’ of tax credits.

Latest figures show that the numbers of families overpaid has reduced from 1.9 million awards to 1.3 million, following reforms announced in 2005. Tax credits have also played a significant part in tackling child poverty. But overpayments continue to cause families difficulties and 1.3 million were still overpaid tax credits in 2006-07. The charities say that now is the time to build on the reforms to introduce a more stable system. The charities are recommending the review of tax credits announced today considers:

• Paying childcare costs separately from tax credits
• Introducing fixed awards to reduce complexity and overpayments and increase stability of income.
• Creating a face to face service for those who want it.

Kate Green, Chief Executive at Child Poverty Action Group said:

"Tax credits have helped to reduce child poverty, and this year’s figures show that the reforms implemented by Government in 2005 have helped to reduce the number of overpayments. Now is the time to build on this to develop the next generation of tax credits to provide more stable family income and with more effective appeal rights"

Kate Bell, Head of Policy at One Parent Families|Gingerbread added:

“We know that tax credits have helped many more lone parents into paid work, but the system is complex and it can be difficult for claimants to know what they are entitled to, particularly when this includes childcare. A simplified system would increase the transparency and effectiveness of tax credits in making work pay.”

Katie Lane, Policy Officer for Benefits and tax credits at Citizens Advice said:

“While the number of families with overpayments went down last year, there has been little progress in helping claimants understand why they’ve been overpaid. CAB continue to see people who really need the money but are put off claiming because of the problems there have been with overpayments. More immediate changes in the quality of information, advice and support for claimants is essential in rebuilding confidence in the system as well as a longer term review of the policy.”

John Andrews, Chairman of the Low Incomes Tax Reform Group said:

“In the first five years we have not seen the tax credits systems, processes and people operating at their most effective. We would like to see an independent review identifying the reasons for underperformance and tasked with improving the customer experience in the short term. At the same time we should debate the merits of alternatives for the future.”

Notes for editors

• Overpayment figures were published today by HMRC which show that the level of overpayment has fallen between 2005/06 and 2006/07, the period which covers the increased income disregard. The amount overpaid in 2005/06 was £1.7 billion, which fell to £1.0 billion in 2006/07. 1,902 thousand awards were overpaid in 2005/06 and 1,291 thousand in 2006/07.
• Today HM Revenue and Customs and HM Treasury have also published ‘Tax credits: improving delivery and choice a discussion paper’
• CPAG is one of over 100 member organisations of the Campaign to End Child Poverty, campaigning for public and political commitment to ensure the goals of halving child poverty by 2010 and ending child poverty by 2020 are met.
• One Parent Families|Gingerbread is the National Charity representing lone parents and their children. We run a free confidential helpline providing advice and information to lone parents, provide free publications, employability training, and campaign on behalf of lone parents and their children. We are a member of the Campaign to End Child Poverty.
• The Citizens Advice service is a network of independent charities that helps people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
• The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to be a voice for the unrepresented in the tax system. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

For further information please contact:
Jane Ahrends, Press Officer at One Parent Families|Gingerbread on 020 7428 5414 or
Moira Haines at Citizens Advice on 020 7833 7109