Oral question asked in the House of Commons, by George Osborne (Conservative). It was answered on Thursday, 12 July 2007 on behalf of the Treasury.

Tax Credits

Question: I of course welcome the right hon. Gentleman to his new job and wish him well in his post. It will be fun shadowing someone with whom I am actually on speaking terms—[Interruption]—for the moment, at least. Unlike most Chancellors, he cannot blame his predecessor for the undoubted mess that he has inherited, and there is no greater mess than the tax credits system and its administration. Will he confirm that the figures that he published 30 minutes ago show that that in 2005-06, the last year for which the Inland Revenue has published figures, it overpaid £1.7 billion of taxpayers’ money and underpaid £549 million. That is well over £2 billion in mistaken payments that bring hardship to many hundreds of thousands of families, and, of course, cost the taxpayer dearly. Does the Chancellor accept, in his second week in the job, that that is a totally unacceptable scandal? Will he promise that the level of error and fraud will be reduced while he is Chancellor?

Answer: I thank the hon. Gentleman for his good wishes. May I congratulate him, too, on holding on to his position? I see that there was some speculation as to whether he would be moved, but I am glad to see him here. I hope that we shall remain on speaking terms—we shall try for the next 50 minutes or so and see how we get on. On the hon. Gentleman’s point about tax credits, of course it is unacceptable to have such high levels of error. Following the introduction of tax credits, I can well see how those errors arose, especially with a system that allows for annual assessment, and when there are many families whose incomes and circumstances may change quite a lot during that period. However, as a constituency MP, I know, as I am sure that most hon. Members will know, that we all have cases in our constituencies where things have gone wrong and the sums have added up very quickly, and that clearly causes distress. As I said a few moments ago, just as with the social security errors of a decade ago, so with tax credits. We need to do everything we can to reduce those errors. I still think that it is better to model the system on the tax system, and try to work on an annual basis, rather than moving to a far more complex system of assessment. However, the hon. Gentleman is quite right: we need to get the levels of error down and ensure that the right sums are being paid to the right people.

Secondary information

Type: Oral question
Reference: 462 c1591-2
Session: 2006-07
Oral question type: Supplementary
Chamber / Committee: House of Commons chamber
Subjects: Administration Fraud Overpayments Social security Welfare tax credits Eligibility Income tax Low incomes Tax rates and bands Take-up
Link: View this Oral question on www.publications.parliament.uk