Tax Credit System Must Be Simplified - Alexander

4.31.32pm BST (GMT +0100) Mon 8th Oct 2007

Commenting on today's [Tuesday] Parliamentary Ombudsman's report Tax Credits: Getting it wrong?, which criticises administration of the tax credits system, Liberal Democrat Shadow Work and Pensions Secretary, Danny Alexander MP said: "This report is another devastating indictment of the tax credit system designed by Gordon Brown which has caused confusion and hardship.

"Claiming tax credits can be highly distressing and the complaints mechanism is clearly still failing.

"Gordon Brown is incapable of admitting mistakes. His callous disregard for the Ombudsman's first report, as the title suggests, has led to continued incompetence in the administration of the system.

"Well intentioned policies for low income families are entirely undermined by mass means-testing, chaotic administration and rampant overpayments placing millions of families in hardship.

"Debt and problems experienced by millions of families are a consequence of the way the system was set up in the first place. In many cases, the system is hindering the aim of ending child poverty and helping people back to work.

"Unless there is fundamental reform, the Government will continue to fail thousands of low-income families.

"Tax credits should be focused on those in real need, with the money saved spent on increasing child benefit and investment in education for the poorest children."

Notes

At the recent Liberal Democrat conference four major reforms to the administration of tax credits were passed as party policy:

1) Return to stable, fixed, six-monthly awards. This will end the overpayments crisis, reduce administration costs, and reduce the costs of the £25,000 disregard for increases in incomes. This will save hundreds of millions of pound per year.

2) Reverse the burden of proof in cases where overpayments have been caused by official errors - people will not have to repay unless it is clear that they should have been aware of the mistake.

3) Introduce a right of appeal to an independent tribunal before recovery of overpayments.

4) Simplify the tax credit award notice, with clear information to check.