Penny-pinching 'is delaying tax credit reforms

An influential group of MPs yesterday expressed alarm that cost-cutting had delayed reform of the government's tax credit system, which they said remained unfair to low income families.

The Public Administration Select Committee, which oversees the conduct of Whitehall departments, said it supported the view of the parliamentary ombudsman that tax credits suffered from systemic maladministration.

The committee claimed in a report that HM Revenue & Customs, which runs the tax credit system, had failed to consider the needs of low income families "for whom regular and reliable payment is not a desirable budgeting convenience but a real necessity".

The government promised to implement reforms to the system following criticism from campaigning groups and the ombudsman. More than £2bn of tax credits were reclaimed from 2 million families in the 2004-05 tax year, often with no notice or explanation.

But key reforms announced last summer by the paymaster general, Dawn Primarolo, and increased in scope in December were unlikely to take effect until November at the earliest, officials told the committee.

The committee said: "We are concerned that the Revenue seems to suggest that protection of the public purse overrides other considerations, including fairness. Public services cannot be designed or delivered without regard to costs, but an unfair system, while it may well be cost-effective, cannot be said to constitute good public administration."

A spokesman for Revenue & Customs said that "significant improvements to the administration of tax credits" had been made since the committee hearings. "Many of the recommendations made by the Public Administration Select Committee and the ombudsman are already being addressed."