Tax credit delay for 1m families

The government stood accused of being unable to cope with the numbers of people applying for tax credits yesterday after it admitted plans to transfer a million families on jobseeker's allowance to the controversial new system would be delayed.

Dawn Primarolo, the paymaster general, made the admission in a written ministerial statement in which she indicated the proposed transfer had been deferred from last month until some point "in the course of next year".

In March the minister said the process of moving families over would begin in April, with the automatic transfer to start in October after a review. But in her new statement Ms Primarolo suggested the transfer would not begin until at least February next year as she wanted to see "a full cycle of tax credit activity" before giving the go-ahead.

"It is extremely important to safeguard continuity of support for children among this particularly vulnerable group" she added.

The Inland Revenue confirmed the "full cycle" could not be completed until after the end of January, when original claims need to be submitted to be reprocessed. The delay will not affect levels of payment, but is being seen as an admission the tax credits processing system is unable to cope with an extra million claims.

When the new child tax credits and working tax credits system was introduced in April 2003 half a million families were still waiting for the payments to be honoured, a month after its implementation, and an extra 700 workers were drafted in to staff a £53m helpline set up to deal with the confusion. Even now MPs cite "daily horror stories" which occur due to delayed payments or constituents being given the wrong amount.

David Willetts, the shadow pensions secretary, said: "This is further evidence of the problems the government have got in delivering their tax credit. The Inland Revenue are in such a mess they have had to abandon their plans to move those claiming jobseeker's allowance on to the child tax credits.

"Gordon Brown said he wanted to move everyone onto one system but this is an admission that isn't happening. The child tax credit needs to be far simpler to administer."

Steve Webb, the Liberal Democrat pensions spokesman, said: "This shows the system is still a shambles."

The admission comes as MPs warn that hundreds of thousands of families will find their payments being cut in the coming months after a re-evaluation of incomes. Each of the 6.1 million families in receipt of the credits had to submit details of their incomes for the year up to April 2004 to the Inland Revenue by September 30, and will have overpayments clawed back.