Tax credit fraud and errors cost £1bn

MORE than £1billion in tax credits is lost to fraud and error every year, MPs revealed yesterday.

Some £ 9billion was paid out in tax credits to 4.7million claimants by HM Revenue and Customs in 013/14.

But 4.4 per cent of this was in fraudulent claims, as well as errors by claimants and benefits staff – amounting to almost £1.3billion every year. The Com- mons Public Accounts Committee also criticised fraud in benefits paid out by the Department for Work and Pensions, such as jobseeker’s allowance and housing benefit.

In addition to the £ 9billion paid by HMRC in 013/14, the Department for Work and Pen- sions, which manages most remaining benefits and the state pension, paid out £164billion to 18million people.

Details of the overpayments in tax credits came a day after the House of Lords defeated George Osborne’s plans to cut the benefit. The finding by the MPs will add to the belief of many Tories that much of the tax credit budget is wasted.

The MPs said HMRC’s reduction in tax credit fraud and error from 8.1 per cent of expenditure in 010/11 was encouraging. But committee chairman Meg Hillier called for a new focus on failures in the benefits and tax credit systems, and accused the Government of ‘a paucity of ambition’.

She added: ‘Put simply, too much taxpayers’ money has gone where it shouldn’t – and too little where it should.

‘Legitimate claimants have missed out on support running into thousands of millions of pounds. Overpayments cost every household £ 00 a year. The PAC would expect to see targets for reducing fraud and error, with a focus on making best use of the public pound.’