Tax credits costs rise tenfold

The cost of administering the tax credit system has risen tenfold from £36.1m
to a staggering £403m in four years, Treasury figures have revealed.

The huge rise in costs was disclosed in parliamentary answers to questions
posed by Liberal Democrat David Laws, and also showed that 65.5 million award
notices have been issued in two years despite only six million households
receiving tax credits.

The IT system behind the tax credits has repeatedly come under fire for
problems with its payments. Last month Gordon Brown said he wanted to ensure the
IT system ‘works better’ and that tax credit forms were ‘clearer’.

Shadow chancellor George Osborne said: ‘Gordon Brown needs to acknowledge
whether the ongoing problems are a result of his obsession with fiddling and
complexity, or gross failure of his ministers and department to administer the
payments effectively.’

In June this year Accountancy Age reported that the Revenue is
currently seeking about £100m in compensation from its former IT supplier, EDS
for its handling of the child and working tax credits IT system.

An EDS spokesman told Accountancy Age that discussions with the
Revenue were ‘ongoing’.

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