Revenue chief attacked by MPs over families' tax-credit misery

David Varney, the head of HM Revenue & Customs, has come under fire from MPs over his handling of tax-credit overpayments, which they claim is causing many families great hardship.

Mr Varney appeared before the Treasury Sub-Committee yesterday after being lambasted by the National Audit Office for the "unacceptably high" level of errors in the tax-credit system.

Lorely Burt, a Liberal Democrat MP on the committee, said: "This isn't just the odd case. It's hundreds of thousands of families who are under enormous stress." Many people have received too much in tax credits since they were introduced for low-income families by Gordon Brown in 2003, and are now being forced to repay them.

Mr Varney said: "We do try to reach agreement [with such families] which is satisfactory on both sides but our aim is to recover the money." So far, £123m of overpayments have been written off and a further £961m of "doubtful debts" will be waived.

Ministers are in discussions with EDS, which set up the tax credit computer system, for compensation. Tax-credit overpayments in 2003-04 totalled £2.2bn and 2004-05 figures are estimated to be similar.

The Government is trying to introduce a fully-automated computer system designed to suspend recovery of disputed overpayments, but has admitted this would take time.

Mr Varney told the committee: "This is a system that deals with six million people. There is a group where we have real problems. We are trying to deal with that. There is built into the system the expectation that there will be overpayments."