The Employment Service acknowledges the mistake, which also affects graduates taking up their first job, but says it has been too busy establishing the tough new Jobseekers' Allowance (JSA) to correct it.
Labour wants to know how many people and how much overpayment is involved and how much has been refunded. Ian McCartney, the chief employment spokesman, believes anything up to 3 million taxpayers could be involved.
The problem arises because people securing a job are automatically given an emergency tax code unless they can provide their own rating. For the lowest-paid the overpayment can be considerable. For some people securing a job on pounds 8,400 the excess tax could be pounds 343, said Mr McCartney. The programming error was identified in February 1995 but corrective action scheduled for that October could not be taken because staff had to be diverted to the introduction of the Jobseekers' Act. Mike Fogden, chief executive of the Employment Service, said overpayment could continue until the defective NUBS2 software system is closed down in August next year.
Official figures show that between February 1995 and June 1996, 2.95 million people moved from unemployment into work.
Mr Ian McCartney said: "It's an absolute disgrace ... Moving from benefit into work is often a particularly difficult time financially and it is astonishing that the Government has been piling on the misery by allowing excess tax to be taken from people's pay packets." Mr McCartney contrasted the Government's keenness to introduce the JSA, which he believes will deprive many unemployed people of benefits, with its inertia in dealing with overpayment of tax for those finding work.
In a letter to the Labour Party, Mr Fogden said that "substantial numbers" of civil servants had been diverted to the JSA. He said the overpayment of tax would occur "to a diminishing extent" after summer this year. Although the programme could not be altered because of pressure of work, "clerical procedures" were in place to deal with the problem until a new system was in place.
A spokeswoman for the Employment Service said refunds would be paid to those who legitimately claimed they had been overtaxed.Reuse content