Half a million lose out in tax blunder

Half a million low-income families have been left out of pocket because the Treasury refused to install a contingency plan for its new child tax credit scheme, the Tories claimed last night.

Some four million claims were submitted for the benefit, intended to replace working families' tax credit on 5 April, but delaysleft about 500,000 households unpaid.

The Conservatives claimthat the Chancellor, Gordon Brown, was warned months before of impending chaos but vetoed a contingency plan to keep paying working families tax credit to those whose new benefit had not arrived.

Documents from the Association of London Government (ALG) show that the capital's councils warned in January of the strain likely to be imposed by the change. The ALG says London authorities could lose £8m a month in extra housing benefit paid to needy families waiting for their tax credit.

Sir Robin Wales, the Labour Mayor of Newham and chair of the ALG, wrote to the Chancellor on 31 March warning that "some low-income people will suddenly have a lot less money". He added that the scheme was causing severe administrative disruption.

David Willetts, the shadow Work and Pensions Secretary, said the documents provided irrefutable evidence that ministers were warned the system would be a shambles. "We have called for contingency plans. It's now clear the Revenue had one. But presumably ministers wouldn't let them implement it. It is clear the blame lies with the Chancellor."

The Treasury said the system had been overwhelmed because the new credit was so popular. Dawn Primarolo, the Paymaster General, said all claims made before 25 April had now been paid.