'Harsh' and 'unfair': efforts to claw back tax credit overpayments are berated

Gordon Brown's flagship tax credit system is under attack again, this time from the Parliamentary Ombudsman, Ann Abraham.

In her second report into the system, published on the same day as the pre-Budget report, Ms Abraham concluded that 365,000 families a year were being forced into debt in order to hand back credits that had been overpaid originally.

She branded as "harsh" HM Revenue & Customs' attempts at recovering overpayments and said they were causing "worry and anxiety to many low-income families".

Ms Abraham did note some minor improvements since her first report in 2005 but said she expected to be dealing with complaints from the public for many years.

Some 91 per cent of all complaints received by her office, she added, resulted from an "unfair and inconsistent" application of the rules on reclaiming cash.

Meanwhile, the charity Citizens Advice said the problems were eroding public trust in the £16bn tax credit scheme. A survey of visitors to its bureaux found that more than half would be less likely to claim credits in future as a result of their experiences.

In response, HMRC said it was consulting on changes in the way it went about recovering money. Official figures show a third of all claimants were overpaid in 2005-06.