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Welfare Tax Credits

Volume 460: debated on Thursday 17 May 2007

To ask the Chancellor of the Exchequer what (a) underpayment and (b) overpayment there has been of (i) pension credit, (ii) working tax credit and (iii) child tax credit in each year since their introduction. (136404)

Pension credit was introduced in 2003. It is designed to ensure that no pensioner falls below a minimum level of weekly income, and also rewards those who have saved for their retirement.

The amount of pension credit estimated as overpaid in each year due to fraud, customer error and official error is published as National Statistics. The amount estimated as overpaid in each year since the introduction of pension credit is shown in the table, together with the percentage of pension credit expenditure for the relevant period.

2003-042004-052005-06

£ million

Percentage

£ million

Percentage

£ million

Percentage

Overpayments

270

5.4

280

4.6

270

4.1

Underpayments

85

1.7

121

2.0

100

1.6

Figures for 2003-04 are available only for a combination of pension credit and the minimum income guarantee (the system which pension credit replaced).

Child and working tax credits is a flexible system which responds to changes in family circumstances. Therefore, overpayments and underpayments are part of the system and can be caused by income rises from one year to the next, families overstating the extent to which income has fallen, delays in reporting changes in family’s circumstances, and provisional payments made at the start of the year which are based on out-of-date information. They are not therefore, comparable with over and underpayment arising from the pension credit.

Estimates of the number of families with tax credits awards in 2003-04 and 2004-05, including information on overpayments and underpayments (based on finalised family circumstances and incomes for 2003-04 and 2004-05) are available in the publication: “Child and Working Tax Credits Statistics. Finalised Awards 2004-05. Supplement on payments in 2004-05”. This is available on the HMRC website at:

http://www.hmrc.gov.uk/stats/personal-tax-credits/cwtc-payments-0405.pdf

We do not produce statistics separately for child tax credit and working tax credit. Figures for 2005-06 are due to be published on 22 May 2007.