Residents of South Edinburgh have been overpaid by £1.4 million in tax credits during the past three years, resulting in hardship and turmoil for thousands of families in the area.
Overpayments mean that a large percentage of the local population is due to reimburse the Government for bureaucratic mistakes made at administrative level, meaning many could be left out of pocket after spending money received in good faith.
City-wide, more than 15,000 families may have to repay tax credits after receiving more than they should have from the Treasury.
Of nearly 40,000 tax credit awards in Edinburgh, 42 per cent were incorrect, with overpayments totaling £8.6 million.
The complex scheme has been dogged by fraud and error since it was introduced in 2003.
To make the scheme more accessible to claimants it adopted a “pay now, check later” approach which relied too much on detecting false claims after payments had been made.
The figures published by HM Revenue and Customs show that, at the same time, the Labour government failed to pay over 800 local families the tax credit awards to which they were entitled. This amounted to a massive underpayment of £400,000 of desperately needed financial support.
One resident of South Edinburgh, who did not wish to be named, received 16 letters from customs officials in just two weeks and is now being asked to pay nearly £11,000 in repayments.
She said: “They want £10,500 from me, but I’m not going to pay it because I have been very vigilant in sending the correct info to them, filling out their documents, sending out letters and phoning.
“When I’ve written they’ve sent me back their bog standard letter which just tells you details of your tax credit award.
Even when the woman, from Gilmerton, told officials of a change in circumstances, they still failed to process the information correctly and take the relevant course of action.
“When I’ve been telling them that my husband’s or my salary has gone up, they just write back saying ‘thank you for your tax credit claim’. On one occasion we wrote telling them about a big increase in my husband’s salary, and they said they would give us over £100 more – so I phoned and asked how come we’ve got more money when my husband’s salary went up.
“A couple of months later they wrote to us saying they’d made an error and that they would put us back to the previous rate,” she said.
“Some of them that you get on the phone are interested in sorting out for you, but others just want to send you forms. When it comes to the door, it’s the same letter stating your tax credit award for the financial year, with no information at all, apart from the fact you’re working, your husband’s working and you have one child.
“They sent 16 envelopes to me and my husband in two weeks, all of them the same.”
The woman refuses to pay the amount the Government is demanding as reimbursement for three years of overpayment, saying, “I have been spot on – phoning them and writing letters, informing them of their mistake. At the same time, though, I’ve have spent all their money.
“I always thought I would have to pay them back – a few people I know had the same thing. I don’t know anyone who claims family tax credit who hasn’t had to pay something back.”
HM Revenue and Customs reduced her monthly award to claim back more than £100 earlier this year, and has since stopped stopped tax credit payments.
The Citizens Advice Bureau (CAB) warned that people will find it difficult to fight against having to make repayments.
Spokesman John Wheatley said: “Some families have been left seriously out of pocket and confused because they are being asked to pay back tax credits, which they believed they were entitled to.
“Challenging the recovery of overpayments is not easy and currently thousands of families are being threatened with court action. People often say that they have received contradictory award notices, or been told that the money definitely is theirs.”
CAB urged anyone who has experienced problems with tax credits to come forward to seek advice.
Edinburgh South MP Nigel Griffiths said, “While hundreds of thousands of families have benefited from the Tax Credit system it is quite unacceptable that some people are losing out through no fault of their own.
“I am pressing for an amnesty for the innocent victims of the miscalculation by Her Majesty’s Customs & Revenue.”
“I estimate that in South Edinburgh alone, some 5,000 families have benefited by up to £50 a week. It has been a major plank in the Labour government’s efforts to make work pay and has helped many families in the transition from dole to work, no work to paid work.”
