Chairman Edward Leigh

The Commons public accounts committee has described the introduction of the Inland Revenue's new tax credits system as "nothing short of disastrous".

The MPs found that the department should have been more cautious and realistic in fixing the timetable and assessing the resources needed for setting up and testing new tax credit IT systems.

It reported that the adoption of the new system, which replaced the Working Families' and Disabled Person's Tax Credit schemes, resulted in a catalogue of errors and loss of public funds.

Noting that several hundred thousand claimants failed to receive their money on time, the committee says the IR should have devised more comprehensive contingency arrangements.

Committee chairman Edward Leigh said the new system had caused "inevitable hardship for some, inconvenience to employers, and disruption to other parts of the Revenue's business".

"Going forward the Revenue must make sure it is successful in dramatically reducing the level of overpayments - as high as £700 million a year under the old system," he added.

"It should also explain to claimants how its recovery of overpayments will impact on other benefits."

Responding to the report, Child Poverty Action Group said the implementation of the new system had been "totally unacceptable".

"Many claimants have seen awards adjusted automatically to recover an overpayment discovered during the course of the tax year without any explanation of how the overpayment arose, leaving some with weekly incomes substantially below income support levels," said CPAG welfare rights manager Paula Twigg.