Paymaster General: We will "consider" writing off tax credit debts

People struggling with spiralling levels of personal debt could benefit from a new fund set up by the Department of Trade and Industry (DTI).

Paymaster General, Dawn Primarolo, has sought to defuse the incendiary problem of tax credits, which many have said have forced them to turn to the loans market.

Yesterday a critical report published by the Parliamentary Ombudsman, Ann Abraham, showed that many families were struggling to cope after being overpaid in the first two years of the child tax credit system, with thousands turning to loans as a means of alleviating the issue.

However, Ms Primarolo said today that she would "consider" voiding the debts of some families, with implications for those seeking loans.

The Treasury spokesman said that in some cases people had already been allowed to keep the extra money they had been paid and hinted that more remuneration might follow.

"What the department does do ? is already writes off an excess payment where it can be demonstrated, where it's obvious, that the department itself made the error ? and that the claimant should have had every reason to believe that the payment correct."

However, she remained sceptical about writing off all overpayments, saying only that she would "have to consider that".

"But where people clearly knew they had been overpaid, accept that they have been overpaid, I don't really see why they shouldn't be paying it back."

The fallout from the tax credit issue is said to have pushed a number of families into financial difficulties with many taking out loans to repay the overspend.

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