Tax credit fiasco prompts Britons to turn to loans

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

An increasing number of Britons are turning to loans in the wake of tax credit demands from the government, according to a new report from Citizens Advice (CAB).

The charity has compiled its response from 150,000 separate cases, and says that many working parents on low incomes are now turning to loans as a means for meeting overpayments handed out by the agency.

CAB says that a series of "completely unacceptable" errors have backed many families into a corner, forcing them to take out loans in order to bail themselves out.

According to figures from the Office for National Statistics (ONS) £1.9 billion was mistakenly handed out in overpayments last year.

"In the light of the historic level of administration errors, more overpayments should be written off," the report read.

Tony Blair today admitted that there were "serious issues to be addressed" in the tax credit system in the wake of the report.

The prime minister apologised to the families who had had their tax credits unexpectedly stopped after they had been overpaid through no fault of their own.