'Tax credits may need overhaul'

THE senior official in charge of Gordon Brown's tax credits system today admitted that the scheme may have to be overhauled.

David Varney, the chairman of Revenue and Customs, said changes would have to be made if the problems with overpayments were not resolved.

Two scathing reports revealed that attempts to reclaim the £1.9bn in overpaid benefits had caused 'hardship and distress' to thousands of families.-Under the system the credits are paid on an annual basis.

But if the claimant's income rises during the year the treasury will claim back the money. Mr Varney accepted that the Revenue and Customs had 'let some people down'. He said: 'If there are problems in discharging the policy then you'll have to debate what the right policy is."

Figures from Paymaster General Dawn Primarolo showed that the costs of the tax credits scheme had almost trebled in the last year to £403m.