HMRC tax-credit losses approach £10bn

The Liberal Democrats say the flawed tax-credit computer system has lost £9.91bn in fraud, error and overpayments to date

The cost of flaws in the UK's tax-credit system has risen to almost £10bn, according to the Liberal Democrats.

HM Revenue & Customs' system to give a tax break to families has lost £9.91bn in fraud, error and overpayments to date.

The tax-credit computer system, designed by EDS and now run by Capgemini, was recently condemned by spending watchdog the Public Accounts Committee for suffering "the highest rate of error and fraud in central government" and losing about £1bn in erroneous tax-credit payments each year, with the system described as "fragile".

The Liberal Democrats said the quarterly figures released by HM Revenue & Customs show that the government has failed to hit its target of reducing the number of overpayments by a third.

Shadow work and pensions secretary Danny Alexander said in a statement: "The government's boasts about the tax-credit system have been exposed as spin."

But the Treasury has refuted the numbers, saying they ignore the fact that HMRC will recover the majority of overpayments and that they include "unrelated" figures.

Financial secretary Jane Kennedy said in a statement: "These claims are entirely misleading."