Thousands losing out over tax credit fears

They missed out on average annual payments of £1,200, according to statistics from Revenue and Customs, which administers the system.

The Citizens Advice Bureau (CAB) has warned MPs that hard-up families are shunning tax credits because they fear having to pay back overpayments.

Last week, The Northern Echo revealed that families in the region had been overpaid nearly £90m in only 12 months - of which about two-thirds will be claimed back by the Treasury.

In its submission to an inquiry by a committee of MPs, the CAB said: "We are deeply concerned by the growing numbers of claimants who tell advisors that they do not want to claim because they are afraid of being overpaid, or simply worn down by trying to resolve administrative problems."

One man on low income lost out on more than £2,000 when he decided not to tell Revenue and Customs of the birth of his child because he "feared errors", it said.

Statistics for the numbers missing out, published by the Liberal Democrats, revealed the total nationally may be 1.7 million, including 110,000 in Yorkshire.

David Laws, Liberal Democrat work and pensions spokesman, said: "It is deeply disturbing news that so many of the poorest families are shunning the tax credit system because of fears of having to repay large amounts."

But a Revenue and Customs spokesman said: "It is nonsense to suggest that people are being put off.

"Take-up is greater than any previous system of income-related support, with 82 per cent of those entitled making a claim and over 90 per cent of money available being claimed."

A total of 96,000 people were overpaid in the North-East in 2005 to 2006, at a cost of £75m. A further 18,400 in North Yorkshire were overpaid £14.8m.

In past years, the Treasury has written off about a third of overpayments, but has demanded £60m back.

The CAB has submitted evidence to an inquiry into tax credits being carried out by the all-party Treasury Select Committee.