The public spending watchdog has refused to sign off the accounts of Revenue & Customs for the sixth successive year after discovering that as much as £1.5bn may have been overpaid in tax credits.

Tim Burr, head of the National Audit Office, said levels of tax credit error and fraud were “significant” when compared with the expenditure of the scheme. The Revenue has announced its intention to reduce overpayments to less than 5 per cent by 2011.