Discredited credits

Government demands for the repayment of tax credits that it had overpaid are making many poor families' pips squeak. Figures revealed by HM Revenue Customs, after parliamentary questions asked by the LibDems, show that:

"Almost 200,000 families in the lowest 10% on the income scale were forced to repay £3,400 after they were overpaid tax credits in the year to April 2005. The repayment demand is more than a hundred times the amount levied from the most affluent 10% of families."

It isn't surprising of course that affluent families have less tax credits to pay back, but then neither is the maladministration and the heavy-handed way the Treasury have gone about this. Poor families have to budget very carefully so callously demanding so much money back after giving it out is a real kick in the teeth.

As of July, errors made administrating tax credits had cost the taxpayer an amazing £1.1bn. HM Revenue & Customs are in the process of reforming the system, but Mark Francois, the Shadow Paymaster General, has criticised the plans for being piecemeal:

"This is yet another example of how Gordon Brown's over-complicated tax credits system is costing the taxpayer. This new change, which will cost the Treasury an additional £850m to implement over the next four years, will still only reduce the number of overpayments by a third."

This record is Brown's achilles heel. We need to emphatically highlight how his methods for helping the vulnerable have not only failed but often exacerbated the situation.  As John Redwood will point out on GMTV, for example, his stealth taxes have disproportionately hit poor, hard-working families. If we can shatter any lingering perceptions of Brown's social justness, we can take No.10.

Deputy Editor

Comments

[Andrew Sanderson]

Hear hear. I fear by ruling out substantial tax relief and pledging to match spending plans DC isn't going to be able to back up his criticisms with beef. Voters will come back to the Tories when the redistributive ways of Brown are shown to have failed to create a more just society, not when we are seen as "acceptable" to the Latte Liberati.

[RichardShackleton]

Spot on Andrew.

[michael mcgough]

And the "idiots " still say Gordon Brown has been a fantastic Chancellor.Tax credits were designed to lessen the headline tax take and reduce the welfare total not to help the poor.Pity that his opposition is ineffectual.

[bee]

tax credits are a disaster.

If a couple with a child earns £5k/year each, then if one of them works more hours to get an extra £1k, they will actually only receive an extra £430, an effective tax rate of 57%.

The result of this is that people decide it's not worth working for an effective rate of as little as £2/hr, and reduce the hours they work. So the economy is shrunk by the governments handouts.

I am sure you could find higher marginal tax rates than 57% - like the worst of socialism from the 70s, but here now.

[Chris]

I've always been against tax credits, it simply adds an extra layer of administration into our already complicated tax system. We should scrap the system and raise the threshold at which you start paying tax, it would also be beneficial to all tiers of society that way.

[TomTom]

This country once had a remarkably flexible and simple benefit able to be applied quickly - it was called Income Support.

Anything that is easy and simple frustrates Gordo Brown who would just love to have a camera on every wall and everyone asking his permission before they leave their homes each day

[Denis Cooper]

This has nothing to do with "tax relief", aka "Tory plans to cut taxes to benefit their wealthy friends, will they say now which hospitals they would close down?"

It's only to do with Gordon Brown's idea that additional help with the costs of raising children should be targetted, not universal. It's turned into a shambles because it's too complex and the Inland Revenue is too incompetent.

It would have been better to simply increase the universal child benefit, and then claw back up to 40% of it from high earning families through normal income tax, but that is not the Gordon Brown way of going about things.

[TomTom]

That may be true Denis but Brown wants to stop universal benefits and intends to Means-Test the State Pension as in Australia