Radical remedies for the credit fiasco

Every now and then, the curtain lifts and politicians glimpse what
life is like for the many families who constantly live on the edge
of financial disaster, writes Yvonne

In the week in which we read how much the spoilt boys of Windsor –
Charles and Andrew – spent on ferrying themselves around last year
(£565,801 on private jets and helicopters for the useful Duke
of York) – Tony Blair said sorry to the thousands facing hardship
as a result of the tax credits fiasco.

More than £1.9bn was overpaid to 1.8 million families
receiving child tax credit and working tax credit last year – and
£500m was underpaid. A report by the Citizen’s Advice Bureaux
revealed the plight of those who had money clawed back without
prior notice. Some had to give up work because they couldn’t afford
child care; others had to rely on Salvation Army food parcels. Ann
Abraham, the parliamentary ombudsman, has said the Treasury must
write off the cash.

The child tax credit is available to families on incomes up to
£58,000 with children under 16. The working tax credit offers
support to 1.8 million low income earners.

Dawn Primarola, the paymaster general, has promised reforms to the
system. Without doubt, they won’t go far enough.

The first and most vital question to answer is one that successive
governments have avoided – how much does a family need to sustain a
basic standard of living? Plainly, existing levels of support are
insufficient when it takes so little push people into relying on

Second, why does the system have to be so complex – more than 20
per cent of those eligible for tax credits don’t apply. Third, as
people’s wages rise, their tax credits fall and their income tax
and national insurance payments go up. So, for two million people,
for every extra £1 they earn, 60p is taken away by the state.

Fourth – an inquiry should be conducted into the extent to which
tax-payers are shoring up employers who pay way below the odds –
and make substantial profits. The argument is that without
financial support, these jobs wouldn’t exist. Let’s see the
evidence and decide whether some employers are being unfairly

The Daily Mail advocates freeing the low paid from income
tax completely. For once, it’s right. What’s urgently required now
is something far more substantial than weak reforms and an apology
from the prime minister.

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