Tax credits system needs new approach

The government should not automatically claw back overpayments
of tax credits, according to a report published by Citizen’s
Advice today, writes Clare Jerrom.

The national charity claims that the recovery of overpaid tax
credits has left families in severe hardship with incomes as low as
£56 a week plus child benefit with no tax credit payments.

Families’ basic financial security has been threatened and
in extreme cases, Citizens Advice Bureau clients have been
threatened with repossession or eviction.

“Some have had to give up work because they were unable to
pay for childcare,” the report says. “CAB advisers have
had to arrange Salvation Army food parcels for families left
without enough money to eat.”

Tax credits staff have even told some families to take out
high-cost loans to repay overpayments.

Payments are supposed to be responsive to falls in income but
the system is complex to administer and incomprehensible and
contradictory award notices have meant people cannot understand
their entitlement or spot errors made in their payments.

The report calls for adjustments to payments to be limited to
ensure families are not left with weekly incomes below minimum
levels. There should also be a statutory independent right of
appeal against Revenue decisions instead of claimants having to
pursue the issue through the complaints procedure, it argues.

“Tax credits are intended to combat poverty by providing a
guaranteed stable income, and many of the poorest families rely
absolutely on them,” said David Harker, chief executive of
Citizen’s Advice.

“But our report shows the system  is failing the very
families most in need of extra money, causing hardship the system
is designed to prevent and making it more difficult for people to
save or to hold down a job, rather than supporting saving and
employment.

Around 6.1 million families containing 10.3 million children
have been awarded tax credits.

‘Money with your name on it’ from http://www.citizensadvice.org.uk/