Esther Shaw: From a fanfare to fiscal failure in three years

The child tax credits debacle shows that the Government hasn't learnt from its mistakes

I may not have children yet (I'm still not entirely capable of looking after myself, let alone taking responsibility for anyone else), but I know that if I did, then I would be angry.

It is three years ago this month since the Government launched its child tax credit scheme - amid a fanfare of hype and publicity - with the promise of delivering much-needed cash to parents.

But today, the flagship scheme, a central part of Gordon Brown's programme to help low-income families, has failed to deliver.

Admittedly, there are now around six million families in receipt of the credits, but an awful lot of them continue to suffer as a result of the chaos that has mired the scheme since its launch.

Now a new report says that HM Revenue & Customs (responsible for administering the scheme) overpaid an estimated £2.2bn to claimants in the 2004-05 tax year.

Even taken in isolation, this is a pretty hefty figure. But when you find out that this is the second consecutive year that overpayments have reached this level, it becomes simply inexcusable - particularly given that ministers had pledged to alleviate the problem.

We all make mistakes - although generally less costly ones than this. And when we do, we learn from them so that we don't make the same ones twice. One of the key issues with the child tax credit scheme is that an element of overpayment is an inevitable consequence of the way the system is designed. This is because families claim tax credits on the basis of their income from the previous year.

But in the words of Edward Leigh, chairman of the Public Accounts Committee, "What came out of the blue for the Government was that overpayment would routinely occur on such a gigantic scale."

While this smacks of maladministration and bad planning on the part of those running the scheme, it is not the perpetrators who suffer. Instead, it is vulnerable families. The taxman's attempts to claw back the money have had a devastating impact on low-income households, whose finances have been thrown into chaos by sudden and often unexpected demands for repayment.

In the bulk of cases, overpayments were the result of recipients failing to report changes in their circumstances. But some arose from errors by the Revenue.

Campaigners such as Citizens Advice have long called on the Government to write off overpayments made in error - and some concessions have now been made. These are part of a wider overhaul of the system by Mr Brown, announced in the pre-Budget report.

For example, claimants have to tell the taxman only if their annual income increases by more than £25,000 (compared with the previous £2,500).

But as Mr Leigh points out, it is too early as yet to tell if this - and other measures - will be successful. And the Government still has to address the problem of a computer system that continues to be plagued by problems - not to mention the ongoing risk of fraud.

I was there at the launch of the tax credits scheme back in March 2003 - a rather jolly event at 11 Downing Street, attended by a multitude of journalists and a very smiley Dawn Primarolo, the Paymaster General, singing the praises of her new "baby". The "face" of tax credits was the TV presenter and "celebrity young mum" Gaby Roslin, and the scheme was then branded "Money2Mummy" because the credits were to be paid directly to the main carer (usually the mother).

The scheme was backed by a £9m advertising campaign, and the claim to be "the biggest financial boost for mothers since the introduction of child benefit". But three years on, the picture is very different.

The saddest thing about all this is that tax credits, which were designed to lift low-income families out of poverty, have in many cases had quite the opposite effect. Some parents are even opting not to claim the money they are entitled to for fear of what might happen, preferring to stay clear of the scheme altogether

Mr Brown is struggling to restore the credibility of the scheme, but as experts such as Jane Moore from the Institute of Chartered Accountants in England and Wales warn, the short-term picture for tax credits still looks bleak.

Three years is a long time in anyone's book - and long enough, you would think, to make the changes required to achieve the balance between providing families with a stable income, and remaining responsive to changes in their circumstances.

All we can hope is that it doesn't take another three years to get it right.

Sam Dunn is away

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Day In a Page

    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
    Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

    No grace of God for Katy Perry as sisters act to stop her buying convent

    Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
    Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

    Residents just want water and power in a city chosen to be a ‘smart’ metropolis

    The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
    Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

    Something wicked?

    Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
    10 best sun creams for body

    10 best sun creams for body

    Make sure you’re protected from head to toe in the heatwave
    Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

    Nick Bollettieri's Wimbledon files

    Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
    Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

    There is more than a shiny trophy to be won by England’s World Cup women

    The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map