Taxation: Mauling for Chancellor's benefit plan

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The Independent Online
MINISTERS WERE forced on to the defensive by a wave of criticism of Gordon Brown's flagship policy to help low-income families, the Working Families Tax Credit.

As the Bill to bring in the system in October was given a second reading yesterday, Frank Field, former social security minister, said the system, which will replace Family Credit, would leave female workers vulnerable and cost pounds 750m in fake claims. Women who had left employment because their had been harassed would depend on the goodwill of employers to ensure continuing payments of the new tax credit. There would be employers who may "wish to abuse their power". Mr Field said employers might also fill out returns stating higher wages than they paid. "They could then make cash payments and keep the rest themselves and employees may involuntary be drawn into fraud."

But Dawn Primarolo, Paymaster-General, said females could contact the Inland Revenue immediately after they had left their employment to ensure they still received payments. A code of conduct was being drawn up so that employers would face penalties if they abused their power.

Promising that the new tax credit would "remove the obstacle of affordable childcare" and make it easier for families to move from welfare into work, she pledged it would give them a "guaranteed minimum income" of pounds 10,000 per year. Ms Primarolo said the WFTC and the Disabled Person's Tax Credit being brought in by the Bill were "central elements to the Government's strategy" of making work pay.

Eric Pickles, for the Tories, said the measure would shift money "from the purse to the wallet, the smaller the amount that will be expended on children". The net result of the Government's much-vaunted family policy might be that it set husband against wife. The system was open to abuse and fraud. The centrepiece of last March's Budget, the WFTC will be paid through the pay packet rather than as a benefit. Ministers say the switch will make work pay for more people. The tax credit tapers off more slowly than Family Credit as incomes rise, and it includes generous additional tax credits of up to 70 per cent for pounds 100 a week childcare costs for one child, pounds 150 a week for more.

However, the Confederation of British Industry said companies would only act as agents for paying the tax credit, and could not assess employees' entitlement to it. It said having the credit paid by their employer could increase, rather than reduce, the stigma for claimants.

It urged the Government to consult more fully on its plans, and called for small firms to be exempted because of the administrative burden.