HMRC should help the poor

Not all the £5.6bn can or will be recovered, but we are talking about a huge sum the HMRC is seek to extract

Share

The complexity of the tax credit system has imposed a heavier burden of debt on some of the working poor than previously thought. As we report exclusively today, overpayments of tax credits mean that nearly 5 million families now owe the Exchequer £5.6bn.

This is a lot of money. It is so much that it would pay the salary of an extra teacher in every school in the country for five years. That statistic gives some idea, not just of the scale of the problem, but of the moral dilemma involved in trying to solve it.

The money that HM Revenue and Customs is trying to recover could be put to good use - not least because the Government is still spending so much more than its income. Yet it is trying to recover the money from people who are already among the hardest-pressed.

The existence of a backlog of debt this size is a criticism of the complexity and inefficiency of Gordon Brown's policy for increasing the incentive to move from benefits into work. The aim of the tax credit scheme was a good one, and it may have helped create the conditions for today's jobs-generating recovery. But the scheme has been dogged by poor administration from the start, mainly because it relies on taxpayers telling HMRC about changes in their circumstances. Tony Blair claims that Mr Brown, as Chancellor, kept him in the dark about the costs of the scheme. Even so, while Mr Blair was Prime Minister the tax authorities seemed to be getting a grip, bringing the number of cases of overpayment down to 1.2m. Since then, though, the number of cases and the total outstanding have increased every year.

The temptation might be to say that it is too difficult to recover the money, and that it is unfair to try to do so from families who are, or have been, only just above the poorest. Indeed, the Government has not helped its case by subcontracting debt collection to private agencies. However, an amnesty would be unfair to those people who have diligently informed HMRC of changes in their circumstances, thus cutting their tax credits.

Actually, the Government's approach is probably about right. It has cut back the generosity of the tax credit system overall, and has tried to simplify it - paradoxically a complex task, with much of the energy of attempted reform being wasted on the failure of Universal Credit. It focuses its recovery attempts on the minority of cases owing more than £1,000 - and claims to take a sympathetic attitude to the avoiding of hardship.

However, Gillian Guy, chief executive of Citizens Advice, is right to warn: "The safeguards put in place look sensible on paper but with such huge pressure on household budgets, it does not take much to push families into financial trouble and mistakes by HMRC will be harmful."

And there is more that could be done to secure public support for the tax credit system and the debt-chasing that seems to be an intrinsic feature of it. Our suggestion is that any tax-credit overpayments that are recovered should go into a fund earmarked for cases of hardship, including those affected by the bedroom tax, which often affects the same people, and especially for those working on low incomes.

Obviously, not all of the £5.6bn can or will be recovered, but we are talking about a huge sum that HMRC is seeking to extract from the pockets or bank accounts of some of the poorest people in the country, many of whom owe tax-credit repayments through no fault of their own. Social justice requires that the money recovered should be used only in ways that benefit those on low incomes.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Tradewind Recruitment: Science Teacher

£90 - £140 per day: Tradewind Recruitment: I am currently working in partnersh...

Tradewind Recruitment: Year 3 Primary Teacher

£100 - £150 per day: Tradewind Recruitment: Year 3 Teacher Birmingham Jan 2015...

Ashdown Group: Lead Web Developer (ASP.NET, C#) - City of London

£45000 - £50000 per annum + Excellent benefits: Ashdown Group: Lead Web Develo...

Tradewind Recruitment: Key Stage 2 Teacher Required in Grays

£21000 - £40000 per annum + Negotiable: Tradewind Recruitment: Key Stage 2 tea...

Day In a Page

Read Next
Kylie has helped to boost viewing figures for the talent show  

When an Aussie calls you a ‘bastard’, you know you’ve arrived

Howard Jacobson
The number of schools converting to academies in the primary sector has now overtaken those in the secondary sector – 2,299 to 1,884 (Getty)  

In its headlong rush to make a profit, our education system is in danger of ignoring its main purpose

Janet Street-Porter
Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee