Thousands 'losing out' on tax credits

A tax credit designed to help new parents in the first year of their child's life was condemned yesterday for failing to reach hundreds of thousands of families.

The Conservatives said the credit had the lowest take-up rate on record. Fewer than one in five of the families expected to benefit had put in an application. The baby tax credit was announced by Gordon Brown in his 2001 budget, offering up to £1,000 to "around 500,000" parents of newborn children each year. But figures released yesterday showed 85,000 families had applied for the credit since its introduction last April.

David Willetts, the shadow Secretary of State for Work and Pensions, said the low take-up rate proved the system of tax credits was too complicated. He said: "Gordon Brown's tax credits aren't working, and as a result, 415,000 families are losing out by up to £1,000 a year, and the Treasury is spending only £30m out of a £170m budget.

"Millions of hard-working families dislike Mr Brown's complicated and intrusive tax credits and the low take-up explains why he is so far away from achieving his targets on child poverty."

The baby tax credit doubles the £529 child tax credit available to most parents for the first year of a baby's life.

Ministers have used peak-time television advertising to publicise tax credits, and have tried to increase take-up rates by including forms in packs given to new mothers when they leave hospital.

A Labour Party spokesman said the 85,000 applicants represented good progress towards increasing take-up rates. "Labour's tax credits have done a huge amount to help hard-working middle income families," he said.