Coalition’s Attack on Benefits Will Leave Thousands Worse Off

By far one of the policies of New Labour which made a huge difference to the lives of some of Britain’s lowest paid families, was tax credits. It is, therefore, disgraceful that the coalition will now be removing one of the key features of that benefit which prevented thousands of the lowest income claimants in the UK from incurring huge overpayments and ultimately debts.

Working as an income adviser, the difference was palpable over a short space of time between 2003 and 2004, when client’s who previously couldn’t afford to work, suddenly taking up part-time jobs. The biggest beneficiaries were single parents, who suddenly could afford child care.

The tax credit system, however, wasn’t perfect. It required people to predict their income a year ahead and with many of the jobs people took up being casual, this led to people wrongly estimating their incomes, which resulted  huge overpayments of  thousands of pounds for many.

Often these overpayments were repaid by direct deductions from claimant’s future tax credits, meaning they lost the benefit of the credits and thousands of claimants either stopped going to work or worse still stopped claiming the benefits, avoiding future overpayments which they couldn’t afford.

The innovative solution to this introduced by the Labour Government was to introduce a buffer, which meant if someone miscalculated their income by up to £25,000 they would not have to repay their overpayments. The difference was immediate with people suddenly having the confidence to claim and the lowest income families not being burdened by debts they did not realise they were incurring.

The  coalition’s decision to reduce that buffer to £10,000 by next year and £5,000 the following year ,  will result in  the lowest income families, with young children, incurring overpayment  they cannot afford.

What worries me is that for  many this will mean the risk of claiming working tax credits will be too high and uncertain and going back into the workplace will no longer be  worth while.

Watch for the child poverty rates beginning to increase again.

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