Have just spotted a rather interesting press release from HMRC about tax credits statistics which says,
The statistics show that the level of overpayments in 2007-08 was £1 billion compared to £2.2 billion in 2003-04. The number of families entitled to end of year top ups has increased as anticipated last May to 1.29 million (£798 million). This is as a result of one of the components of the package of measures announced in the Pre Budget Report 2005 to reduce overpayments.Did you spot it? See how first of all they're comparing figures today with figures from 4 years ago? It couldn't be because they can give maximum impact of the reduction in overpayments to distract from the fact the system is still so broken it pays out £1,000,000,000 each year when it shouldn't, could it?
There's more in there though. Notice the bit about they've increased the "end of year top ups" by £798 million and that is because of measure they introduced to reduce overpayments? What they;re saying is that they introduced measures to reduce overpayment by introducing underpayment to the system, which, at the end of the year, means people get top-ups to rectify their payments.
This is the classic case of a press release trying to make something that is crap look good. Reading between the lines though it's pretty clear that the tax credit system remains thoroughly broken. Where once it was just paying certain people too much - and then ripping the money back - now it is not only paying some people too much, its also paying 1.29 million people too little, and then having to correct itself.
Here's a radical idea on how to fix it. How about, instead of taking low income people's money through tax, spending a bit of it in order to employ people to process the forms that have to be filled in to get a little bit of back (either too much or too little), why don't they just not bother taking the money in the first place?
To be honest, I've always found Labour support for tax credits utterly bizarre. It doesn't take a genius to see that the system is (a) wasteful of taxpayers money (b) stupidly complex, meaning many don't get the benefits, and (c) when they do get the benefits its so broken that the wrong amounts are paid. Added to this of course it is means-testing, something that Aneurin Bevan fought so hard to abolish, as he said,
"[the] purpose of the Means Test is not to discover a handful of people receiving public money when they have means to supply themselves. The purpose is to compel a large number of working-class people to keep other working-class people.Admittedly, tax credits are a bug bear of mine. An incoming Tory Government should pledge to scrap them and introduce tax measures that actually take the low paid out of tax altogether. It's always seemed perverse to me that in an alleged progressive tax system the lowest paid have to pay tax, and then, when they get tax credits, they see themselves taxed at marginal tax rates of over 70% when they try to earn a little bit more.
How exactly can anyone from the Labour Party consider that "social justice"?
Update: It may not be clear in this post that I am referring to those tax credits that are given to people who are working, hence references to not taxing them at all. I say this because of a comment that seemed to think I was referring to "tax credits" (which are really just benefits and nothing to do with tax, that are given to those who can't work because of, for example, a severe disability.