Working Tax Credit - Criticism

Criticism

The Working Tax Credit scheme has been subject to much criticism, particularly in the wake of the difficulties surrounding its implementation. Criticism has focused on the way that credits are calculated on an annual basis, leading to overpayment, followed by large demands for repayment, which those on low income may find difficult to meet. David Harker, chief executive of Citizens Advice commented "This is an untenable system. An annualised system doesn't provide the stability of income required by low income families". In addition, the scheme has been accused of being over complicated and difficult for claimants to understand, and of underestimating the extent to which the incomes of low-earners can fluctuate over a year, especially a problem for self-employed people whose income may fall below the minimum wage (at which point Working Tax Credit is disallowed).

The Labour Party claim that the tax credit system has proven to effectively tackle child-poverty, with, by their previous government's definitions, 2 million children lifted out of absolute poverty and almost 1 million out of relative poverty by 2007. However, the current Coalition government is seeking to redefine poverty so as to highlight "children living in workless households or those with drug-dependent parents", despite their tax credit incomes, remaining in poverty. Even with the previous definition, this government cites that the existing tax credits system failed to "meet its statutory target to halve the problem by 2010 - despite the huge amount of taxpayers’ money spent on tackling it."