Britain hit by £10bn tax credit fraudsters, claims Duncan Smith.
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Britain hit by £10bn tax credit fraudsters, claims Duncan Smith.
Panda Mon 31 Dec - 10:55
Britain hit by £10bn tax credit fraudsters, claims Duncan Smith
Taxpayers have lost at least £10 billion to illicit welfare claimants and fraudsters from “around the world” targeting Britain’s tax credit system, the Work and Pensions Secretary claims.
Iain Duncan Smith Photo: Geoff Pugh
By Robert Winnett, Political Editor
9:58PM GMT 30 Dec 2012
1285 Comments
In an article for The Telegraph, Iain Duncan Smith accuses Labour of establishing a system of tax credits for the lower-paid that is “wide open to abuse”.
HM Revenue and Customs conducts just 34,000 checks a year on tax credit claims deemed to be “high risk” – less than a tenth of the number of investigations into benefits fraudsters, he writes. As a result public finances have been pushed to “breaking point”.
Mr Duncan Smith’s attack on tax credits represents a new assault by ministers on Britain’s welfare system. Previously, ministers have focused on the abuse of benefits but George Osborne has insisted that further savings need to be found to help repair the public finances.
Tax credits were introduced by Gordon Brown to top up the incomes of the lower-paid, particularly those with children, and are regarded by Labour as one of the party’s proudest achievements. They are overseen by the Treasury rather than Mr Duncan Smith’s department.
A low-paid family with two children in child care can receive more than £10,000 annually from the tax credit system. But official figures show that about one in 12 tax credit claims is incorrect or fraudulent – compared with fewer than one in 25 benefit claims.
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In his article, Mr Duncan Smith describes a “story of dependency, wasted taxpayers’ money and fraud”. He says the system, which largely benefits those in work, is out of control and unfair for “hard-working taxpayers”. Today’s article continues: “In the years between 2003 and 2010, Labour spent a staggering £171 billion on tax credits, contributing to a 60 per cent rise in the welfare bill.
“Far too much of that money was wasted, with fraud and error under Labour costing over £10 billion.”
He writes that the ease by which the system could be abused meant it was “no surprise” that fraudsters from other countries were tempted to come to Britain, where they could claim the benefit.
Senior Conservative sources said they had been “shocked” by the level of fraud and illicit claims that had been either permitted or ignored within the tax credit system.
The system works by people providing an estimated income for the year ahead, either based on the previous year’s earnings or a projected salary. At the end of the year, HMRC is supposed to analyse the earnings and reclaim any overpayments.
Initially, people could earn £2,500 more than they had predicted before HMRC would attempt to reclaim overpayments. However, this was increased to £25,000 in 2008. This meant that people could legally keep overpayments – worth thousands of pounds a year. People could also continue to claim the credits for up to four weeks after leaving employment.
Even those breaking the rules have often not repaid the money. The Treasury has already written off more than £1 billion in unpaid debts from tax credit claimants — and it is estimated that without reform the unpaid debts could rise to £6.5 billion by the next election.
Mr Duncan Smith says: “In the year before the last general election only 34,000 checks were carried out on what were deemed 'high risk awards’. In the DWP today, we carry out around 30,000 checks a month on what we would consider high risk claimants. Even for those in genuine need of support, tax credits were not fit for purpose.
“The system was haemorrhaging money while at the same time trapping people in a system where those trying hard to increase the amount of hours they worked weren’t necessarily better off.”
Mr Duncan Smith accuses Labour of sharply increasing taxpayer expenditure on the credits in the run-up to the 2005 and 2010 general elections in “an attempt to gain short-term popularity”. He said payments had risen by 58 per cent in 2005 and by more than 20 per cent in the two years before the 2010 election.
He writes: “At the most basic level, Labour used spending on tax credits as an attempt to gain short-term popularity. They knew what they were doing – it was a calculated attempt to win votes.”
In the coming months, the Coalition will reduce the so-called income disregard from £25,000 to £5,000 – which will lead to far more people being pursued for overpayments of tax credits. About 80,000 families claiming for childcare will also have to provide proof of payments – replacing the current system of self-certification.
More than 500,000 families with teenagers aged between 16 and 19 – who are eligible to continue claiming tax credits – will have to provide proof that their offspring are in full-time education.
In total, the Treasury believes that more than £300 million can be recouped in the next three years by reducing fraud and error. It will also seek to recover more than £400 million in unpaid debts.
In the longer-term, the administration and policing of tax credits will be transferred from the Treasury to the Department of Work and Pensions – where it will be rolled into the new universal credit.
Labour is trying to block Coalition plans to freeze benefits and tax credits for the next three years.
Ed Miliband, the Labour leader, has alleged that the move announced by Mr Osborne in this month’s Autumn Statement is an attack on “strivers” as most of those affected are lower-paid workers rather than the unemployed.
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Another Dept on my hit list. If a single mother goes out to work she receives a Tax Credit of a certain amount on which no tax is payable. However, the system is flawed because she could have a live in boyfriend contributing to expenses , which is often the case.
For too long now Britain has been too generous to young single mothers and as a result more and more get pregnant knowing the State will provide for them.
Taxpayers have lost at least £10 billion to illicit welfare claimants and fraudsters from “around the world” targeting Britain’s tax credit system, the Work and Pensions Secretary claims.
Iain Duncan Smith Photo: Geoff Pugh
By Robert Winnett, Political Editor
9:58PM GMT 30 Dec 2012
1285 Comments In an article for The Telegraph, Iain Duncan Smith accuses Labour of establishing a system of tax credits for the lower-paid that is “wide open to abuse”.
HM Revenue and Customs conducts just 34,000 checks a year on tax credit claims deemed to be “high risk” – less than a tenth of the number of investigations into benefits fraudsters, he writes. As a result public finances have been pushed to “breaking point”.
Mr Duncan Smith’s attack on tax credits represents a new assault by ministers on Britain’s welfare system. Previously, ministers have focused on the abuse of benefits but George Osborne has insisted that further savings need to be found to help repair the public finances.
Tax credits were introduced by Gordon Brown to top up the incomes of the lower-paid, particularly those with children, and are regarded by Labour as one of the party’s proudest achievements. They are overseen by the Treasury rather than Mr Duncan Smith’s department.
A low-paid family with two children in child care can receive more than £10,000 annually from the tax credit system. But official figures show that about one in 12 tax credit claims is incorrect or fraudulent – compared with fewer than one in 25 benefit claims.
Related Articles
In his article, Mr Duncan Smith describes a “story of dependency, wasted taxpayers’ money and fraud”. He says the system, which largely benefits those in work, is out of control and unfair for “hard-working taxpayers”. Today’s article continues: “In the years between 2003 and 2010, Labour spent a staggering £171 billion on tax credits, contributing to a 60 per cent rise in the welfare bill.
“Far too much of that money was wasted, with fraud and error under Labour costing over £10 billion.”
He writes that the ease by which the system could be abused meant it was “no surprise” that fraudsters from other countries were tempted to come to Britain, where they could claim the benefit.
Senior Conservative sources said they had been “shocked” by the level of fraud and illicit claims that had been either permitted or ignored within the tax credit system.
The system works by people providing an estimated income for the year ahead, either based on the previous year’s earnings or a projected salary. At the end of the year, HMRC is supposed to analyse the earnings and reclaim any overpayments.
Initially, people could earn £2,500 more than they had predicted before HMRC would attempt to reclaim overpayments. However, this was increased to £25,000 in 2008. This meant that people could legally keep overpayments – worth thousands of pounds a year. People could also continue to claim the credits for up to four weeks after leaving employment.
Even those breaking the rules have often not repaid the money. The Treasury has already written off more than £1 billion in unpaid debts from tax credit claimants — and it is estimated that without reform the unpaid debts could rise to £6.5 billion by the next election.
Mr Duncan Smith says: “In the year before the last general election only 34,000 checks were carried out on what were deemed 'high risk awards’. In the DWP today, we carry out around 30,000 checks a month on what we would consider high risk claimants. Even for those in genuine need of support, tax credits were not fit for purpose.
“The system was haemorrhaging money while at the same time trapping people in a system where those trying hard to increase the amount of hours they worked weren’t necessarily better off.”
Mr Duncan Smith accuses Labour of sharply increasing taxpayer expenditure on the credits in the run-up to the 2005 and 2010 general elections in “an attempt to gain short-term popularity”. He said payments had risen by 58 per cent in 2005 and by more than 20 per cent in the two years before the 2010 election.
He writes: “At the most basic level, Labour used spending on tax credits as an attempt to gain short-term popularity. They knew what they were doing – it was a calculated attempt to win votes.”
In the coming months, the Coalition will reduce the so-called income disregard from £25,000 to £5,000 – which will lead to far more people being pursued for overpayments of tax credits. About 80,000 families claiming for childcare will also have to provide proof of payments – replacing the current system of self-certification.
More than 500,000 families with teenagers aged between 16 and 19 – who are eligible to continue claiming tax credits – will have to provide proof that their offspring are in full-time education.
In total, the Treasury believes that more than £300 million can be recouped in the next three years by reducing fraud and error. It will also seek to recover more than £400 million in unpaid debts.
In the longer-term, the administration and policing of tax credits will be transferred from the Treasury to the Department of Work and Pensions – where it will be rolled into the new universal credit.
Labour is trying to block Coalition plans to freeze benefits and tax credits for the next three years.
Ed Miliband, the Labour leader, has alleged that the move announced by Mr Osborne in this month’s Autumn Statement is an attack on “strivers” as most of those affected are lower-paid workers rather than the unemployed.
================
Another Dept on my hit list. If a single mother goes out to work she receives a Tax Credit of a certain amount on which no tax is payable. However, the system is flawed because she could have a live in boyfriend contributing to expenses , which is often the case.
For too long now Britain has been too generous to young single mothers and as a result more and more get pregnant knowing the State will provide for them.
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