Why tax credits can't work - ever

Following the previous post on the nonsense that is tax credits, a contact points out that not only are they unworkable, they offer huge scope for easy fraud. This is because they require timely notification of a vast amount of personal information to a central point which in practice is uncheckable.

For instance

Some changes in circumstance mean that your tax credit payments will go down, for example you stop working or your child leaves full-time education. You must tell us about such changes within one month, or you could get paid too much money and have to pay it back, and you may be charged a penalty of up to £300.

You have one month to tell us if:

• you start or stop living with a partner
• your working hours change
• your childcare costs change
• a child moves out to live with someone else
• a child leaves full-time education
• a child starts claiming tax credits in their own right
• you or your partner leave the United Kingdom for more than eight weeks

Who would think this would work? - apart from a fanatical centralist devoid of imagination.

Of course, there's more.

Some changes in circumstance mean your tax credit payments will go up, such as having a baby. Although you don't need to tell us within one month, it's better to do it straight away as any increase in payments can only be backdated by up to three months. So if you had a baby on 12 June but you didn't tell us until 12 October, we could only give you the extra money from 12 July. You'd miss out on one month's extra payment.

Tell us straight away if:

* you have a baby
* your income goes down
* your childcare costs go up
* a child over 16 but under 20 is in full time education
* you start working 30 hours or more a week.

Of course there's more. Far, far, far more. I defy a clued up middle class couple with time on their hands to get all this right, let alone a harassed single parent who may be struggling with their literacy.

Even if the computer software were faultless, this intrusive system could never ever work in the real world.

Bizarrely, though

There's no need for you to tell us if you expect your income for the current year to be no more than £25,000 higher than your income for the last year. It will make no difference to the amount of tax credit you will receive for the current year although the increased income will be taken into account in the following year.

But woe betide you if you have to try to work out your income from employment. This takes you into a world of worksheets similar to a self-assessment return.

There is no chance that HMRC would ever pick up more than a tiny fraction of failures to notify changes in personal circumstances - or late notifications. Chancellor Brown's system is asking for a coach and horses to be driven through it. And no doubt the undetected fraud is huge.