Wednesday, 10 December 2014

Tax credits: the missing billions

Andrew Fisher on the missing billions that should be in the pockets of low income households

Every year £5bn is unclaimed in tax credits - ever heard a politician mention that? Or encouraging people to get their entitlements? Ever read in the print media about the scandal of some of the poorest people missing out on billions?

Now think how often you've heard an MP or the read in the press about benefit fraud - which costs us less than one-third (c.£1.5 billion) of what the government saves every year by people not claiming the tax credits to which they are entitled.

In total over 1.1 million people are collectively entitled to more than £3 billion in working tax credit, while over 500,000 families should be receiving around £2 billion in child tax credits. In total £5.09 billion in working age tax credits (HMRC data).

This is because the take-up rate for these means-tested benefits are 66% (working tax credit) and 88% (child tax credit):

The question is what could a full take-up rate do for poverty levels in this country? According to the IFS, a full-take of tax credits would cut child poverty by 400,000 by 2020.

The knock-on effect on the economy of putting an extra £5 billion in the pockets of low income households would be beneficial too, through the multiplier effect, as lower income households spend a higher proportion of their incomes.

It would also have a modest stabilising effect - socially and economically - on those households, potentially reducing the upheaval caused by evictions for non-payment of rent (currently at an all-time high) and the impact that has on children's education, etc.

If you do nothing else today, please share the link below - especially if you are a campaigning group or trade union representing thousands of low income households.

Let's get that £5 billion in people's pockets before it's reallocated for even more tax cuts for those who don't need it.

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