9 Conclusion
215. The Government introduced new tax credits as
a step towards achieving "three over-arching objectives":
- to provide adequate financial
incentives to work;
- to reduce child poverty; and
- to increase financial support for all families.
According to the Paymaster General, the tax credits
regime provides support for six million families and ten million
children, as compared to 800,000 families who received support
under the previous regime of family credit:
Put another way, over 19 million people in this country
are benefiting from tax credits. That is seven times the level
of family credit or nearly one in three of all people in this
country.[349]
216. We support the principle of tax credits and
are encouraged to hear that they are providing financial assistance
to so many people, particularly families with children. Tax credits
have succeeded both in achieving a significantly higher rate of
take-up than was the case under previous regimes and in creating
incentives for people to seek work.[350]
We welcome the close attention that the Government continues to
pay to improving the design of the regime, as evidenced by the
package of reforms announced in the PBR 2005. We note that these
reforms are not expected to be fully implemented until April 2008.
Consequently, it will not be possible to assess the success of
the design of the tax credits regime for several years—perhaps
four years—as the reformed regime will need to be allowed
to run for an annual cycle, and the data from that cycle will
then need to be collected.
217. In the meantime, it is crucial that HMRC continues
to push ahead with the fundamental shift in its departmental culture
that is already, of necessity, underway. The difficulties associated
with administering the tax credits regime have detracted from
the regime's successes and have had real impacts on the lives
of some claimants. HMRC must remember that, as the Ombudsman put
it, "the greatest difficulties are suffered by the core group
that the tax credit regime is aimed at helping, namely families
on low incomes." Those families with the most fluctuating
circumstances will often also be those families on low incomes,
who are vulnerable to poverty. It is the needs of these families
which HMRC must focus on, if the tax credits regime is to achieve
its policy objectives of tackling poverty and making work pay.
349 Q 307 Back
350
Qq 304 and 307 Back
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