Tax Credit Clawbacks
There was a quite reasonable statement from the Paymaster General (Dawn Primorolo) about Tax Credits today.
The problem is that if you have a responsive system which changes as people's incomes go up and down then you will end up with some overpayment. These overpayments may from time to time need recovering. There needs, therefore, to be a system for this.
The problem with this is that the government merely take the money out of people's bank accounts and wait for them to complain. Many households are very marginal from a cash flow perspective and cannot afford this.
What the government should do is agree the repayment rate before clawing back the money. I have written a letter (follows) to the Paymaster General to call for this.Letter to Dawn Primorolo
I understand that currently you are stopping clawback if a dispute is raised.
Would it not be better to only claw back when the recipient has agreed the clawback rate?
Hardship is caused when the clawback rate is too high. At the moment monies are taken directly out of people’s bank accounts. This can cause massive problems for domestic cashflow. Rather than take the money off people until they claim it would be better to get the agreement first then take action.