Early Warning System policy update: Tax credits

December 2015

The Early Warning System (EWS) is a framework which has been developed by Child Poverty Action Group (CPAG) in Scotland to collect and analyse case evidence about how welfare changes are affecting the wellbeing of children, their families and the communities and services that support them. The latest policy bulletin focuses on tax credits.

Cases gathered through the Early Warning System highlight that policy changes about the way tax credits are administered, delays and error and having a direct role in causing and exacerbating child poverty. We have seen a dramatic increase in the number of cases regarding tax credits in 2015. The main concerns highlighted are:

  • Recovery of in-year overpayments – families left with as little as £6 a week for a child to live on for the remainder of the tax year.
  • Alleged undisclosed partner interventions – lone parents targeted unlawfully and risk losing employment or childcare places as a result.
  • Offsetting notional entitlement – refusal to reduce overpayments as a way of punishing claimants for failing to understand rules when there has been no loss to the public purse.
  • Delays and administrative error – families resorting to food banks and Scottish Welfare Fund as a result of failures in the tax credits system.

These issues are causing severe hardship for families, directly impacting on the wellbeing of children, and having implications for education, health and social care services.

Following last month’s U-turn, the government has belatedly recognised the importance of tax credits to working families. Tax credits were introduced with the aims of reducing child poverty and making work pay, and will continue to be the main source of support for most families for at least another two years before the transfer to universal credit begins in 2018. The policy bulletin makes several recommendations to improve the system to make it work as intended.

Read the policy bulletin.