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Families pay more than they get in tax credits
Over the past decade or so the Labour government has put into place a number of measures that were aimed at helping children and families with children in terms of their finances, and one such measure was the introduction of tax credits. However, a recent enquiry has concluded that in many cases tax credits are not providing families with any benefit, because they are paying more in tax than they are receiving by way of tax credits.
It has been estimated from the recent study that two thirds of families that are receiving tax credits are not actually benefiting from these credits. Officials said that these two thirds of households that are on tax credits are paying back as much if not more in taxes each month than they are receiving, making the credits pointless. The report claimed that the average family gets around £450 a month in tax credits and social security, but they pay back around £500 a month in taxes.
Officials involved in the research have concluded that for these families nothing has been gained from the measures that have been taken by the Labour government over the past ten years to ease their financial situations. They described the Labour government of 'unnecessary churning' because of the way that they give money to families with one hand and take it away with the other.
The group that carried out the research has also called for a reform of the tax credits policy, stating that they should only go to the most needy families rather than turning over five million families into claimants, as it does at present. Tax credits were introduced in the late 1990s by Prime Minister Gordon Brown, who was then Chancellor of the Exchequer. The aim of the scheme was to put an end to child poverty by the year 2020.
One industry expert that was involved in the research said that if the government was to scrap these family tax credits and instead simply reduce the tax contributions of families, most households would be no worse off and the majority would not even notice the difference.
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