I came across an article on the BBC website today that made me wonder which lunatic invented the rules relating to the tax credit system.

For a start, the current system is that people estimate their income for the next 12 months and are then paid credits based on their estimate.

The amazing part here is that they do not have to repay any overpayments as long as their estimate was within £25000 of their actual earnings :

Many more people will have to pay back some of the money paid to them as tax credits in the future, experts say.

At the moment credits are based on a family’s own estimate of income for the coming year, with households allowed to earn an extra £25,000 before they have to pay money back to the government.

Yes, £25000!

How the hell anyone could legitimately underestimate their earnings by that amount is beyond belief. More likely, the system is designed to maximise the payments made to people to ensure their continuing loyalty to the state.

Having worked in a large organisation for many years now, I am well aware of how people maximise their earnings under the current system.

Typically, the person concerned will be on a part time contract and will regularly perform overtime to increase their earnings. When it comes to tax credit assessment time, they will say that they cannot work any overtime for a period of 6 weeks which then means that their proof of estimated pay will be based on their basic contractual pay and not their usual take home pay with overtime.

Even with this underhand method (in my opinion but allowed by the state), it would still be rather difficult to earn £25000 more than the basic amount unless you are working all your waking hours.

This madness, however, is about to change :

But over the next 18 months that buffer will be reduced to £5,000, meaning that many families could face repayments.

One expert warned the number of overpayments would “rocket”.

In my opinion this will mean that people will be less likely to underestimate their income in the first place which will lead to a large reduction in benefits payments rather than increasing cases of overpayment.

Obviously, the handwringers are out in force at the BBC :

The changes to the overpayments buffer were announced in the Budget and will be implemented from next April.

Campaigners fear many more people than currently have to repay money will be hit – people like Sarah Holding, a single mother from Wigan who works as a receptionist.

She claims both working and child tax credit, but because she has changed jobs frequently over the last year, and her childcare has altered, she has been overpaid.

She has now been told she now owes Revenue and Customs just over £2,000.

“Obviously I don’t have that kind of money,” says Sarah, who has put her house up for sale and is seeking cheaper accommodation.

She accepts she has to pay it back, but finding £40 out of her weekly budget is hard-going.

As a result, she says, she has been having sleepless nights, and suffering from severe stress.

“The worst case scenario is: I’ve not got the money – I’m going to end up in jail,” she says.

Note that under the current rules, she has actually earned £25,000 in wages more than she estimated when claiming her credits as she would otherwise not be being asked to repay the £2000.

Interesting that this is not mentioned in that little section of the article.

Something else missing there is how on earth someone working as a receptionist can earn £25000 more than they estimated they were going earn when they completed their claim 12 months ago?

The numbers are huge in this one area of benefit alone :

Last year more than a million families were overpaid child or working tax credit, and more than £2bn was written off by the government.

So the government announced changes in last month’s Budget designed to recoup some of that money.

At the moment the tax credit a household gets is based on its own estimate of annual income.

The government has allowed people to earn an extra £25,000 over that estimate before it asks for a refund.

But from next April, that leeway, or buffer, will be reduced to £10,000. The following year it will be cut to £5,000, meaning many more families face being asked to pay money back.

Lee Healey, a benefits expert, thinks the consequences will be serious.

“I would expect overpayments to rocket, and for many more people to be hit with an overpayment of their tax credits.”

Even £5000 is a rather generous leeway in my opinion and I would certainly expect to have to pay money back if my estimate was that far out especially as I would be earning £100 per week that I had not planned for unless I had deliberately underestimated my income in the first place.

Note there as well the “benefits expert” – I suggest to him that people will be making more accurate estimates rather than continuing to be leeches on the rest of us who pay taxes and claim bugger all in benefits!

Finally, I think I now understand why Labour continues to get the levels of votes they do at the polls – they have paid for every single vote and paid damned well too!