Steve Hemingway

There is an astonishingly good article in this month's Prospect Magazine about Tax Credits. The article is admirably balanced and I urge you to read it as an outstanding example of the sort of article that not even the Economist or the FT can deliver about one of the most important policies of the Labour government of the last ten years, whose architect is very clearly identified as Gordon Brown.

The practical difficulties encountered by claimants are crystallised in the claim form itself, which requires individuals to compile statistics from various sources. Aside from earnings over the previous year, the form asks how much individuals have contributed to PAYE, pensions, social security and gift aid. And calculating childcare costs means individuals having to try to account for fluctuations in circumstances, such as school holidays. The guidance notes themselves run to 50 pages.

The story of how a simple idea first put forward by Milton Friedman could have delivered a system in which 5.4 billion pounds have been "misdirected" over the last three years is painful to read. Yet again the story involves the drafting of bad law combined with a disastrously-implemented computer system. As usual nothing has been done to learn from the mistakes, and EDS, the developers of the original system have been rewarded for their failure with more government contracts. Will they ever learn?

References

Tax Credits: the Success and Failure