The Government is hoping to save more than £300 million in the next three years by reducing fraud and error in the tax credit system, and also wants to recover more than £400 million in unpaid tax credit debts.
Work and Pensions Secretary Iain Duncan Smith said the current system, set up by the previous Labour government, was "not fit for purpose." Writing in today's Daily Telegraph he said:
Even for those in genuine need of support, tax credits were not fit for purpose. The system was haemorrhaging money while at the same time trapping people in a system where those trying hard to increase the amount of hours they worked weren't necessarily better off.
At the most basic level, Labour used spending on tax credits as an attempt to gain short-term popularity. They knew what they were doing - it was a calculated attempt to win votes.