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Tax credits – the way forward: A discussion paper from One Parent Families

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October 2005 Tax Credits have had a major impact in reducing poverty amongst lone parents and their children, helping to cut the child poverty rate by an estimated six per cent, and enabling many to enter employment. However, while tax credits are a responsive system that has helped both to tackle poverty and to make work pay, the system has been far from user friendly, and has failed to deliver either a seamless system of support to families or a stable income. We worry that these failures are limiting the impact the scheme can and will have on child poverty and employment rates.
 This paper is an attempt to look at the longer-term prospects for tax credits. It looks at what both Government and we thought could be achieved by the introduction of new tax credits, and whether these aims have been achieved. It then looks at what additional problems have arisen, whether these are short term or are likely to persist, and what might be some solutions to these - bearing in mind the original objectives of the system.
 Sections two, three and four discuss the objectives of tax credits when the tax credit system was designed, what One Parent Families hoped to see from the reforms, and whether these objectives have been achieved. In section five we look at options for reform of the tax credit system in the short, medium and long term.

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