Tax credit staff 'deal with suicidal callers every day'

Staff at a company contracted by the government to cut fraudulent tax credit claims are forced to deal with "suicidal callers" every day, a whistleblower has claimed.

An unnamed worker at the Belfast call centre, which is run by US firm Concentrix, told BBC2's Victoria Derbyshire programme staff "weren't even trained" in how to deal with such calls and were not offered appropriate after-care.

He added that instead of counselling, they were told: "Have a smoke, you'll be fine."

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Call centre workers were shouted at "every day" by claimants whose payouts were cut, "people crying down the phone to you that they're down to their last bag of wipes, have no food in the fridge to feed their kids", he added.

"We were dealing with people claiming they were going to commit suicide. You had to try and keep them on the phone, while a manager phoned the police to get out to their address to make sure that they were OK," said the whistleblower.

"Some of the [call centre workers] that were dealing with the suicide calls weren't given the back-up, weren't given aftercare by our aftercare team."

Concentrix denied the claims and said staff were trained in accordance with government guidelines. It said: "Our staff are supported as much as possible where we have encountered this type of scenario."

The company has a £75m contract to cut around £1bn in incorrect or fraudulent tax credit claims.

It is tasked only with removing payments from those not entitled to payouts in the first place, but it was alleged earlier this year, also on the Victoria Derbyshire show, that it had cut tax credits from genuine claimants.

Within hours of the report being aired, HMRC announced it would not renew its deal with Concentrix when it ends next year.

"We want to reassure customers who have had their tax credits stopped that we will prioritise their cases and make sure that they are processed as quickly as possible," the tax watchdog told the BBC. "That's why we have decided not to extend our contract with Concentrix and HMRC is redeploying 150 staff so that customers can get through to advisers and resolve any issues about their claim."

More complaints over working tax credit changes

8 February

Working tax credit changes are again the subject of a report alleging hardship for claimants, after new rules on recovery of overpayments came into force this week.

The Low Incomes Tax Reform Group (LITRG) has honed in on a change that came into force at the start of the new tax year on Wednesday, which will double the reduction in tax credit awards for those earning at least £20,000 and have previously been paid too much.

The group argues the change will cause problems for those with high childcare costs or have a disability that adds to their living expenses.

Under the reforms, which were announced in the 2014 Budget, those in receipt of tax credits who earn more than £20,000 and owe the government money from past years can have their in-work benefits reduced by up to 50 per cent. Previously, the maximum that could be deducted was 25 per cent.

All other recovery rules remain unchanged, so those in receipt of the maximum benefit – and so most in need – will not see their benefits cut by more than ten per cent, while those who earn enough not to qualify for the full award but less than £20,000 a year could lose 25 per cent. Those only receiving the £545 family element of child tax credits can still lose the whole of this amount.

Recoveries are ordered when, for example, a claimant fails to inform HMRC that their wages have risen to a level that would mean they should get a lower level of the benefit.

Anthony Thomas, the chairman of LITRG, said: "We are extremely concerned that this measure, especially when combined with other recent debt measures like recovering working tax credit overpayments from ongoing child tax credit awards and vice versa, might well cause claimants to fall into hardship.

"We urge HMRC to consider protecting those with childcare costs or who qualify for any of the disability elements from this 50 per cent recovery rate."

The government has had a torrid time with its change to working tax credits, which represent its efforts to cut a bill that has ballooned to £30bn in recent years. It was forced last year to U-turn on cuts to payouts worth £4bn that would have hit the majority of claimants and is still under fire for lowering the threshold at which higher wages affect benefit awards.

It is also being criticised for changes to child tax credits that will remove the £545 flat-rate family payout and top-ups for the third child onwards for new families and children born from April 2017. Added to that, it has proceeded with cuts to Universal Credit, although the system is still considered more progressive than the one already in place.

A spokesman for HMRC told the BBC the overpayment changes were designed to recover debts faster and ensure claimants "return to full payments sooner". He also pointed to hardship rules that in the most extreme cases could see the recovery cancelled and urged those who are concerned to get in touch as early as possible.

Are 800,000 people still going to see their tax credits cut?

08 February

Last year, amid a public outcry and a clash with the House of Lords, the government was forced into what The Guardian brands a "humiliating climbdown" on its planned cuts to working tax credits. Now the newspaper reports that one measure affecting as many as 800,000 people has escaped the U-turn, prompting an urgent question to be tabled by Labour.

What has triggered the new row?

The government has tabled a draft statutory instrument – secondary legislation that doesn't need to go through all the parliamentary readings of a full bill – proposing to press ahead with a reduction to the "income-rise disregard" for tax credits. It means claimants will start to lose benefits when their earned income increases by £2,500, instead of the current £5,000.

That sounds like a cut

It does – and it will save money: £170m next year and £250m by 2018-19. But it's not as simple as the other cuts that were abandoned: the disregard only applies to additional money earned in the year a tax credit award applies, so, in the Treasury's own words, "by definition there will be no losers".

I'm confused. Will people have tax credits removed?

Yes, in as many as 800,000 cases – but only if the claimants earn more than they expected. It works like this: a provisional tax credit award is calculated at the beginning of the year based on the previous year's earnings but in many cases, eventual income comes in higher than the estimate. At the moment, as much as £5,000 extra can be earned without affecting the final award. Under the new rules, anything above £2,500 extra will be assessed and could see some of the award withdrawn.

That would mean tax credits having to be repaid - £200 to £300, on average - but overall household income would still have risen. It's worth noting that household income can also fall without tax credits being increased, with this disregard already set at £2,500.

If income is higher, what's the problem?

Critics say that reducing the amount of extra money people can make before they start to lose tax credits acts as a disincentive to earn more by getting a new job or pushing for promotion. If a claimant earns more than £2,500 extra in a tax year than they expected and this pushes them over the £6,420 income threshold, they will lose 41p for each pound above this level.

There are also complaints that forcing more low-income households that may not understand a complex system to repay money causes hardship. The Guardian notes a previous "crisis of overpayment" prompted the then Labour government to set the disregard at a massive £25,000 briefly in 2006. When tax credits first came in, the disregard was set at the now-proposed £2,500.

Repayments can be avoided by informing HMRC as soon as wages rise enough to prompt a "change of circumstances".

What happens now?

The Lords' secondary legislation scrutiny committee is asking questions – and it brought the issue to light by complaining that no impact assessment was supplied with the proposal. Labour has tabled a question in the Commons and there will be discomfort for the government on the issue given the history, but as claimants aren't losing money, it might not be forced to back down this time.

Osborne told to 'abolish tax credits as we know them'

11 November

Chancellor George Osborne is under mounting pressure over his planned cuts to tax credits, which he has pledged to relaunch later this month with a number of new measures designed to mollify the fierce criticism he faces, some of which comes from within his own party ranks.

The latest broadsides come from the former Labour prime minister Gordon Brown, who says the cuts must be "abandoned once and for all", as well as the Tory-majority Work and Pensions Select Committee, which has demanded that the government put the proposals on hold for a period of 18 months if it cannot mitigate the impact of the cuts on poorer working families.

Cuts from 'Victorian times'

Brown, who introduced tax credits in 1999 during his time as chancellor, writes in The Mirror today that 2.3 million children are currently living in 'relative poverty' and that "this is now projected to rocket to 3.9 million by 2020" due to welfare cuts.

Children are defined as living in poverty if they live in a household with income 60 per cent below the median level in the UK, according to the BBC. Earlier this summer the Department for Work and Pensions estimated that the proportion of households meeting this criteria was broadly unchanged. In fact, the numbers fell slightly during the first four years of the previous coalition government.

Brown argues that the latest cuts will hit low-paid working families, "the new and biggest group of poor families". He adds that "because their wages are low and stagnant and their rents or mortgage costs are high, they are officially the new poor" – and says that unless the minimum wage were to rise to £12 or £14 an hour, welfare supplements are needed to lift them out of poverty.

"[The cuts] are founded on wrong claims – that the majority of our poor are work-shy and live in chaotic families. They are based on the wrong prescription – that you make Britain more prosperous on the backs of hurting the working poor. Indeed they come out in the wrong century – more akin to Victorian times… the Autumn Statement on November 25 has to see them abandoned once and for all."

'Abolish tax credits as we know them'

The comments come on the day the Work and Pensions Committee of MPs issued its latest report on the cuts. In it, the committee claims that Osborne's mitigating measures of increasing the personal tax allowance and boosting low pay will still mean that 78 per cent of families in receipt of tax credits will lose out.

According to a previous House of Commons Library report, a family with one earner working full-time at the national minimum wage of £6.70 per hour and with two children, will this year receive a net income, including tax credits, of £21,699. By 2020, assuming they are over 25 and earning the estimated £9.35 per hour national living wage, this will be £21,700 after the cuts, as previously announced.

This implies a real-term income fall, but fails to take account of the offer of free childcare that the government claims is worth as much as £5,000 a year. It also fails to take into consideration the fact that the majority of families receiving tax credits are on part-time hours and will therefore not feel the full benefit of the minimum wage increase.

The Work and Pensions Committee reckons that the average claimant family will lose out by an average of £1,500 a year. Osborne previously promised to offer 'transitional protection' to help those who will lose out – at least until the full effects of the national living wage are felt in four years' time – but the committee's chairman Frank Field says that if this concession is not enough the cuts should be put on hold and a more radical overhaul considered.

"My advice to the chancellor would be to pause and use the next 18 months to bring forward a major overhaul to abolish tax credits as we know them," he told the BBC. A new system could come in fully by 2020 when the chancellor's National Living Wage will be paying a wage of £16,000 per year… to help only lower-earning families with children."

Tax credit cuts: the fallout

28 October

The row on tax credit cuts is far from over. An all-day debate is scheduled for tomorrow, during which Conservative MP David Davis and Labour MP and Work and Pensions Select Committee chairman Frank Field will present some alternatives for Osborne to consider, as he lines up "transitional support" in the coming Autumn Statement.

Then there is the 'constitutional crisis' some claim the defeat in the House of Lords of a financial policy approved in the Commons represents. And what about the reputational damage done to some of those elected representatives, who had invested political capital in the measures?

So what are the consequences for...

...George Osborne?

The Chancellor's reputation as the Conservative's master strategist has been dealt a blow. The truth is that in failing to provide proper analysis for claims the majority of existing claimants would be better off, justify the cuts for those left worse off, or, most importantly, bring forward sufficient mitigating support sooner, he walked into a trap of his own making.

Speaking in the Commons yesterday, Osborne said he will continue to reform tax credits, but confirmed he will unveil help for affected families when he delivers his Autumn Statement next month. He will hope he can deliver a performance to recover his reputation similar to the way he did after his 'omnishambles' Budget of 2012.

...those claiming credits?

For now, they have a reprieve. David Cameron's spokesperson confirmed notices detailing how much each affected family will lose have now been put on hold. "Clearly any reform to the tax credit system would need to be in place before the letters detailing the changes go out," she said.

Until we see the transitional support, we won't know how people will be affected. There are calls in particular for cuts to be phased to match the staggered introduction of the living wage and income tax threshold increases, so families would lose less in the short term.

Others, such as Davis and Field, suggest the level at which cuts bite needs to be increased, protecting those on the lowest incomes, with perhaps a corresponding increase in the withdrawal rate at a higher level.

...the economy?

The Lords defeat means the government is currently unable to proceed with plans that would cut an estimated £4.4bn from the welfare bill this year and £3.7bn by the end of this parliament. Transitional measures will almost certainly mean the eventual savings will be lower, at least in the next few years.

What this means will depend on the wider figures on borrowing and tax revenues Osborne has to work with from the Office for Budget Responsibility. He has a surplus of £10bn pencilled in for 2019/2020, so he could in theory reduce the savings here and still meet his pledge to put the Budget in the black.

But as Philip Aldrick notes in The Times, with growth stuttering and projections that he will miss his borrowing target for this year, this margin for error could vanish fast.

...the House of Lords?

Unelected Lords overruling the Commons on a financial policy – they haven't done this in a hundred years – amounts to a 'constitutional crisis', in the eyes of many MPs. But views are mixed and some argue that as this was secondary legislation rather than a formal money act, done to speed its process through the chambers, the Lords had every right to vote it down.

It could have got worse overnight when peers almost voted to kill off controversial electoral registration changes, but eventually that challenge failed by just 11 votes.

This hasn't stopped calls for changes, with soon-to-be-ennobled William Hague calling in The Telegraph for the principle that financial measures cannot be voted down to be enshrined in law. David Cameron is undertaking a "rapid review" to look at options.

...Labour?

This is the first big political blow the Labour leadership has inflicted on the government - albeit inadvertently. Now, as the party seeks to gather momentum, expect its leadership to move tactically in the days ahead.

Shadow chancellor John McDonnell in particular has won plaudits. He has come across as serious and has publicly stated he would not seek to make political attacks on Osborne if he backed down (while making clear that he means a full reversal, possibly funded by broader tax changes).

Sebastian Payne writes in The Spectator that it is "harder for Osborne to sling insults across the floor when the other side is calmly engaging".

...the welfare state?

One thing that has emerged from all of this is how complicated the system is. While a family with someone earning full time is likely to benefit by 2020 from the changes to the minimum wage, this does not come close to representing the full range of situations for tax credits claimants and it's been fiendishly difficult to work out who wins and loses overall.

Some are even calling for this to be catalyst for more radical change. Writing in City AM, the Adam Smith Institute's Ben Southwood called for tax credits to be replaced by a "negative income tax"

"It might guarantee a monthly income of £700," Southwood writes. "For each extra £100 a person earns... they lose £50 of their initial £700 benefit. When their wages hit £700 they're getting £350 from the state, for a total of £1,050 - when their wages hit £1,400, they no longer get anything."